Chapter VIII: Introduction (2)

The form letter presupposes a uniformity of conditions. It is written to appeal to certain desires of the recipient; its arguments are based on the supposition that the same desire exists in the minds of all to whom it is sent, and that the same arguments will cause its readers, as a class, to yield to those desires.

The result of a form letter campaign depends on the extent to which the letter fulfills its mission in adapting itself to the conditions of the class to which it is sent--its adaptability to the mentality and environment of its readers. The same argument will not appeal to the mechanic, farmer, merchant, and banker.

The failure of most form letter campaigns can be traced to one of two causes--failure to adapt the letter to existing conditions, or lack of judgment in selecting a list for a trial. The goods offered may be used by plumbers and lawyers, but the same letter should not be expected to _pull_ with both classes. Like the selling talk of the personal salesman, the letter should be changed for each class.

Other conditions, also, must be studied. Iowa may have harvested a bumper crop, while Kansas suffers from a drought; mills in the Pittsburg district may be running overtime, while Buffalo is in the midst of local labor disturbances. All of these local conditions influence the results of the letter campaign.

As to lists used for trials, the more usual mistake is in the use of too small a list. Some sales managers, who have mailing lists of from 25,000 to 100,000 names, profess to try out a letter with a list of 300 to 500 names. A list of this size is not sufficient to give an actual test of the pulling power of any letter. Some of the most successful letter salesmen give it from their experience that the very smallest list from which a safe test can be made is 1,000 names.

_Keying Form Letters._ It is just as necessary to _key_ form letters as to key magazine ads. The key makes it possible to trace results. The question of keying is most important when a series of letters is used--which is true in most campaigns--for it then becomes necessary to check the returns from each letter in the series. When one letter only is sent to a given list, the replies received from that list can be safely credited to the letter.

There are several methods of keying form letters, among which are the following: the reader may be requested to address his reply to a certain department; he may be offered a sample or some novelty; or the letter may be written in the first person singular so that replies will naturally be addressed to the writer.

The writer confesses to a preference for the last named method. The average mail order buyer likes to feel that he is receiving personal attention--that there is someone in the house to whom he can write, instead of addressing the house. A personal touch can be put into the letter signed by an individual that is impossible in a letter signed in the name of the house.

There are those who contend that only the name of the house should be used, that the name of an individual should never be signed to a letter, and who have printed on their letter heads the phrase: "_Address all communications to the company, not to individuals._"

While it is perfectly proper to use every legitimate means to keep the name of the house before the public, there is a good deal of senseless fear that the prestige of the house will be usurped by the individual. In some quarters this fear has resulted in the adoption of ridiculously extreme rules and regulations. One incident in the personal experience of the writer will serve to illustrate the point. Having occasion to request a favor from a certain manufacturer--a favor which would be granted, if at all, by the advertising manager--and knowing the advertising manager personally, he addressed the request to him, using his title in connection with the name of the firm. Somewhat surprising was the following letter, received a few days later:

DEAR SIR:

We have your favor of the 12th, addressed to our Mr.--------, and your request will receive the attention of the proper individual.

Our method of handling correspondence is such that, to insure proper attention, all communications should be addressed to the company. We request that you observe this rule in the future.

Yours truly,

No more reason for the fear that the house will be injured by the personality of one of its correspondents can be seen, than that the personality of the salesman will have greater weight with customers than the reputation of the house. If the personality of an employe--be he a personal salesman or a correspondent--is worth anything in a business way, the benefit accrues to the house that employs him.

There is one other objection to the use of the name of the writer of the letter, and it comes from the United States Statute making it a criminal offense to open mail addressed to another. But this objection can be easily overcome; any employe whose name is used will sign an order authorizing the opening of letters addressed in his name, unless marked _personal_.

_Form Letter Records._ A copy of each form letter written should be kept permanently. The copies should be filed in a manner that will make it easy to refer to them. For this purpose an arch file or binder is most satisfactory. The letters themselves may be punched for the file, or the loose-leaf scrapbook idea can be adopted, pasting several letters on one leaf.

Each letter should be given a number for the purpose of identification, whether or not it appears on the letter itself. The copies should be arranged in the file in numerical order, but where there are several departments or divisions using form letters, they should be divided by departmental indexes.

It is also well to keep a second copy of the letter with a sample of the enclosures, as the enclosures may have an important bearing on the results. These copies may be preserved in the manner suggested for filing copies of ads and printed matter.

When a form letter is written, a record form, as shown in Fig. 21, should be started. This may be on a card or loose leaf; the latter is preferred on account of the larger space for the record. The heading shows the No. of the letter, the subject, name of the writer, its No. in the series to which it belongs--first, second, or third--the enclosures, and the names of any special lists used. The body of the form provides for a record of letters mailed during the year, with a monthly record of total costs.

