The Managemenf of Credit

Ihe Sole lsn't Complef ed Until The Cosh ls Coffecfed

As a credit man vvho has devoted over 30 years in the field of credit, mostly retail and consumer, I have learned as much as any other personwith the same amount of experienceabout the many problems of the average creditor and debtor. I am still learning. This subject of credit selling is one on which no man will ever be fully informed.

I learned the credit granting and collection business the hard way. I "chased" delinquent 50c and $1.00 a week installment accounts-with a bicycle as a vehicle-during my high school days, and eventually began a new career in the small loan. auto discount and finance field in Chicago. f)uring the depression years creiit seemed a far cry from today's accepted standards. But in the credit profesiion. standards never change, ^only the methods.

In the old days, buying on time was frowned upo.r 6y the mijority. Today credit is an important salLs tool. Orig- inally, I believe credit rvas designed to be a servant to the retailer and consumer. I have found far too many retailers, lumber and building supply firms among them, rvho have let ciedit become a master instead of a servant. They have gone overboard with receivables, their charge-off each year beyond reclaiming (as a certain percentage of it should be) and original operating capital rapidly draining away. Hard earned profits were tied up in receivables because they were meeting the demands of the credit buyers in their trade areas without system to such a precarious method of merchandising. Anyone can approve a credit sale. It takes knowledge of the credit profession to control it.

It has not been uncommon for me to find a retailer u'ho had completely dissipated his reserves by promiscuously granting credit. If, for example, he had 10 employees, they all were granting credit. That would be an ideal situation provided he had 10 credit and collection manag'ers. One dealer who called me into help him out of the credit jungle had over 9155,00o.00 on his books, all unsecured and as intang- ible an investment as he could aquire, and computation of his credit outstand-

by Willicrm E Locke

considered potential charge-off in the credit management field. Whenever I have related these facts to other old time credit men, bankers or business economists of my aquaintance, their reaction was the same. They usually asked, "What kind of a business are they running?"

itrg revealed,70% of it delinquent. He said, "That's bad, isn't it?"

Yes, that was bad. In fact, over $60,000.00 of it was over 90 days delinquent. In other words, over 38/o of his investment was shaky-a oossible charge off. However, he was .rot alone in a dilemma such as this. During a recent two year period I have served 34 independent business firms retailing services and hard goods. Original computation of their receivables, which were almost all unsecured, showed nearly a million dollars on their books. Of this amount, $558,654.00, an average of 58%. was overdue. Inclnded in these delirrquent dollars were over $300,000.- 00-90 and over 9() days delinquent,

Wi|liom E. locke is o credit monogement qnd credit supervision consultont, opercting his own firm with heodqudrters in Sqn Fr"oncisco. He hqs more thqn 3O yeors experience in mosl phoses of the retoil qnd consumer credit field. Since the origin of his professioncl services I O yeqrs ogo, he hos ossisted severql hundred business firms, including building supply declerships. He is recognized by vcrri. ous trqde qssociqtions ond writes for trqde publicotions. For detqils write direct to Williom E. Locke, 34Ol Bolboei Streel, Sqn Frqncisco 21, Cqlifornio, or lhe editor of The Cqlifornia lumber Merchont.

It is most imoortant to note that in all of the 34 buiiness firms mentioned above, and in all of the several hundred firms I have assisted in the last 10 years, uritrained personnel were doing their best without standards to follow. During these last l0 years I have been exposed to many different industries, and I can say without reservation, the building and supply dealers are as charitable with regard to granting credit as I have come in contact. It seemed easier for them to grant credit to the u'orthy and unworthy than to establish comoarable controls that are found in inventory controls, budgetary controls, required and proper accounting procedures, and general management practices.

It is always amusing to me to have a dealer in a small town sav to me. "The people in this town are different from those found in a big city."

B)' tro stretch of the imagination will I ever concede to such reasoning. The people, his customers, are perhaps different because he doesn't understand credit selling. He has unknowingly educated his customers "not to pay him." He doesn't realize that he can put into common practice the same procedures found in big city stores. only on a smaller scale. There is no reason why a customer should not pay for r.l'hat he buys in any town, or at least make as much effort to pay as you are making to collect-providing you are making an effort.

If you lose a customer by asking him to pay his bill, you are probably better off without him.

