How do I check a wholesale company’s returns and damaged goods history?
Ask for the credit notes, return authorizations and damage write-offs over as long a period as the records go back, grouped by product and by customer. Then ask who absorbed each cost, the supplier, the carrier or the company. Patterns matter more than any single event.
Returns and damage show how well a wholesaler handles its goods and its customers. Start with the credit note register. Sort it by product, supplier, customer and reason. A cluster around one product may point to a quality problem, and a cluster around one customer may point to a difficult relationship or lax ordering. Compare the volume with sales to see whether it is growing.
Then follow the money. Ask what share of returns the supplier takes back, what the carrier pays for, and what lands on the wholesaler. If damaged goods are stored in a corner awaiting a decision, look at them and ask how they are valued in the books.
Check the cost of goods figures in the financial statements. Unrecorded returns, or damaged stock still carried at full cost, can inflate profit. Ask how customers are credited and how long it takes. Your accountant can read the accounts with you and flag adjustments worth discussing before closing. If the wholesaler sells goods with a short shelf life, ask how expired product is handled and whether suppliers share that loss.
Key takeaways
- Sort the credit note register by product, customer and reason to find clusters.
- Find out who absorbs each loss: supplier, carrier or the wholesaler itself.
- Look for damaged stock still carried at full cost in the inventory.
- Ask how long customers wait for credit, since slow credits strain relationships.
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat is the cost of goods sold (COGS)
- 02Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 03Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
- 04Business Development Bank of CanadaGovernmentWhat is inventory
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