A company’s credit culture defines its approach to credit management throughout the organization, reflecting how decisions regarding credit are prioritized alongside other critical business initiatives. Ensuring timely payments from customers is vital for the success of any sales transaction. However, establishing and enforcing a comprehensive credit policy is often overlooked, leading to challenges in collections and increased bad debt.

As a trusted advisor to members of Western Growers, I frequently encounter situations where businesses lack a formal credit policy, relying instead on ad hoc procedures. In today’s digital age, overlooking the need for a well-defined credit policy is no longer acceptable. To mitigate bad debt experiences, it’s imperative for companies to institute mandatory credit policies, ideally overseen by a dedicated credit manager or designated point person.

Where should you begin? Developing an internal policy for approving customers and setting credit limits is crucial. Utilizing resources like the Produce Blue Book for foundational financial insights, along with tools for predictive analysis, can streamline this process. Additionally, conducting thorough evaluations of customer financials, references, and business practices is essential to assess creditworthiness accurately.

Establishing protocols for ongoing customer reviews is equally important. By consistently adhering to established credit policies, businesses can minimize the risk of bad debt. Here are eleven key considerations to guide your credit assessment process:

1. Leverage credit reporting agencies and other resources for informed decision-making.
2. Obtain audited financials and bank references.
3. Clarify payment practices with customers upfront.
4. Evaluate the longevity of the customer’s business.
5. Verify PACA and DRC licensing.
6. Identify principal owners and officers.
7. Seek feedback from other suppliers.
8. Investigate past payment issues involving customer employees.
9. Consult with other industry peers.
10. Utilize available trade resources for additional insights.
11. Exercise caution when information is lacking, prioritizing informed business decisions over immediate sales.

Remember, establishing a disciplined credit culture requires consistent leadership and commitment throughout the organization. Regularly reassessing customer creditworthiness and adapting policies as needed are integral to long-term success. Should you require further assistance in developing or refining your company’s credit policy, please do not hesitate to reach out to me at 949.885.4808 or [email protected]. Investing in a robust credit culture will yield significant dividends by minimizing bad debt and promoting financial stability.