The sheets are arranged in the order of letter Nos., in a card file or a loose-leaf binder.

The reverse of this record form is ruled, as shown in Fig. 22, to provide a record of sales resulting from the use of the letter. Sales can be entered daily or weekly, but the daily record is recommended.

The methods of obtaining the details for these records is described later.

=Follow-up Systems.= A necessary and very important factor in the success of a business transacted through the mails, is the follow-up system. And in a business in which sales are made by personal salesmen, the follow-up is used for certain purposes, and is as important as though used to secure orders.

To follow-up is to keep after, to keep in touch with, and to keep a certain subject before certain individuals. Whether used to secure orders or make collections, the idea of the follow-up is the same, though it is better known as a system for promoting sales.

The follow-up arises from the same necessity that compels the personal salesman to call on a prospective customer more than once--often many times--before the first order is secured, and continue to call to hold his trade. The follow-up simply makes use of letters and other literature to take the place of the personal salesman.

Mechanically, the follow-up system is a _system_ or _method_ that insures the sending of the right literature at the right time. Letters--both form and special--catalogs, booklets, folders, circulars, and mailing cards are all used in the process of following up the prospective purchaser; the automatic method of showing when each piece of literature in the series should be sent, is the follow-up system itself.

_Tickler Method._ The simplest method of handling the follow-up system is to use a tickler in which to file memoranda or correspondence by dates. A tickler consists of a file equipped with a set of indexes numbered from 1 to 31 to represent the days of the month, and 12 indexes printed with the name of the month. The monthly indexes are arranged in order, and the daily indexes are placed in front of the monthly indexes in numerical sequence. The file may be a vertical correspondence file, a card tray, or a flat desk file.

In using the tickler for a correspondence follow-up, letters are filed back of the index representing the day on which the subject is to receive attention. Each day the letters filed behind that day's index are removed, and after receiving attention, are filed ahead to the next follow-up date.

If it is desired to have a letter come up for attention in another than the current month, the day of the month is noted on the letter, and it is placed back of the monthly index. On the first of the month, the index for the previous month is placed at the back of the file, which brings the current month's index to the front. All papers that have been filed back of the monthly index are then distributed by dates. A correspondence file drawer, equipped as a tickler, is shown in Fig. 23.

For a small amount of correspondence, the use of the tickler is very satisfactory, and it is also used to excellent advantage for keeping track of the many matters that require attention at a future date. A tickler should be included in the equipment of _every_ office, no matter what the line of business.

_Card Follow-up._ For most extensive follow-up systems, the card index is used, for the reason that a card is easy to handle, occupies but little space, and can be adapted to any classification desired. A card is used for each prospective customer, or name on the list to be followed up, and should bear the name and address and a brief history of the efforts made to secure an order, or accomplish the object of the follow-up.

In operating a follow-up system--especially if the object is to sell goods--the correspondent should have before him a history of the efforts previously made to secure an order. He should know what letters and other literature have been mailed just as the personal salesman knows what arguments he has used. When form letters have been used it is not necessary to have copies of the letters in each case, but they should be identified by their numbers, or otherwise. Records of these letters, by date and number, can be made on a card, so that the card itself will give the correspondent a complete history of the case. The correspondence--letters from the prospective customer and copies of special letters to him--can then be filed in the regular way, and is accessible at all times.

The oldest method of operating the card follow-up is to use the tickler index in a card file. The follow-up is operated in exactly the same manner as described for the correspondence file tickler, except that the cards are filed ahead instead of the original correspondence.

A typical follow-up card is shown in Fig. 24. At the head of the card is the name and address of the prospective customer, followed by the credit rating, the business, and the source from which the name was obtained--whether from advertising, a special list, or from a traveling salesman. The body of the card is ruled for a record of letters mailed, form and special letters separated. When a letter is sent the No. and date--if a form letter--is entered, and in the file column is noted the number of days the card is to be filed ahead--as 10 days or 30 days. If at the time specified, the next form letter in the series is to be sent, provided no response has been received, the No. should be noted on the next blank line in the No. column, so that the letter can be sent by a clerk, without consulting the salesman.

When the cards come from the file, those on which no form letter is indicated for the next follow-up should be referred to the correspondent. If he considers a special letter advisable, he should have all previous correspondence attached to the card, that he may know just what has been done to land the customer.

=Cross-Indexing the Chronological File.= One of the disadvantages of the tickler or chronological index, described above, for a follow-up is the difficulty of locating a card, when the date under which it is filed is unknown. A letter may be written on June 10, and the card filed ahead to June 25; on June 16 a reply may be received which makes it necessary to find the follow-up card, but to do this it is necessary to look through all of the cards filed between June 16 and June 25. If the card is not found, the chances are that on the 25th a regular follow-up form letter, which will make the system appear ridiculous, will be sent.

