Credit Analysis Without All the Facts

“Everybody who works for the company is an extension of the credit department,” Lott maintains, “starting with the customer service person who takes the order.”

She, too, emphasizes staying in contact. “Not only do you run the credit and the references when you’re first starting out with the customer, but it’s a good idea to keep in touch,” explains Lott.

Industry Support
Lastly, sharing experiences and information with others in the trade can also be helpful in tricky or unusual situations.

Many credit personnel belong to groups like the National Association of Credit Managers (NACM), headquartered in Columbia, MD, which serves as an advocate for credit management professionals throughout the country. There are local chapters, meetings, and an extensive network of contacts.

Lott meets with the NACM’s Midwest chapter. “There’s a mediator from NACM and we meet with other vendors and talk about new customers,” she confirms.

While certain details such as terms are not discussed, Gillis finds such partnerships with other credit managers well worth the time and “very helpful, because you can hear from their end how things are going, and if they’re having the same issues you are.”

What Comes Next
So the big question becomes, is the customer worthy of a credit line?

Gillis suggests a few other questions to ask: “Is this a strategic account or a geographical/regional account we want to go after? Is it a sales opportunity for us as a company? Is it an account where there’s a potential for growth in a new item or a new package?”

For Lott, it’s a bit different but still follows the same basic lines of thought: is the customer “worth giving $3000 or $10,000 or $20,000?”

How established is the restaurant and how much money is invested in it? Does it have a good location? What is the customer buying, e.g., specialty items to set it apart from competitors?

After gathering the essential information and making a determination about a customer’s creditworthiness, next comes the task of developing terms. In addressing credit terms, produce suppliers must also consider volume and flow.

Lott looks for regular service and a long-term relationship. “We try to create terms that will be easy for customers, as well as for us. When you’re extending credit to a customer, you’re actually giving them money to work with—it’s like a bank loan without the interest.”

And even though many companies that extend credit charge interest when a customer goes beyond terms, Lott says “we don’t charge interest at this time.”