The credit department holds the key to a company’s revenue.
Salespeople bring in the business, but those in credit actually collect the money. Whether this is two employees or several, without them finances would be a jumble.
In a company’s startup phase, the credit function often falls to management. Then, when business starts to take off and revenue goes up, it can easily become too much for one person to handle.
From the time a salesperson requests an order to the time payment arrives, the credit department is involved. The responsibilities of this department range from evaluating new customers and their ability to pay to determining payment terms and dealing with collections and delinquent accounts.
Credit departments are a vital part of every business and instrumental in keeping a company afloat.
Charles Brown is director of credit for Hapco Farms, LLC, BB #:104132 a grower and importer in Westhampton Beach, NY. He is well acquainted with the value of credit department functions and their importance to the bottom line.
At Hapco Farms, Brown says the credit department establishes credit limits, performs billing and cash applications, and files and handles claims—all of which are vital to both the short- and long-term health of the company.
When a credit department is at the top of its game, it minimizes carrying costs (warehousing, inventory control, insurance, etc.) and maximizes profit.
So how can a credit department be at its best? Let’s delve a little deeper into some of the responsibilities, goals, and objectives to see not only how they work, but how they can be optimized.
Essential Functions
A member of the sales team has made a deal with a big buyer, and needs the credit manager to sign off on establishing a substantial line of credit. The first step, of course, is for the credit manager to assess the customer’s creditworthiness.
When prospective customers want to buy product, the more data available, the better—this makes the credit analysis more accurate and shields the selling company from risk.
One tool used by Cathy Jimenez, credit manager at Del Campo Supreme, Inc. BB #:163269 in Nogales, AZ, is the customer’s status with Blue Book Services, especially its Blue Book Score. Created in 2005, Blue Book Scores forecast the probability that a produce company will or won’t become delinquent or default on its payments within a year.
“The volatility inherent to the produce industry brings daily challenges and payment risk; thus, we rely on outside sources and the potential customer’s status in the produce industry,” explains Jimenez.
“We trust information created by peers or industry-specific publications to make an informal view on whether we should offer credit to certain companies,” she adds.
Every potential customer should be vetted and required to undergo both credit and reference checks. If a company’s credit history is less than stellar, this information is vital. The simple task of verifying references is also essential in reducing risk.
This is an excerpt from the Credit & Finance Department in the November/December 2021 issue of Produce Blueprints Magazine. Click here to read the whole issue.
