of good or fair grade of risks, and that not over 10 per cent of it should be such as requires anything but the standard routine service of the department. In this latter grade of business is the opportunity for the credit manager to exercise the prerogatives of his department in such a manner as to lose business that is potentially good, or to accept this business and help re-make it into a good grade of risk and thereby increase the amount of business that can be accepted. To do the latter, beyond the usual functions of routine credit granting, resolves itself to a great extent into policies of management. Policies of management are sometimes dictated more by force of circumstances than by a mere matter of choice, but regardless of the impelling motives, the credit manager should have a voice in forming policies to insure the efficacious enforcement of them.

Enforcement of Terms.-One of the policies of management that usually concerns everyone to a transaction is that regarding enforcement of terms. Shall terms of sale always be rigidly enforced regardless of consequences, or shall there be an application of common sense in considering some of the things that often greatly affect terms of sale? There are many things that may enter into the consideration of this policy. The following are some of them:

Kind and nature of the business.

Quality of merchandise or service as compared with that of competitors.

Prices as compared with those of competitors.

Distance, affecting time of delivery and transportation charges.
Seasons.

Markets.

Advertising policy, affecting sales resistance and creating demand.

Class of salesmen employed.

Grade of customers solicited.

Discounts, trade and cash.

Perishability of products.

By-products and their possible market.

Distributing agencies.

Dispensing equipment.

Storage facilities and containers.

Desirability of buyers' location for trade.

Adjustments.

Desire for expansion in new and old fields.

Investment considerations in expansion plans, etc.

All these are things that vitally affect the acceptance of risks, and consequently the maximum volume of business that can be accepted. They have a bearing on the amount of bad debt losses, the loss of customers, and the expense of conducting the credit and collection department.

Accounts Receivable, Current

Accounts Receivable, 30 days overdue....

$

Accounts Receivable, 60 days overdue or more (not in

cluding attorney and uncollectible
accounts)

Accounts Receivable, In attorney's hands..

Acccounts Receivable, Uncollectible

Accounts Receivable, TOTAL

Collections

Net Sales

Value of orders held up

Value of orders canceled

Figure 35. Monthly Report from Branch Office

But, whatever the question in point, or the policy involved, the general management of a business should always be ascessible to and approachable by the credit manager. Unless this is made possible the best coordination of departmental activities cannot be had. There should be frequent conferences between the management and the credit manager.

A Report System.-There should be an adequate system of reports from branch offices to the credit manager, and from the credit manager to the general management. A form like that shown in Figure 35 should come regularly from all branches to the credit manager. These should be assembled for the management on a summary form like shown in Figure 36. Results from this form may then be graphed as to sales, collections, and receivables, as shown in Figure 37.

When the above reports are received, tabulated and graphed, it is no difficult matter for the management to place their hands

Figure 36. Monthly Summary Form for Assembling Branch Office Reports

on any phase or branch of the work that is not showing proper ratios and percentages. These reports show the management the amount of sales being made, amount collected, overdue accounts, losses, orders held pending acceptance, and business rejected.

The Credit Department Budget. In addition to the above, where a budget system is used, it is necessary to advise the management of contemplated collections the following month to permit the planning of the financial budget. This estimate may be readily obtained by referring to the above

Dollars

reports and chart. It is simply a matter of sizing up previous month's business, observing the trend of sales and receivables, noting the seasonal swing of the business, taking into account conditions in various parts of the territory covered, including prices, noting any specific conditions, and arriving at an approximation of what the collections with ordinary routine efforts should be.

Figure 37. Chart Showing Assembled Branch Office Reports

The following is a convenient form for a credit manager to use in keeping daily check on the estimate of collections furnished the management for budget purposes, Figure 38.

With the estimate of collections and other reports above shown, the credit department should furnish the management an estimate of contemplated expenses. A form like that in Figure 39 may be used for this purpose.

At the end of the year the management should be furnished with a report like that in Figure 39, but giving the total figures for the year, together with percentage of losses to sales, cost of operating the department and its percentage to amount of

Figure 38. Form for Checking Daily Collections

sales. It is well to give with this report a statement of orders that were rejected on credit terms and lost to the business as orders, and the reasons there for, and also a statement of orders denied credit on original terms but which the credit manager succeeded in having filled on satisfactory terms. A statement