November 5, 2019

Standard Operating Procedures To Help You Get Paid (Part 1)

Here at Western Growers Trade Practices, we encourage shippers to embrace a culture of best practices by putting in place every day procedures and protocols. As part of that mantra, I am pleased to provide a two-part guest blog from Mr. Bart Botta with the law firm of Rynn & Janowsky, LLP. Mr. Botta is a partner at Rynn & Janowsky which specializes in agriculture, PACA and employment law. You can view Mr. Botta’s bio HERE. Below, Mr. Botta provides some practical guidance of which standard operating procedures every shipper should have in place to ensure you get paid. After all, a sale is completed when the money is in the bank, not when the cooler is empty.

Having some good standard operating procedures in place when dealing with customers that may have financial difficulties is very important, and will serve you well if (and more likely “when”) you have to take steps to collect. The first line of defense against customers failing to pay you is to be proactive. It is important to prevent a customer from getting too far behind in the first place, and this can be best accomplished by having procedures in place before you begin selling to a new customer. 

Some tips for being proactive include, first and foremost, using a detailed Credit Application. These applications are great sources of information, and you can request information such as bank accounts, customers, credit limits, etc. Because the customer is new and is hoping to buy from you, this is the best time to get as much information as you can (to use later if necessary). Plus, a detailed credit application will help you successfully evaluate credit risk and manage credit.

We usually recommend that clients also request that the new customer sign a personal guaranty. Once again, because the customer usually needs you more than you need the customer at this early stage of a potential business relationship, getting a personal guaranty in place should not be too difficult. Also, before selling even one strawberry to a new customer, check the PACA website to make sure that company has a valid PACA license and to confirm there are no PACA reparation or disciplinary cases pending against the company. The website is found at:

If you cannot locate a valid PACA license, or if you want more information, just call the PACA Department (either a regional office or the D.C. main office) at 1-800-495-7222.  You can and should also check the company’s rating with Blue Book Services, which provides invaluable information on a company’s credit worthiness, trade reputation, and integrity.

Another thing you can do to be proactive can be summarized by the old saying that it is important to, “document, document, and document.” Making sure your sales related documents are in order can give you greater priority and may result in better recoveries for you if problems arise.

Make sure your documents contain the PACA trust language on the face of each and every invoice you send to a buyer. You, as the seller, must have a valid PACA license, and assuming you do, including this statutory language will automatically give you a PACA trust claim against the buyer. This trust claim will allow you to have extremely high priority in a bankruptcy, will allow you to obtain injunctive relief (freezing assets) against a non-paying customer, and will usually give you the ability to hold the controlling insiders of the company personally liable. The PACA trust language must be on each and every invoice to the seller, and must be word for word as set out in the PACA statute.

In addition to the PACA trust language, making sure your invoices and sales documents have “PACA Prompt” payment terms (i.e., 10 days) is also important. While payment terms can be extended beyond 10 days, if you do so, the PACA requires a pre-transaction written agreement. Therefore, we always recommend that clients keep the payment terms at ten days, since no agreement extending the payment terms is then necessary.

Finally, on your sales documents, make sure all documents contain consistent payment terms, and also make sure to include language on your invoices allowing for the recovery of attorney fees and finance charges of 1.5% per month. 

On your Bills of Lading, there are several provisions that you should be sure to include, the most important of which possibly being the “No Recourse” language. If you need any of these specific terms, do not hesitate to contact Western Growers’ Bryan Nickerson or me.

Bartholomew M. Botta
Partner Rynn & Janowsky, LLP

I would like to personally thank Bart for letting us all know of the standard operating procedures each shipper should have in place. And as always, should you as a Western Growers member be in a position where you are dealing with an issue and not sure what your next step should be, give me a call at 949-885-2392 or email me at [email protected] to discuss your available options.