Agribusiness Planning & Analysis: Customer Credit Notes Page Customer Credit/AP8... · his lawn...

Agribusiness Planning & Analysis � AP8 � Customer Credit

Agribusiness Planning & Analysis: Customer Credit Notes Page

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Customer credit

Advantages

Disadvantages

Credit policies

Billing and collection

Delinquent credit

Credit standing

Sources of credit information


Agribusiness Planning & Analysis: Customer Credit AP8.1

What Should We Have Done Differently?

A local feed store has sold several thousands of dollars of feed to several customers on account. Later these customers either refused to pay or could not pay. As a result, the feed store is going to go bankrupt. What could the feed store have done differently to insure that customers would have been able to pay their accounts?

The local greenhouse is known for its quality work for funerals and weddings. Nearly everyone in the town of 5,000 people uses them for important events. The little old lady who owns the place is so trusting and does not have a problem with customers charging items. Recently, though, the greenhouse has been facing financial difficulties and is having trouble collecting on its accounts. It may be on its way to bankruptcy. What could the greenhouse have done differently to ensure that customers would have been able to pay their accounts?

Austin has really been working on expanding his lawn mowing business. He even invested in some new equipment so he could start to blade snow during the winter months. Austin has never really had a problem with his customers paying their bills and has not found it necessary for them to pay up front. However, just recently he has taken on some new customers in the neighboring city and is having trouble collecting. If this continues, it could be the end of his mowing business. What could Austin have done differently to insure that customers would pay their accounts?

A local seed dealer has sold several thousands of dollars of seed to several customers on account. Later these customers either refused to pay or could not pay. As a result, the seed dealer is going to go out of business. What could the seed dealer have done differently to ensure that customers would have been able to pay their accounts?

Samantha spends her summers tending to her garden. She plants a ton of vegetables and has huge success at the local farmers’ market each summer. Samantha has begun to get regular customers who not only buy from her at the market, but visit her home to get produce. She started to set up accounts for many of them in order to make larger transactions instead of small payments here and there when they come get vegetables. Samantha is having trouble keeping track of these accounts and collecting. She is concerned she is going to be in the red at the end of the season. What could have been done differently?

Joseph started restoring tractors and other farm equipment for his SAE. He has been showcased at the state fair and has since started to restore equipment for people outside of his family and circle of friends. He typically buys all supplies needed and sends a bill to his customer after the work is finished. This had been working fine, but Joseph has recently run into a few customers who could not, or would not, pay their bills. He is concerned his SAE is going to be in the red. What could Joseph have done differently to avoid this situation?



Credit Policy As a business owner, what would your credit policy look like and/or contain?



Customer Credit Standing How would you, as a business owner, establish your customer’s credit standing?



Customer Credit Portfolio Evaluation Create a Customer Credit Portfolio of local businesses’ credit policies and credit application processes. Set up interviews/meetings with four local business owners to discuss their customer credit policies. In addition, ask for sample documents they use to facilitate their customer credit policies. Compile this information into a three-ring binder, dividing each business, and organizing each section to include an introduction/summary page of each business’s customer credit policy, credit application or customer credit standing policy, terms and conditions or credit, and delinquent account procedures. The final page of each section will be a ½ page reflection of the effectiveness of the customer credit policy.

Customer Credit Portfolio Scoring Guide Business #1 ___________________________________________________________________ Introduction/Summary of Business’s Customer Credit Policy 20 15 10 5 0 Credit Application/Customer Credit Standing Policy 10 5 0 Terms and Conditions of Credit 10 5 0 Delinquent Account Procedures 10 5 0 ½ Page Reflection 20 15 10 5 0 Business #2 ___________________________________________________________________ Introduction/Summary of Business’s Customer Policy 20 15 10 5 0 Application/Customer Standing Policy 10 5 0 Terms and Conditions of 10 5 0 Delinquent Account Procedures 10 5 0 ½ Page Reflection 20 15 10 5 0



Business #3 ___________________________________________________________________ Introduction/Summary of Business’s Customer Policy 20 15 10 5 0 Application/Customer Standing Policy 10 5 0 Terms and Conditions of 10 5 0 Delinquent Account Procedures 10 5 0 ½ Page Reflection 20 15 10 5 0 Business #4 ___________________________________________________________________ Introduction/Summary of Business’s Customer Policy 20 15 10 5 0 Application/Customer Standing Policy 10 5 0 Terms and Conditions of 10 5 0 Delinquent Account Procedures 10 5 0 ½ Page Reflection 20 15 10 5 0



Customer Credit Alternative Evaluation

1. List three sources of credit information. a. b. c.

2. Explain one advantage and one disadvantage of extending credit to customers.

3. What are three factors that should be included in the credit policy of an agribusiness? a. b. c.

4. List the steps in collecting delinquent credit.

5. Define customer credit.

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