Stop to think how costly writing off credit losses can be. For example : If a retailer operates on 5/a net to sales, for everv $1.00 written off to bad debt he musi sell $20.00 of merchandise. Now, picture the plight of a building supply dealer I was called in to assist who wrote off one contractor account in the (Continued, onPage 6)

Build plywood sales and store profits with new Plans Genter

More than 2,000 dealers are finding this new Handy Plans Center a real sales-builder. It's an attractive, compact self-selling display that holds over 800 DFPA Handy Plans and Home Improvement Ideas. It increases sales of plywood, paint, tools, hardware and related items. It builds in-store traffic because it's eye-catching. One customer tells another, and comes back himself. ft boosts year-round profits because there's a new kit with seasonal ideas every three months. Besides plans and the permanent display rack, the kit has a colorful window banner, pennants, envelope stuffers and ad mats. For more information on how to build sales this easy way, see coupon on next page'

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Northwest dealer finds profits in packaged plywood cabins

The plywood second home market is still growing, and most of the profits are in shell homes, according to Russell Walters of Center Lumber & Construction Co., Tacoma, Wash. The firm has been in the prefab cabin business for twelve years, currently sells 30 to 50 packaged homes and cottages a year. Walters uses plywood as much as possible-for siding (Texture One-Eleven), sheathing and subfloors. He likes DFPA trademarked plywood because it saves time and gives him dependable quality construction. Buyers may finish cabins themselves, or a Center Lumber building crew will do it. Cabin below is DFPA's plan No. 8. See coupon for more information on plywood cabins.

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Dealer-fabricated trusses are profitable and easy to sell

"Nail-glued trusses with plywood gussets are more profitable to sell, yet more economical to make and handle, than any other truss we've worked with," says Roy Lanham, president of Brown Lumber in Midland, Mich. The firm went into components four years ago, and finds it costs g1 less to build a truss with plywood gussets than with metal. Yet they're so strong and rigid that contractors willingly pay a premium price. Bundles of 20 trusses are easy to transport, and need no special handling because they don't rack and gussets won't work loose. If you'd like more information on plywoodgusseted trusses, write DFPA.

Golor coding and unit loading speed plywood sheathing sales

Sheathing profits are rising for dealers who order standardized unit loads now offered by many mills. Steel-strapped packages of plywood with Exterior adhesive are edge-stained red; Interior, green. The DFPA trademark, grade and thickness are stenciled in black on the side of the bundle. Stacks of plywood are neater, cleaner, and plainly marked, so customer service is faster and ordering is simpler. Pilferage and in-transit damage are eliminated. The system is keyed to fork-lift equipment used in most lumber yards; the average package is 30 in. high and weighs 2,900 lbs. For more information on colorcoded unit loads of plywood sheathing, send in the coupon at right.

Supermarket merchandising ptys off for Galifornia dealer

Cash-and-carry and customer service, plus quality plywood and other merchandise mean profits for Build 'n Save, Long Beach, California. Manager Robert Marks goes all out to make shopping convenient and interesting. The store has information booths; doit-yourself and architectural consultants; grocery carts for hardware and small items; a self-serve drive-in lumber yard; specially designed display racks for plywood; well-flled shelves of DFPA plans and other literature. Build 'n Save emphasizes quality throughout, and stocks only DFPA trademarked plywood. The store is only two years old and already sells at the rate of $3 million a year. Marks says his plywood sales are roughly three times those of the average cashand-carry yard in the L. A. area.

Plywood bins make it easy for customers to help themselves

At Whiting-Mead Builders Market, San Diego, plywood bins for shorts and mill ends make self-service easier for the customers, and free salesmen for other selling jobs. The bins, near the central check-out counter, are of s/5," plywood, and rest on skids so they can be handled with a fork-lift. They are roomy and strong so they can take full loads of mill ends, short pieces of plywood and other materials. All stock in the bins is price-marked clearly with colored pencil. The system works so well that a month after the bins were in place, half the yard's inventory of shorts and mill ends was sold.

Be sure you ahvays specify DFPA trademarked plywood

It's good business to use this handy rubber stamp (shown below) on all your plywood orders. It's your assurance that you'll always get DFPA grade-trademarked plywood, manufactured under a rigid, industry-wide quality control program. When you stock and sell only DFPA trademarked plywood, your customers keep coming back because they know they can depend on its quality. The DFPA trademark also stands for the Douglas Fir Plywood Association's $6-million-ayear promotion program. Through national television and magazine advertising, field promotion and research into new and better uses for plywood, DFPA brings new and repeat business into your store and builds your plywood sales. If you don't have one already, send for your free DFPA order stamp (see coupon). And use it on all your plywood orders. ft's always a profitable idea.

DFPA has sales aids and information to help you build your plywood business. Booklets-envelope stufferscounter displays-construction plansjust send in the coupon, and we'll see that you get complete lists and descriptions of all available material, on the subjects you're interested in.

I Tacoma 2, tlashlngbn i i Please send me a list of sales aids and in' I 0l sSles In' formation to help me sell more plywood.

I'm interested inr'

E flandy Plans centcr n Cebins and sccond homss n Color{oded unit-loaded sheathing

E trcc 0tPl plywood oldsr stamp