September 13, 2017

What is Your Company Credit Culture?

By: Tom Oliveri

A few years ago I wrote a blog on “Produce Shippers MUST Establish a Company Credit Policy and Follow it.” When I mention a company credit culture, it means a way of doing business from top to bottom within an organization and making decisions about credit that should be looked upon as just as important as other critical initiatives that make your company successful.  After all, selling produce to companies who will pay for the purchase makes for a successful sales transaction.   

I am re-addressing this topic because I am routinely requested by regular members of Western Growers with collection help for slow pay or no pay sales contracts.  It is not uncommon to hear feedback from a member when I first inquire about the credit procedure for their company, that I am advised that they have no official company policy.  With all the technology and access to information we are afforded these days, not having a well-defined credit policy that is strictly followed is no longer acceptable. To help limit your companies bad debt experience, it is essential that shippers have a mandatory credit policy, and if possible, have a credit manager, or  at a minimum, a point person (champion of sorts) to ensure that all agreed upon credit policy procedures are followed.   

Where to begin?  An internal policy detailing how to approve and authorize a customer in your system and set a credit limit is essential. The Blue Book is a good foundational first step in addition to seeing and reviewing the customer’s audited financials.  There are also some predictive financial tools and analytical tools I would encourage you to explore with the Blue Book. Other steps are bank references, customer references, how many years has the company been in business and having a general understanding about the customers’ business model.  Just because the phone rings, that does not make the caller on the other end of the phone your best new customer.

Establishing internal protocols to review existing customers is also a good best practice. No matter what criteria you establish for your credit policy, it has been my experience that if followed, you can minimize bad debt experience.  

Below are eleven general items to consider, but should not be considered an exhaustive list:

  1. Utilize credit reporting companies as well as other resources to assist in making your decisions.
  2. Obtain audited financials and bank references.
  3. Ask about what the pay practices will be with your shipments.
  4. How many years has the customer been in business?
  5. Do they have a PACA and DRC license?
  6. Who are the principal owners and officers?
  7. Check other supplier references and, if appropriate, call those references.
  8. Have any employees with the customer been connected with prior companies that have experienced payment issues?
  9. Talk with other shippers, if appropriate, that may be supplying that customer to check on their experiences with pay.
  10. Call Western Growers Trade Practices Department to obtain any information we may have on the account, i.e. any PACA or DRC complaints pending.
  11. If you cannot obtain needed information to make an informed business decision, make the tough decision not to sell until you can get the information to make an appropriate business decision to sell.

For the most part the above items are quick and easy steps to begin to implement your own credit policy, and start your own Credit Culture.

Don’t forget that a customer assessment should be an ongoing work in progress, so always be assessing any changes in payment or other changes to the customer. Once a customer has been established, we understand some flexibly will be needed.  It may be a good idea to consider a small internal committee to allow for a consensus with any changes to credit limits or other terms.   

I hope these suggestions assist in helping you think about your own credit policies. Please contact me if you would like to discuss your specific company credit policy in more detail.  Remember, starting a disciplined credit culture will take leadership in order to inculcate that policy throughout your company, but adhering to an established credit policy will pay dividends to your company by minimizing bad debt write off.

Please forward your questions or suggested topics to or call me at 949-885-2269.