To so file the cards that any one can be found by name, without interference with the automatic features of the follow-up system, is an important consideration. This can be accomplished by the use of a card like the one shown in Fig. 25. It will be noted that this card bears a small tab or projection, on which is printed the letter _B_. These tabs are cut 1/20 of the width of the card and are in twenty positions across the card. This allows for twenty subdivisions of the alphabet, the _A_ tab being in the first position, _B_ in the second, etc.

In filling in a card, one bearing the letter corresponding with the first letter in the name of the correspondent is selected--a _B_ card for Brown, an _S_ card for Smith. Now since _B_ is always printed on a tab in the second position, and this tab is always the same distance from the end of the card, when the cards are filed, all _B_ tabs will be in a straight line from front to back of the drawer.

No matter under what date it is filed, if Brown's card is wanted it will be found by looking through the row of _B_ tabs in the second position from the left. Regardless of the number, all tabs printed with the same letter are found in one row, making it possible to file cards by date and cross-index by name.

=Cross-Indexing the Alphabetical File=. An improvement over the cross-index of the tickler, described above, is the method of cross-indexing an alphabetical file in a manner to insure a follow-up on a specified date. A card without tabs, as shown in Fig. 26, is used. Across the top of the card is printed a series of numbers representing the days of the month. This may include all of the numbers, from 1 to 31, or the month may be divided into five day periods.

In connection with this card a metal tab, which can be attached at will, is used. One of these tabs is placed over the number which represents the date on which it is to be followed up. The card is then filed, indexed by name.

The numbers being printed in the same position on every card, all tabs placed over the same number will be in a direct line in the file. The cards to be removed for the follow-up on a certain date are those bearing tabs over the number representing that date. On June 20, for illustration, all cards with tabs over No. 20 are taken from the file. When letters have been written, the tabs are moved to the next follow-up date, and the cards returned to the file.

This method of cross-indexing with movable tabs permits of the filing of the cards in any manner desired, with the knowledge that the follow-up date will be surely indicated. The tab method is also used for a combination of daily and monthly index. On the card shown in Fig. 27, the names of the month are printed under the date. For a follow-up in a later month a colored tab is used to represent the monthly index, while a black tab represents the day of the month. To illustrate, we will suppose that the card is placed in the file on Oct. 5 and the next follow-up date is Nov. 10; a black tab is placed over No. 10, and a red tab over No. 2. The card will not be disturbed on Oct. 10, as the red tab indicates that it is to be removed in a later month, but on Nov. 1, the red tab is removed from the card, and the black tab will bring it to notice on Nov. 10.

=Lists of Customers.= Every concern whether it secures business through the mails, by means of personal salesmen, or both, should have a list of its customers properly classified and arranged for easy reference. This should be something more than a list of names and addresses; certain essential facts about each customer--such as his business, the name of the buyer, the credit rating, and amount of purchases--should be recorded.

All of this information can be placed at the head of the ledger sheet, but it never should be necessary for another department to consult the records of the accounting department for information needed daily. The information given by the customers' list is of most value to the sales department and should be kept in that department.

For customers' lists, cards are most largely used, and are most satisfactory. Cards are readily classified, new names can be added at will, and old names are removed without disturbing the balance of the list or the general arrangement of the cards.

The follow-up card can be used as a customer's card, but should be moved from the follow-up to a separate file; or a new card can be made when a prospect becomes a customer.

On the back of the customer's card a form similar to Fig. 28 should be printed. This is intended for a record of the purchases of the customer and provides for a monthly record, covering a period of five years. The amount of purchases is entered monthly from the ledger. In a business in which the purchases of each customer are infrequent, each order should be entered with the date, in place of the monthly summary.

_Classification of List._ The value of a list of customers is greatly enhanced by a careful classification of the names. Lists of those engaged in the different trades and professions can be bought, but no list is so valuable as one made up of the names of those who have answered your advertisements, or with whom you have done business.

Most houses sell goods to those in different trades or occupations. A manufacturer may sell different lines, or the same line, to jobbers, retailers, and consumers; a mail order concern may sell to farmers, mechanics, and small retailers; a retailer may sell to men and women. To sell each different line to a different class of people, requires different arguments--a new line of selling talk must be used in each case. While the personal salesman has an opportunity to size up his prospect, and make his argument fit the individual, the letter salesman must fit his argument to a _class_. To drive home the right argument, he must be sure of the class to which his prospect belongs. He cannot hope to form the personal acquaintance of his prospects, but must rely on a proper classification.

