Financial Reports
Credit managers agree on the value of a financial report to determine a customer’s creditworthiness. “Clearly the first and best source to make a good credit decision is based on financial statements,” Brown asserts. “We ask for them, but we don’t always get them.”
Though credit is important in all business sectors, it is much more of a concern in the perishable fruit and vegetable industry. It’s not particularly difficult to start a produce business, Brown notes. For example, in the PVC pipe business, a company would need to invest in a building, manufacturing equipment, and inventory. “That’s not the case in the produce business,” Brown says. “People can pick up the phone, call other people, and have trucks rolling with produce in them. So in terms of credit, it is a much more dangerous industry.”
Mitigating Risk
Giving customers credit keeps the produce business growing and moving, but establishing creditworthiness will never be a simple matter.
The companies that have mastered the process do so with a good credit application and prudent use of outside sources. These tools do not eliminate risk, but they can help mitigate the many pitfalls of operating in the fresh produce industry.
