Think for a moment about the most unpleasant task you must perform in your business. Is it the annual cleaning of the bathroom? Packing up unsold stock in a driving rainstorm after a horrible bookfair? After hashing over all of the possibilities, most booksellers would probably agree that collecting overdue bills ranks at the top of the list. And, it's a job that's not made any more agreeable by the responses you get when pursuing an unpaid bill. You've heard the lies about the check being in the mail, the overt hostility as if it's all your fault for sending the book, or worst of all, the pathetic excuses rooted in the messy personal lives of customers whose intimate biographies you'd rather not know.
Yet, when it comes to debt collection, booksellers are far more fortunate than most other businesses. If you have doubts, just ask any doctor, lawyer, or building supply wholesaler how much time they spend trying to collect overdue bills and how often they must write off bad debts. Booksellers come closer to collecting 100% of their debts than the vast majority of businesses, and for good reason: their client-base (libraries, booksellers, collectors, and readers) is highly motivated to pay their bills. Libraries may grind slowly but like all public institutions they ultimately do pay their bills. The vast majority of booksellers themselves tend to pay their bills if only because they are in this line of work because they enjoy what they are doing and want to keep doing it. Collectors tend to pay because most of them know that people who are slow-pay are not the first to be quoted the best books. (If your customers don't know this, let them know.)
Even the very worst collectors tend to pay, because, like drug addicts, they don't want to be cut off from their supply cold turkey. The general reader tends to pay because people who are readers tend to be thoughtful and moral, as is 99% of the population. This is fortunate because most book businesses operate on relatively small profit margins and with small staffs, with the result that any time devoted to debt collection is time lost that could have been spent cataloging, buying, or selling books or cleaning that bathroom. These "hidden" costs of dealing with debt collection are critical to businesses that don't have the staff, time, or profit margin to spare.
Taking Preventative Measures
This is why it's best to avoid the slow-pay and no- pay crowd by screening them before they get a chance to stiff you. The good news is you can screen and assess your customers, predict which ones are most likely to "no-pay," and practice effective ways of dealing with a customer who falls behind in paying his or her bill. But first, a disclaimer: booksellers vary widely in the way they approach this problem because booksellers vary widely in the nature and scope of their operations. A bookseller with a large used bookstore on a busy street is likely to have a large percentage of "walk-in" sales to strangers for amounts less than $30. A specialist rare book dealer operating from his or her rural home, may sell mostly by catalogue, by Internet, or by private quote, to known customers for amounts over $500. Between (and beyond?) those two extremes falls virtually the entire used and antiquarian bookselling community. For this reason, it should be obvious that not everything I present here will apply to every situation.
My views on this subject are naturally shaped by my own experience. I was a bookstore manager for a nationwide chain — when a teenager; in the 1970s I was a university rare book librarian; in the 1980s I was the literature manager for one of the largest rare book firms in the world; for the last ten years I've operated a rare book business as a sole proprietor, with sales of several hundred thousand dollars a year, mostly by private quote or through catalogues. I have a computerized customer database of more than 7,000 people, of whom 3,000 are sent catalogues. Most of the others do not get my catalogues but do have interests that might result in my quoting them something now and then. I also maintain a database of more than 600 deadbeats, and I screen all new customers against that database. To make a long story short, in ten years, I've sold several million dollars worth of books, some of which the IRS has allowed me to keep for myself. In that ten years I've been unable to collect on just one $85 debt. Here's what works for me:
Assess, Screen, & Profile Your Customers
I screen my customers by sending them a mailing list form. If they do not fill in the complete form, they do not become a customer. I ask for a home phone number, a business phone number, specific collecting interests, and both mailing and street addresses. On first orders, I require book trade references. I actually call references before shipping anything, since one in five people who supply references give fictitious references, or else their references have only bad things to say about them! If a customer has no trade references, I require payment in advance. If they tell me their phone number is unlisted, I ask for it anyway. Only about 1% of my customers have unlisted numbers (ULs); but 50% of those who have tried to stiff me have ULs. Clearly, people with ULs are not bad people, but it is a risk factor. If I don't learn about a customer's employment through casual conversation, I use a nationwide reverse phone directory (SelectPhone CD) to get the name of the business or employer for the phone number they have supplied. Why? Here's a breakdown of customers who have required me to go to extra trouble to collect their unpaid bills:
College students: 4
Texas preachers: 2
Movie producers: 1
In ten years, twenty-three people have let their bills go unpaid after three dunnings, and this is what they do for a living. I make no moral judgments about these professions (I was once a college student, now I'm a bookseller, and some of my best friends are attorneys) but with new customers I use caution in direct proportion to how many risk factors I see in their profile. It is also probably worth noting that a disproportionate number of my best customers are owners of privately-held businesses, and that no self-employed business owner has ever required a second dunning.
