What should I ask about a feed store’s credit accounts with local farmers?
Ask for an aged list of every account showing who owes what and for how long, plus the store’s policy on terms, limits and collection. Find out which balances are likely to be paid, which have been disputed and whether the buyer takes over the receivables.
Credit is how many feed stores keep their farm customers, which means the accounts receivable can be a major part of what you are buying. Ask for an aged list that shows each customer, the balance and how long it has been outstanding. Compare it with the financial statements and ask your accountant to explain any difference.
Look at the pattern. Do farmers pay at harvest, at the end of the season or not at all until reminded? Are some balances carried year to year? Ask the seller how much has been written off, how collection is handled and whether there are written agreements or only handshakes. Check whether the seller extends credit to relatives or friends on easier terms.
Then ask what happens at the sale. Does the buyer take over the receivables, and at what price, or does the seller keep them? That decision shapes your cash needs in the first months. Ask the seller which accounts are sensitive, and think about how you would handle a large, late balance from a neighbour. Your lawyer can advise on collection and on the paperwork behind each account, and your accountant can tell you how unpaid balances show up in the statements.
Key takeaways
- Get an aged list of every customer balance.
- Ask how much has been written off or disputed.
- Settle who takes over the receivables before closing.
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentAccounts receivable
- 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?
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