The classes into which a list of customers and prospects should be divided depends on the nature of the business and the class of goods sold. It might be manufacturers in different lines, the different professions, retailers in several lines, or all of these combined into one list.

With a card list, any classification is easily provided. If the number of classes is small--not exceeding seven or eight--the classes can be indicated by the color of the card, a white card being used for one class, blue for another, etc.

For a more extensive classification, cards with numbered tabs, as in Fig. 29, are used. It will be noted that there are twelve of these tabs, and that they are numbered from left to right. In the follow-up systems, from which this illustration is taken, each number represents a certain line of business.

Suppose that No. 1 represents manufacturers; if all manufacturers on the list are to be circularized, only those names recorded on cards with the No. 1 tab are addressed. Now if the business is one dealing in specialties, it may be that the specialty to be sold will depend on the position held by the prospect--a sales manager will be more interested in a book on sales methods than in one on factory methods. To further classify the list, colors are used.

In the system referred to, eight colors are used. Seven of these represent occupations of prospective customers, while the eighth is used for customers. A manager or executive officer is represented by a blue card, a sales manager by a white card, etc. When a prospect becomes a customer, the card is removed from the follow-up file, the amount of the sale is entered on the back, and it is placed in another file reserved for customers. At the same time a red card is placed in the follow-up file for use in further circularizing. The tab on the customer's card shows his business, but the occupation is not so important since he is already acquainted with the house and its goods. A more familiar tone can be adopted in letters to a customer, than to a prospect.

A complete classification, such as provided in this system, is of immense value to a letter salesman. Suppose he wishes to address all executives--the blue card is used; if he wants to reach customers who are manufacturers, red cards with No. 1 tabs are the ones used. He can make his letter fit a particular class and be sure of the class.

=Classification of Sales.= There are certain lines of business in which a second order for the same article is seldom received from any customer. An example is the music business. The chances of selling a customer a second piano are remote, but the fact that he has purchased a piano is a sure indication that he will be interested in certain classes of music. Book publishing is another example. A man who buys a book on advertising, or commercial law, or auditing is quite likely to be a buyer of other books on the same or kindred subjects.

In a business conducted through the mail, a classified sales list that shows at a glance what classes of goods have been sold to each customer furnishes an excellent guide for further circularizing. On such records it is not necessary to show the amounts of purchases--the class is the important item.

Fig. 30 shows a card used for a record of this kind. The goods are divided into four classes, indicated by the letters at the head of the columns. When the first sale is made, the name and address are entered on one of these cards, and the date indicated in the proper column. A movable tab is placed on the upper edge of the card, over the letter that indicates the class, and the card is filed. As subsequent purchases are made the dates are entered, and if the purchase includes another class of goods, another tab is placed on the card. In time, one card may bear four tabs, indicating that the customer has bought goods in all four classes.

When new goods are received, they can be brought to the notice of those customers whose purchases indicate that they are most likely to be interested, without disturbing the other cards.

=Indexing Customers' Cards.= The best manner of indexing customers' and prospects' cards depends on the size of the list. A list of a few hundred names is best indexed alphabetically. A large list should be indexed geographically--according to location.

The geographical index consists of index cards printed with the names of the states, and sets of indexes bearing the names of the cities and towns in the different states. The state indexes are arranged in alphabetical order, and back of these the town indexes are filed alphabetically. The cards are filed back of the town indexes, these also being arranged alphabetically. When the number of names in a city is large, the cards are further subdivided by alphabetical indexes. In states where the list is small, an alphabetical index can be substituted for the town index, the letters representing towns; names of customers in Alton would be filed back of the A index, those in Springfield, back of the S index.

An advantage of the geographical index is that a definite territory can be covered by the letter salesman, or the personal salesman can go over the list and find out the condition of the trade in his own territory.

PERSONAL SALESMANSHIP DIVISION

Though the volume of business secured through the medium of the mails is increasing at a rapid rate, the bulk of the business of the country is done by personal salesmen.

Leaving out of the discussion the question of retail salesmanship, the personal salesmanship plan--the employment of traveling salesmen--is the least expensive method of selling goods at wholesale. To sell certain low-priced specialties to consumers, the mail order plan is sometimes best, for the reason that it is necessary to reach a large number of _possible_ buyers to find a few _actual_ buyers. This can be done at less expense by letters than by traveling salesmen.

More is being learned about how to use the mails to promote business--how to make the follow-up system an assistant to the salesmen. The manufacturer whose goods are sold to the trade, by salesmen, is learning how to build up his own business by assisting the dealer to sell his goods. He advertises to interest the consumer, he follows up the consumer and the dealer, and in the end assists his own salesman to sell more goods.