Another part of that profile includes the age of my customers. Of those who have required dunning, only one was over 60, two were 50-60, one was 40-50, and the rest under 40. Those who require dunning tend to be ten years younger, on average, than my general customer base. And they tend to be unmarried, unlike my general customer base.
I have never been able to determine any geographic trends among deadbeats, other than the fact that both of my deadbeat preachers were Texans. Southerners, Yankees, and Californians all seem about the same, when
it comes to paying -or not paying- their bills.
Gender can also be evaluated as a risk factor. Of those 23, 5 were females. Females comprise only 5% of my general customer base, but 22% of my deadbeats. Again, I make no judgments about this (my spouse is female), but in assessing risk, it is a factor, just as being young and male is a risk factor when applying for automobile insurance.
I have also noticed that those buying gifts, although a small percentage of total sales, frequently require dunning, and this pattern even applies to some regular customers who pay their bills on time for the books they or buy for themselves. I have also noticed that when a good customer begins to take longer and longer to pay their bills, the trend rarely reverses itself. Slow- pays almost always evolve into no-pays, a fact worth remembering.
While the actual numbers I cite are small, they are statistically significant since they are not a mere sampling, but comprise the entire population of deadbeats from a pool of more than 7,000 customers. And while it is beyond the scope of this article to explore the social, economic and psychological reasons that might account for these numbers, I do know this: If a 28 year old unmarried female attorney with no trade references, an unlisted phone number, only a post office box for an address, and fuzzy wants, expresses a wish to buy a gift for a friend and orders a book, I'm going to exercise more caution than I would with a 65 year old married male business owner with trade references, a published phone number, home and business street addresses, and specific wants.
Keep a Deadbeat File
Finally, a vital part of my screening process is my "deadbeat file." All new customers are checked against this file. As mentioned before, this is a database of more than 600 individuals or businesses who fall into one of the following unsavory categories: they do not pay their bills, they are con-artists, they are thieves, or they are "nut-cases." Whenever a bookseller mentions a deadbeat in conversation, or I read about a book thief or con-artist who has been arrested or convicted, I enter his or her name, the details, and my source of information in my database. I add two or three a month, and almost as often I hear from somebody in this elite group, requesting a catalogue or ordering a book. While I cannot legally publish or circulate this database, I do respond candidly when fellow dealers call when my name has been given as a reference, and if all dealers did the same, we'd all be better off. The time it takes me to maintain that database saves me not only both catalogue printing and postage costs, but prevents untold headaches later.
A Look at Payment Methods
Once you have screened and assessed a customer, a bookseller basically has four ways to take payment. Each has advantages and disadvantages.
CASH: It works for me. But make sure you produce an invoice or receipt verifying the amount paid in case the book is returned for a refund or a dispute arises.
CREDIT CARDS: Given the nature of my business, in ten years I have lost only two very small sales because I did not take credit cards. Some of my best customers have told me they would never dare charge a book to their credit card for fear that their spouse might see what they were really paying for some of their books. In terms of debt collection, the 3% fee (or more, depending on your bank) would total far more money than the small amount of time or money I spend dunning a handful of people each year. If I had a storefront with a large walk-in trade for general used books, I'd absolutely accept credit cards. Now that the Interloc public database is up and running, I'm forced to think about it.
CHECKS: In ten years, I've had two bad checks and both were quickly made good. If local, bad checks are actionable with your local district attorney, they can usually be displayed if they are not made good. You can charge a returned-check fee, but verify the prevailing rates in your area since courts have held that such fees must be reasonable.
If you get a bad check as part of a mail-order transaction, the U. S. Postal Service is of little help unless that same person has written numerous bad checks and everybody complains. Mail fraud is not based on a single incident, but on an "established pattern of behavior" and postal inspectors are not in the business of debt collection. When accepting a check you should require at least one photo ID, but it also helps to note whether the check is drawn on a well established account. How can you tell? Look at the check number. Some people start their accounts with the number 1000, so a check numbered 25 or 1025 may be from a recently opened (and soon to be closed) account. Most banks now print the date an account was opened somewhere on the check. Does the person's name, address, and phone number appear on the check? In my database, I routinely record the bank name, account numbers, spouse's name, and phone numbers from checks I receive in payment; you never know when you might need such information.
