meet his first bills promptly at maturity, the limit of credit should be reduced to one-half the previous amount. If he is unduly slow the second time, his limit of credit should again be cut in half, and before filling his third order, a letter should be written to the customer reciting the previous unpleasant experience, and asking him what may be expected in this case. If after receiving his reply, the order is filled and he is again slow, the limit should be erased entirely, and the salesman instructed to sell him only for cash, or avoid him until such time as conditions change. This does away with the unpleasantness of turning down an order.

Differences in Policy.-There are many differences in the application of credit to manufacturing, wholesale, and retail trade. The manufacturer deals with the entire country and even foreign countries, while the wholesaler generally deals only with a specific territory. The former welcomes distant accounts, the latter views them with caution. The manufacturer is generally advertising his goods and wants them to go everywhere. The wholesaler is merely anxious to dispose of his goods promptly, and he can do this better near at home than at a distance. The manufacturer's credit man is thus forced to take greater risks than the wholesaler.

But the differences in credit policy between manufacturer and wholesaler are not nearly so marked as between wholesaler and retailer. Here almost every phase of the subject is different-the classes of customers, the type of credit information, the methods of opening accounts. The aim of the retail credit man is to open as many accounts as possible, but in such a way that the percentage of losses will not increase. He is judged almost wholly by the volume of his sales, and he knows, that, considering the retail competition, he should do his utmost and even advise customers to open accounts.

Retail Charge Accounts.-The element of charge accounts in a retail business is, in fact, of high importance. Some of the greatest department stores of this country

owe their success to their skill in handling and creating this class of trade. They have learned that the charge account holds a customer, induces him to concentrate his buying, and really connects him with the house, while the cash customer buys everywhere and seldom becomes a regular customer anywhere. The charge customer is favored upon every hand. He can order goods quickly and easily, without "waiting for the change." He can return goods if dissatisfied. He can obtain goods when he needs them and pay for them later, at his convenience. This may result, as we have already said, in his buying more than he otherwise would, but the result is beneficial to the merchant, provided the account is good.

Differences in Service and Terms.-Other wide differences between manufacturer, wholesaler, and retailer is in the matter of service and terms. The large general houses, in the question of service, are interested only in accuracy and prompt payments. Their demands may be couched in cold, business-like terms, and yet the recipient will not resent it; he is accustomed to such transactions and realizes that they are purely routine questions between the credit man and himself.

But the retailer, in dealing with his customers, must adopt a far different policy. Here the personal equation must always be recognized and allowed for. The customer is often a woman whose future trade depends upon how well she is pleased, and how tactfully her account is handled.

Not only does credit policy differ in different types of business, but the terms of credit are also different. In general lines of business, terms are so adjusted as to allow of the purchaser's realizing upon the goods bought before the bills for them fall due. The manufacturer will perhaps sell to the jobber on six months' time, while the jobber will in turn sell to the retailer on three months' time. This is because the jobber has to collect from the consumer indirectly through the retailer before he can pay › the manufacturer, and therefore requires twice as much time as the retailer himself. Where the manufacturer

deals directly with the retailer the terms are correspondingly shorter.

The Use of Coupon Books.-Coupon books, the use of which began with railroads, street-cars and restaurants, are now being utilized more and more in general lines of business. While apparently issued as a convenience to the customer, they are really a great money-getter for the merchant. For example, one of the taxicab companies of New York City has recently begun issuing $20 worth of tickets for $19. While ostensibly giving the patron 5 per cent on his outlay, it actually figures out a substantial profit for the taxicab. The man with these books in his pocket will probably use the cab more than the other fellow; and last but not least, the company gets all the cash in hand in advance.

Many merchants now use the "coupon book" plan in connection with their credit system. This is, perhaps, a time-saving as well as a simple form of handling the credit business. The customer is given a book of coupons redeemable in merchandise and, in some cases, gives his note in settlement therefor.

How Handled in Bookkeeping.-The one advantage in this system is in eliminating the necessity for making an entry on books every time a customer buys on time. The entry will have been made, and the coupon received will be considered as cash. In making the entry, Bills Receivable account is debited for the note, but the question is, what account should be credited? Merchandise account should not receive this credit, for no merchandise has been advanced, and the actual gain of the business would not be correctly shown unless there were unredeemed coupons. To overcome this difficulty, therefore, it is desirable to open a Coupon Book account and credit it with the amount of the coupons. Debit Coupon Book account as coupons are redeemed, same as Cash Sales, either daily, weekly or monthly, as may be preferred, and credit Sales account or Merchandise. The books will then show accurate profits at the close of business, and if

there are any unredeemed coupons, the credit balance of Coupon Book account will represent the liability for unredeemed coupons held by the customers.

If a note is not given, of course, the customer is debited with the coupon book the same as he would be charged with anything else, and Coupon Book account would be credited, but none of the coupons should be accounted for in the Merchandise account or Sales account until they are redeemed.

2. CREDIT INFORMATION

The extension of credit is based directly upon the qualifications of the borrower, first as to character, second as to ability, and third as to property. The entire credit system is founded upon the interchange of this commercial courtesy, and the absence of it is more dangerous to business as a whole than any other factor. For practical purposes, of course, the natural basis of credit is in the net tangible assets, which may be taken as an approximate evidence of integrity, ability and property combined. A very important item to be considered is the relation between the volume of borrower's sales and the amount of his expenses, since the nearest index of a man's business condition is the degree of frequency with which his capital is turned over. The only means by which the creditor can obtain this basis for credit is through information of each individual case. Information is accordingly the basis of all credit judgment.

Methods of Obtaining Information.-The principal methods of obtaining credit information may be classified as follows:

1. Personal interviews and correspondence.

2. Commercial agencies.

3. Local attorneys and banks.

4. Salesmen.

5. Commercial interchange.

It is evident that methods of obtaining information

will differ, not only in individual cases, but also in the cases of different classes of trade, such as wholesale and manufacturing, retail and instalment. The credit department of a house must obtain every possible kind of information about trade conditions in general, about its own customers, and also about firms that may become customers, in order to be prepared in advance with a means of judging them. A credit customer must not be admitted until his standing has been determined by the credit man. The success of a business depends very greatly upon the completeness of its records, especially those which contain the business history of its customers, for what has happened in the past is liable to happen in the future, and a customer will on the whole maintain the business character of which he has given evidence.

1. Personal Interviews and Correspondence. In certain types of business, especially in the instalment and retail trades, information has to be obtained almost entirely by direct personal means. Decisions often have to be made on the spot. A majority, also, of the customers in these kinds of trade are women who have to be treated in a more personal way than men, and who have not as definite a financial standing. Business men are rapidly growing away from their former hostility to frank statements of assets and liabilities. As progressive methods and business logic are becoming more universal, they are coming to see that a man who sells goods on credit has the right to know just what are his chances of receiving full return value; and also that refusal of this legitimate information would imply a concealment of facts about their financial condition which, if disclosed, would prevent them from receiving credit. They also know that these rules of business are hard and fast, and that the credit policy does not pertain to one house only, but to all.

The retail shopper, however, is not generally familiar with such matters, and may resent inquiry as to her "personal" affairs. Any correspondence on the subject, either direct or to some third party, must be tactful and