Much good literature has been written on the subject of salesmanship, plenty of advice about being systematic in his work has been given the traveling man, but very little has been written on the subject of making sales records and reports of assistance to both the house and the salesman. Some suggestions on this phase of the question are made in this discussion.

=Routing Salesmen.= How to route his salesmen to the best advantage is one of the important problems of the sales manager. He must first decide how often the territory should be covered, then the extent of the territory he will attempt to work, and the number of men required. When this has been done, the territory of each man must be laid out, and a route which will enable him to cover the territory with the smallest mileage, must be selected. The territory should not be larger than a man can cover in a specified time, but large enough to require all of his time.

_Map and Tack System._ To know just where each man is at all times--to be able to locate Smith or Brown instantly, every day--is very necessary. Perhaps the best method of doing this is by the use of what is known as the _map and tack system_.

State maps, printed in colors, are fastened in the bottoms of shallow drawers, a drawer for each state. Sharp pointed tacks, with heads covered with silk in a great variety of colors, are used for various classifications, and colored silk cords are used to indicate routes and territory boundaries.

To each salesman is assigned a specific color, by which he is always known. Tacks with heads of the proper colors are placed in the map at the towns on his territory. A cord is then strung from tack to tack in the order in which he will cover the territory. When the salesman leaves a town the cord is removed from that tack, coiled up, and placed over the tack at the next town. The tack at the end of the cord always shows the present location of the salesman. Fig. 31 illustrates a map with cords--represented by the heavy lines--indicating salesmen's routes.

Other tacks, with heads of a different color or coiled wire heads for holding labels, are used to indicate special facts--as, competition strong, customer ready to buy, claim to be adjusted, or collections to be made. These are placed at the side of the salesman's tacks and are a reminder to write to him, about the special matter, at that town. If an inquiry is received or a good prospect developed, in some small town not regularly visited by any salesman, a special tack is placed in the map at that point. A cord of special color is then strung from this tack to the nearest stopping point on any salesman's route. This is a reminder to write the salesman instructing him to make a special trip to this point outside of his regular territory.

_Route Cards._ It is not always advisable to attempt to lay out the entire route of a salesman in advance, neither is it always possible for him to make the towns in the time calculated. It is wise, therefore, to require the salesman to keep the house constantly advised about his stopping places. When the route is a long one, a route card, as shown in Fig. 32, should be mailed to the house weekly. The card should be 3×5 inches in size, to fit the standard size card drawer. Route cards of all salesmen, whether there are five or fifty, can then be kept in a card tray in the manager's desk.

=Reports of Calls.= The successful sales manager of the modern type is learning to get more and more business from his territory; he is not satisfied to show a large volume of business in a large territory, unless he feels that he has secured all of the business possible from every town. If Baker sells two dealers in Peoria, well and good; but why did he fail to sell the other five dealers in the same line? And it is not in a fault-finding spirit that he asks _why_; if he knew why, perhaps he and the salesman could together work out a plan that would solve the difficulty and secure from one to five new customers.

The salesman knows better than anyone else why he has failed to sell certain dealers; he is the man who becomes familiar with the actual conditions in each town--what competitors' goods are most popular, reasons for local business depression such as _crop failures_ or _labor disturbances_, and any causes for dissatisfaction with the goods or business methods of his own house. Possibly the sales manager is not in a position to change conditions, but certainly, he cannot solve the difficulties unless he knows what they are. The salesman should, therefore, assume that there is at least a chance that he will receive assistance by keeping the house posted on every detail that might affect his trade.

The only way in which practical results can be secured is for the salesman to make a report on every call made, in every town on his route. A form of report card is shown in Fig. 33. This is intended for a brief report of calls in one town. Space is provided for reports of seven calls, but if there is a larger number of dealers, more than one card is used. On the back of the card, a full line is allowed to each dealer for remarks.

The salesman is instructed to mail one of these cards, in an envelope specially provided for the purpose, from each town on his route. When received, the sales manager examines them, makes his notations, and files them according to salesmen's routes. When the salesman is next in the house the sales manager goes over the cards with him, and they discuss each case individually.

Forms of report cards differ, naturally, according to the business. In some lines more specific information is needed in each case to enable the sales manager to judge intelligently the chances for future business. Fig. 34 represents a card used in one business for a specific report on each call made. The form shown in Fig. 35 provides for a brief report including suggestions regarding the date of the next call.

=Follow-up of Dealers and Salesmen.= In the modern advertising campaigns of manufacturers in many lines, an effort is made to secure inquiries from consumers, though the goods are sold through dealers only. The inquiry is usually secured by a promise of a free sample, a handsome catalog, or other piece of printed matter.

