Being an old credit hound, I must disagree with those that say "by keeping credit as tight as possible, one cannot grow".

I have been in the biz for 8 years, but it wasn't until a couple of years ago I started to fully understand the concept of credit. 

Credit is nothing more than an extension of sales

• First we have to sell the customer that they are getting the best merchandise at the best rental rate
• Then every week we resell the value of the merchandise
• Then on the value of making on-time rental payments in advance for each rental term.

When I took over the store that I am currently at, credit had been running anywhere from 1/2 % to 2 % over the company standard of 6.5% total close out Saturday. (We work off of a Saturday week ending) The store had just come out of a month were it lost 31 "BOR".

After spending several days analyzing the stores previous poor performance I realized that all they were trying to do was get down to a 5.9 % or less (company standard) closeout and "hopefully" gain a unit or two.  The problem with this approach is, if that's all you are focused on, you tend to make bad business decisions.  In order for a store or an account manager to get down to 6.5% or even under 5.9% total closeout, the tendency is to "pick" on the ones
you know can be easily reached...to either come in an renew their agreement or convince to let you pick up your merchandise. 

What happens...you leave the accounts that really need to be picked up out there, and eventually they get charged off as a skip or stolen account.

Here's what we have done at my store:  Since July 2, 2001 ...

• Average Saturday total closeout of UNDER 3.9% or better
• Average Monday open between 14% and 16% total past due
• In the process we gained 102 "BOR"
• Increased "Potential Rental Income" over $10,000 in the last quarter of 2001 alone. 

How you might ask...let me explain.

EVERY contact with a customer is a sales  opportunity
I train my team to consider EVERY contact with a customer as a possible sales opportunity. Whether they are calling past due accounts or trying to make "cold calls."  This means that every time you go to a customers house to pick up "our" merchandise...try to establish a re-delivery date while you are there.  Even if the customer is over 10 days past due, there is nothing wrong in re renting to them. Of course we always get and verify a new order form in doing this.

Communicate Clearly From the Very Beginning
We explain to the customer that their Rental Agreement(s) expire on the day that they are due, and that according to their Rental Agreement there is no grace period...and we uphold this way of thinking.  Keep in mind that there are times when we will accept a renewal payment commitment for later in the week...but this is done on a per customer basis...I explain to all customers that, regardless of the situation, I will not accept a payment on an expired rental agreement if it is within their first 6 renewal payments.  I also explain to them that if their account is picked up for non-renewal that all they have to do is come by the store, fill out a new Order Form, and we will re-establish their rental.  I will reset their account to the term they had remaining when it was returned to the store, so the customer can retain ownership and NOT start all over again.

By using this approach 

• We have had 6 months of solid growth
• Ideal APU has gone from around $94.00 per BOR to over $107.00

One of the things we try to do every week is get into problem solving mode. By accepting a commitment on a customer every week, or by allowing a customer to go past due every week, we send a bad signal.

The problem in the industry is that people "threaten" to pick up their past due accounts and, instead of following through with this "threat", they either do nothing or go after the ones they KNOW they can get easily!  We have committed ourselves to clean up our hardest accounts first and usually by then our "easy" accounts have taken care of themselves.

Example: We are a "military" store which means that twice per month (1st & 15th) we have between 175-225 account come due.  Most months we may lose between 15 to 25 units before the 10th of the month because we will not take a commitment for their next payday.  On the flip side by the end of the month we are up 10-30 units because we are not scared to redeliver to our picked up accounts.  All to often a store will get a sour taste for picked
up accounts because of the mind set that "Why...we are only gonna have to pick them back up again in a week or two!"  WRONG... we are in the Rental business...that is what we do...this is the career we have chosen for ourselves. 

When you run a lax credit program, all you do is hurt yourself and causing an eventual pick up anyway...Once you really understand "credit", you can run a tighter ship and still keep it afloat!

FYI: Running our tighter (Under 3.9% closeout) Credit program we are usually
over 90% collected for the month and between 96% and 103% Performance
Month-to-Date. 

Anyone that wants it...gets it!  Anyone who pays for it...keeps it!!  Don't be scared to Rent it and Don't be scared to Collect it!