Dl4—Lancaster Farming, Saturday, May 16,1981
LITTTZ What is the cost of
slow-pay to the fruit and vegetable
industry’
The cost could be very high, says
Assistant Secretary of Agriculture
P.R. Smith.
With an average load of produce
at the market costing $15,000 and
with some items as much as
$40,000, it obviously would not take
long to extend significant amounts
of credit in a short period of time,
says Smith.
Like all successful businesses,
fruit and vegetable farmers and
other traders must capitalize their
businesses. For the majority of
persons, this requires some type of
outside financing. Most financial
agreements under which farmers
and traders operate call for
payment of loans on a fixed date.
Like it or not, when payment for
the produce is not received when
due, farmers and shippers can be
turned into their customers’
bankers overnight.
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Salt
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How to beat slow-pay in produce sales
Because the produce industry is
one that conducts its business and
extends credit on a phone call or a
handshake, Smith cautions all
sellers and farmers to closely
monitor their credit programs in
such a way that possibility of cash
flow and slow payment problems
can be minimized.
Most knowledgeable and suc
cessful farmers and traders have
strong credit policies that give
them a shorter turn around tune on
their money. They have taken the
responsibility for credit decisions
out of the hands of salespeople.
Decisions on who will receive
credit and how much credit will be
given and for how long are based
on experience and knowledge of,
their customers’ financial
situations.
Changes in their customer’s
payment behavior also govern the
extent to which they extend credit
to them.
The assistant secretary says
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many farmers and traders make
the mistake of measuring “good”
customers on the volume of
Merchandise bought. It is the
successful sellers, Smith says, the
Measure “good” customers, not
inly on volume, but on when
payment is made.
IN the interests of good credit
management, sellers should have
a firm agreement with their
customers on when payment is
expected. If payment is not made
as agreed, sellers should ask for
their money.
Buyers should be informed that
excessive amounts of credit will
not be given and that if payment is
not made as agreed, steps will be
taken to obtain payment, including
filing of a complaint with the U.S.
Department of Agriculture under
the Perishable Agriculture
Commodities Act.
Obviously, the seller would
refuse any further credit until the
account is current, Smith says.
Any new account should be
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thoroughly researched, Smith
says, before the first sale is made
to determine whether the firm is
able to pay, and whether persons in
the firm had prior problems in the
produce industry. Trade and
financial rating publishers, along
with PACA representatives, can
provide important information on
the history of many firms.
Some growers, shippers, and
dealers have organized their own
associations to take care of their
credit problems, and in certain
cases, to furnish dealers with a list
of buyers who are not meeting
their obligations.
PACA requires that payment for
produce be made ten days from
date of acceptance, unless there is
a specific prior agreement bet
ween buyer and seller for a dif
ferent time period. Complaints for
the recovery of money can be
accepted when payment is not
made.
Smith points out these com
plaints are first handled in
formally. He stresses the high
percentage of success in informal
settlements, citing recovery of
more than $9 million for
injured persons.
Where informal settlement
cannot be worked out, a formal
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complaint can be filed. If a
reparation award is issued, the
buyer is required to pay, or the
firm’s license to trade in produce is
automatically suspended until the
award is paid.
Reparation orders also require
payment of interest from the date
payment was due until payment is
actually made. Recently, USDA
raised the interest rate from eight
to 13 percent to insure that injured
parties were not put at a financial
disadvantage when they have to
borrow money to subsidize firms
that fail to pay for produce.
Smith points out that USDA’s
responsibility in administering
PACA is “to suppress unfair and
frudulent practices in the
marketing of fruits and vegetables
in interstate and foreign com
merce.”
He says complaints filed by
injured persons for the recovery of
money are handled promptly in an
effort to obtain payment. If ap
propriate, arrangements are
sometimes made for payments on
account. When USDA officials
determine that a firm has in
sufficient funds to conduct a
business operation, has committed
' (Turn to Page Dl 5)
FOUR WAYS
Phone: 717
898-2241