These inquiries should always be referred to the nearest dealer, and in answering the inquiry, the name and address of the dealer should be given. In addition to the inquiries received from advertising, manufacturers in certain lines invite dealers to send them the names of good prospects. One of the large paint manufacturers asks the dealer to send two lists--one of people who are talking of painting their buildings, one of people whose buildings need painting. The manufacturer of a widely advertised washing machine asks for the names of all possible buyers to whom the dealer has talked washing machines, without making a sale.

The object of all this is to enable the manufacturer to assist the dealer to sell more goods of his manufacture. Sometimes the margin of profit to the manufacturer is such that he can afford to maintain an extensive follow-up on the names, and even send one of his salesmen to assist the dealer to close the sale.

The manufacturers of one of the popular pianos has secured excellent results from the operation of such a system. In this system, the card shown in Fig. 36 is used to follow-up both the inquirer and the dealer. It will be noted that columns are provided for a record of the postage on every letter or piece of printed matter mailed. The prospect receives a letter once a month, while once in two months a letter is written to the dealer asking for a report.

With the first letter to the prospect, a postal card acknowledgment form is enclosed. On the postal, space is provided for names, which the prospect is asked to fill in with names of friends who might be interested in pianos. By this simple expedient, an original inquiry is often added to with a half-dozen new names.

With the first letter to the prospect, there is also enclosed a formal letter of introduction to the dealer. This letter, which is addressed to the dealer, reads as follows:

The bearer of this letter wishes to inspect our pianos. We shall esteem it a favor if you will kindly explain the merits of these instruments and give---- ----an opportunity to thoroughly examine them.

Respectfully,

At the time of referring the inquiry to the dealer, the blank shown in Fig. 37 is filled in and mailed to the salesman in whose territory the dealer is located. The lower half of the blank is for the salesman's report to the house.

=Salesman's Expense Accounts.= Detailed expense accounts should be mailed to the house weekly. A conveniently arranged form, with columns, for regular expense items such as _hotel_, _R. R. fare_, _livery_, etc., will greatly assist the salesman in making up his accounts. Such a form is shown in Fig. 38. This is a card 3"×5" in size, punched to fit a small ring binder small enough to be carried in the pocket. Both sides of the card are used, providing for a record of expenses covering a period of one week.

SALES RECORDS

Regardless of the nature of the business, whether sales are made through the mail, by traveling salesmen, or resident agents, summaries of sales from day to day, supply much valuable information to the sales manager. Sales summaries which show the amount of sales each day and month, are the working charts of the sales manager.

It should be remembered that these statistics are chiefly valuable for comparative purposes, but to insure comparisons of value, the statistics must be compiled in proper form. It should be possible to compare, not alone total sales, but the sales of each man in different periods, the sales of one man with those of another, the sales in different territories, the sales of different departments, the sales by mail with those of personal salesmen.

=Daily Sales Records.= The daily record of sales should show the sales of each department, the source of the sales, and the proportion of cash and credit sales. These should also be divided as to wholesale and retail.

A convenient form is shown in Fig. 39. This is a sheet punched for a loose-leaf book, and there should be as many copies as there are men in the organization who are directly interested. Besides the sales manager, the general manager, the advertising manager, and the comptroller are all directly interested. By using carbon paper as many copies as needed can be made at one writing.

=Monthly Sales Records.= Fig. 40 represents a sales sheet arranged for a monthly summary, the statistics being obtained from the daily records. The monthly summary follows the same lines as the daily record, except that sales are not divided by departments.

Where the business is divided into several departments one of these monthly summary sheets can be used for each department.

These daily and monthly summaries provide for a comparison of wholesale with retail, mail order with personal salesmen, and departments. If there is a gain in one department and a loss in another, or a fluctuation in total sales, these summaries point out the source, showing where greater efforts are needed and where praise is deserved.

=Salesmen's Records.= While the sale summaries described afford many valuable comparisons, they do not provide a classification that will indicate the value of each salesman. There should be a record showing the volume of business of each man. The form shown in Fig. 41 shows a card used for a daily and monthly record of one salesman. The form might be elaborated to show cost of goods, salary, expenses, gross and net profits; but the tabulating of this information is more properly the work of the statistical department.

These cards should be filed alphabetically by name of the salesman, and divided according to states. They will then show the sales of each man and in each territory.

For a business in which goods are sold by resident agents, a card similar to the one shown in Fig. 42 should be used. The upper half of the card provides for the recording of certain essential information, while the lower half is used to record sales.

THE CREDIT ORGANIZATION

THE CREDIT MAN

Acknowledged specialists may be employed in every branch of an enterprise, the shrewdest brains may be engaged in buying, producing, and selling, but the final conservator of the business is the credit man; others may be profit makers, but he is the _profit saver_ in every commercial organization.