INVOICING: With established customers I invoice their purchases net 30 days. Booksellers who do not pay within thirty days forfeit their discount. I send statements promptly on overdue accounts. My invoices describe the author, title, and price of each item sold, along with catalogue item numbers when appropriate. My invoices are imprinted with my name, address, and phone number, and I record the date of sale and the terms on each invoice. I do not enclose an SASE as some booksellers do; it is a nice gesture, but unexpected, and I don't think the added expense results in quicker payment. I never cease to be amazed by the number of invoices I get that do not have the name of the buyer or seller anywhere on the invoice. Blank receipts from the office supply store are not a substitute for an invoice.
Dialing for Dollars
Finally, let's assume you have done everything right (you have screened, exercised due caution, etc.) but somehow a customer has ended up with your book and you have not ended up with their money. How do you collect?
My approach is to turn up the pressure steadily but slowly in a carefully prescribed sequence, letting the customer know the next step in the sequence each step of the way. By doing this, you teach the person that you will do what you say you will do.
First, I send a statement, with a note that I will call soon if I don't hear from them. Then I send a second statement, followed up with a phone call to their home or business. In that phone call, speaking in a deliberate, calm, and pleasant voice, I express concern and ask why the payment has been "delayed." I never ask "Why aren't you going to pay for this book?" That kind of question, combined with threats, can be a self-fulfilling prophecy. I listen carefully to their answers, and if appropriate, ask for partial payments. Failing an agreement on partial payments, I then request the return of the book, "so that we can remain friendly and you can continue to do business with me and other booksellers." I say this even if I know I'm never selling this person another book as long as I live. Remember that your goal is to collect the payment, not vent your spleen.
My third statement is always final and is marked thus. I send this statement with a letter specifically addressing how many days will pass before the bill is turned over to a collection agency. I follow it up with a call timed just days after they should get that final statement, again speaking in the same calm but firm voice as before, again offering to accept return of the hook, and reminding the customer that the book trade is a relatively small community, that dealers talk to each other frequently, that people who don't pay their bills quickly get reputations, and that I intend to contact other booksellers to see if their unpaid bill with me is part of a pattern of behavior. I do not raise my voice or make any direct threats. Deadbeats are used to dealing with angry people and idle threats. Deadbeats are not used to people who stay calm, and who have done each thing they said they were going to do every step of the way.
To a deadbeat used to angry threatening merchants, such a person can be hard to ignore. In ten years, only one person was immune to this approach, and after consultation with my attorney, I published his name and the facts, carefully worded to avoid libel, in my next catalogue. He had stiffed at least one other bookseller that I knew about, and if he was like most deadbeats, he likely didn't stop at two. For a lousy $85 he ruined his reputation with 3,000 dealers, collectors, and libraries. And, any potential deadbeats who read my catalogue got a glimpse of what might be in store for them.
A Bookseller's Gotta Do Whatta Bookseller's Gotta Do
Yet, for all the unpleasant aspects of debt collection, it can have its humorous moments. A book-scout had ordered a first edition from me, which he immediately married to a dust jacket from a reprint, and sold it at an auction house where he worked part-time. This prince of a fellow had made a healthy profit, but saw no reason to shave his profit margin by paying his bill. He had eluded me for two years, but using SelectPhone CD I tracked him down.
SelectPhone* is a nationwide phone directory (on five CDs) that allows you to search by name, address, phone number, zip code, state, city, business code, etc. You can instantly locate any Oglethorpe in Iowa, all the opera societies in Amarillo, or get the name and address for any published phone number in the country. In addition, once you locate a person or business, you can then hit the "neighbor" key and see who lives on their street. You can also link up to a map showing their location. And you can print labels, in case you want to send a catalogue to everybody in, say, 90210. These features have obvious applications, and I use it most often when updating my mailing-list, when a customer moves without giving me their new address, or when I'm on the road.
That said, I used SelectPhone to locate all of my deadbeat's neighbors and even his dear old mother. I made a call to a neighbor posing as an old friend and quickly learned where my deadbeat worked, and also learned that he sometimes stayed at his mother's house. I then called him at work. Startled, but trying to act nonchalant, the deadbeat asked how I had tracked him down. I declined to answer, but speculated that his mother would be ashamed to hear her son wasn't paying his bills. He scoffed, and said I did not know his mother. I then recited her name, address, and phone number, and said that I knew he stayed with her frequently. He then asked how much he owed me and began babbling. I named a few of his neighbors and remarked that I'd hate to have to go to the trouble to contact them to get his address if he moved again without paying his bill. The check arrived a week later.
If you have any additional questions or comments about this topic, you may contact Kevin Mac Donnell of Mac Donnell's Rare Books at 9307 Glenlake Drive, Austin, TX 78730, (512) 345-4139.