He is on guard constantly--always on the lookout for the slightest sign of danger, ever ready to take prompt and vigorous action to avert disaster to his house or to lend a helping hand to a customer. His duties make him the most misunderstood man in the entire organization.

He is thorough, methodical, painstaking, a keen student of human nature, possessing faith in the inherent honesty of his fellow men. The insistent search for facts that he demands, may cause him to be regarded as an inquisitive busybody by the very customer whom he desires most to help; as a carping critic, by the salesman of his own house.

Through it all he remains faithful to his trust, watchful of the interests of his house, and has the satisfaction of knowing that in spite of his mistakes but a remarkably small part of his credits prove bad--that where his conservatism has lost hundreds in trade, it has prevented the loss of thousands.

On no man in the organization is there such tremendous pressure brought to bear to secure favors; on no man do the consequences of his own mistakes come back so surely. The credit man must be firm, and, while availing himself of every reliable source of information, he must stick to his decisions, for he is expected to collect from those to whom he has extended credit. Every other man has a loop-hole through which he may escape criticism; if a customer is lost because goods are unsatisfactory, it may be "up to" the salesman, the shipping clerk, the superintendent, a foreman, or even an obscure mechanic. The credit man has no one on whom he can place the blame; if a customer fails to pay, no reason short of an earthquake will relieve the credit man of the responsibility.

So much for the credit man. Now for a discussion of the work he is expected to do, the machinery of his office, and his methods of operation--for the writer disclaims any intention of attempting to teach the student how to become a credit man.

INFORMATION REQUIRED

The most important function of the credit man is the determining of the credit risk--the amount of credit that can safely be extended to each individual. When he consents to the delivery of goods to be paid for at a future date, he is loaning his firm's money.

Before credit is granted extreme care must be exercised in determining the ability of the purchaser to pay, or that he will be able to pay when the bill is due. After necessary precautions against assuming too great a risk have been taken, a further insurance against loss is included in the amount added to cost--a certain per cent of the profit is expected to offset the risk.

In determining the credit risk, different classes of information are necessary in different lines of business. While certain specific information about individual applicants for credit is necessary, the subject may be divided into two general classes--wholesale and retail. Under the head of _wholesale_, is included information about all business concerns, whether a single proprietor, a partnership, or a corporation. In a general way also, the same information is required in respect to these concerns by the banker, the manufacturer, the jobber, and the wholesaler. Under the head of _retail_, is included the transactions of a retailer with his customers, who may be regarded as individuals.

Leading authorities on the subject of credit place the factors which determine the credit risk in two classes--the _man_ and the _business_. Under the first heading is considered the business morals of the debtor and his ability in, and familiarity with the business in which he is engaged. The second heading--the business--is considered from the financial standpoint, divided as to its assets and liabilities, and the profits or losses made in its operation.

But as to the relative importance of the two principal factors--the man and the business--authorities differ. In his valuable contribution to the literature of credits, Mr. E. St. Elmo Lewis takes the stand that the man--his character--should be considered secondary. To quote from Mr. Lewis' book:

If goods are the basis of all credit, character of the owner is and should be an after consideration. The very first question any credit man should ask, is, _can_ he pay?

The question of a man's ability to pay is becoming of greater ease of solution.

The question of the intention or inclination to pay must always be shrouded in the nebulæ of psychological theory.

What is the applicant worth? is the crucial test. Then we shall test him by another. What sort of a man is he?

Do we buy a law suit when we sell him goods?

How much must we add for moral insurance against loss?

Character is of vital importance in small concerns; of vital importance in concerns doing a large business on small capital, and it becomes of less importance as we progress into the field of corporations.

In direct contrast to this contention are the views of Mr. Ernest Reckitt, as expressed in an address delivered before an organization of bank clerks. After naming the factors to be considered by the banker before extending credit, he said:

You will note that in enumerating these factors I place first, and purposely so, "The Man Himself," and I believe I am correct in stating that bankers are now placing more stress upon this point than ever before. The man of good character and intelligence, who is full of energy and perseverance, will not find it difficult to obtain a reasonable line of credit with his bankers, while the man who is deficient in those qualities, whatever his reputed wealth may be, will be looked upon with suspicion. It therefore behooves you to become students of human character as well as students of banking, if you are to fill the highest positions within your reach.

These comments may be out of the range proposed by this paper, but I feel I cannot leave this topic without giving you an illustration of the point I wish to emphasize, namely: That it is the character of the man, or men, in a business, which must be first considered before the banker makes a loan. Some time ago, in a certain city, there was a large corporation reputed to be very wealthy, whose balance-sheets were beautiful to behold. Their business being large, they were borrowers of some of the largest banking institutions of their city. Apparently without any warning the corporation was declared bankrupt and went into the hands of a receiver. Later, investigation showed that the balance-sheet was misleading; some people might have called it a worse name, for the assets had been overstated and the liabilities understated. I happened to be in that city at the time of this failure, and, meeting a director of one of the banks with whom I was well acquainted, I inquired if his bank had been caught. "No," said he, "they did try and open an account with us some time ago with the object of becoming borrowers, but we turned them down." I asked him what reasons he and his colleagues on the directorate had for such action at a time when this corporation was supposed to be so prosperous. "Well," said my friend, "some time ago it came to my knowledge that this corporation paid no water tax and that its personal property tax was a mere bagatelle to what it should have been, and I figured out that the officers of a corporation that would be guilty of petty bribery would not be good customers for our bank."

So it will be seen that a knowledge of the business morals of the men in your community and a high ideal, on your part, of what constitutes good business morals is a most essential quality in the make-up of a banker, and that it was these factors that enabled the bank of which my friend was a director to escape what otherwise would have been a bad debt.

=Financial Statements.= Without attempting to decide the relative importance of the two principal factors, it can safely be stated that one of the first steps to be taken by the credit man is to secure a financial statement from the applicant. And the character of the statement may serve as a guide in determining the character of the man with whom he has to deal.

Most business men are willing to comply with any reasonable request relative to their financial standing, when applying for credit. Until recently, the average man had objected to giving out such statements, except to his bankers, but with the more universal demands for such statements has come a change, and now a statement of some sort is almost always obtainable.

The form of statements used by banks differ somewhat from that used by manufacturers and jobbers, and, while it differs slightly as between banks, and also as to whether the borrower is an individual, a partnership, or a corporation, in general the statement required follows the lines of the form shown in Fig. 1. This statement is signed, in the name of the firm by a member, in the case of a partnership; and in the name of the company by one of its officers, in the case of a corporation. A statement in the same form gives all of the information of a financial nature required by the manufacturer or merchant.

=Analysis of the Statement.= Of equal importance with the statement is the ability to read it--to correctly interpret its real meaning. This calls for a careful analysis of the several items of which it is composed. To make a correct analysis means that the credit man must have a general knowledge of the business in which the one asking for credit is engaged. The banker must know, for example, whether the season is one in which more capital is likely to be needed in the trade of the borrower, or one in which he should be liquidating his indebtedness.

So important is this phase of the question that some of the larger banks have adopted the plan of assigning requests for loans in different businesses to different officers. One man will investigate real estate securities, one, applications from board of trade houses, another handles applications from packing houses, others look after the steel, building, jobbing, and manufacturing enterprises. Each man is a specialist, making a special study of conditions in the business to which he is assigned.

In making an analysis of a statement, each item must be taken up separately and considered with respect to its relationship to other items, and its bearing on the statement as a whole.

_Cash on Hand._ The cash on hand should be consistent with the needs of the business, and, if listed separately, the cash in office should never be a large sum. There is seldom any good reason why cash should not be deposited daily. The banker will find it necessary to carefully scrutinize the amount in bank, particularly if the borrower claims to deposit in no other bank.

_Merchandise._ This item is always a somewhat uncertain quantity; often an estimate pure and simple, and the debtor is unlikely to make his estimate too low. In the absence of provable figures, it is necessary for the credit man to apply his knowledge of the business. Is the stock larger than should be required? Is it too low to enable the debtor to keep pace with his competitors? Or, if a manufacturing business, how much is raw material and how much finished goods?

One of the important factors in making an analysis of this item is a knowledge of the accounting methods of the debtor. Does he keep stock records, or if not, is his stock well cared for and stored in a manner to permit of a reasonably accurate estimate? On the latter point, reports of the observation of salesmen, referred to later on, have an important bearing.

_Bills Receivable._ On the statement form shown, this item is divided as to notes, secured and unsecured, not due and past due. To state that the amount of bills receivable is so much is one thing, to state the amount not due, is quite another. Any considerable amount of unsecured and past due paper indicates lax methods in the debtor's own credit department.

_Accounts Receivable._ This item is divided as to accounts less than 60 days past due and accounts more than 60 days past due. These items require the same close scrutiny as bills receivable.

The two items--bills and accounts receivable--should bear a reasonably constant ratio to the amount of sales. Any unusual increase in the percentage of book debts to sales calls for careful scrutiny, and leads to one of three conclusions: that trade conditions are bad, that the credit department has been lax, or that the amount is overstated.

The first of these conclusions is supported or rejected by the credit man's knowledge of financial conditions in general, and of conditions in the particular trade of the debtor. During a financial panic, or in a season following crop failures, it is to be expected that book debts will be greater in amount than in ordinary times. In the event of the third conclusion, it is time for a careful investigation. As a rule, the investigation will be productive of best results if an examination of the books by a public accountant is included.