What should I ask about a food distributor’s spoilage and credit-note history?

Start with the write-offs. Ask for spoilage records by product and by stage: arriving damaged, spoiling in storage, failing on the truck or rejected at the customer. Then ask how each is recorded in the books. A distributor that buries spoilage in cost of goods hides the very pattern you want to see.

Credit notes are the second half. Request the log of credits issued to customers and credits received from suppliers, with reasons. Look for concentration: a single customer, a single driver, a single supplier or a single product line. Ask whether customers dispute short deliveries often, and who approves a credit.

Ask what the owner has changed in response. Ordering habits, rotation of stock, route changes and supplier terms all show whether the problem is understood. Have your accountant test whether credits at year end are recorded in the right period, and ask your lawyer how supplier credit terms are written. If the owner cannot produce the records, treat that as important information in itself. Also ask whether insurance claims for spoiled goods were filed, and what the insurer said. Ask which customers receive the most credits and why. Ask whether drivers can issue credits on the spot.

Key takeaways

• Request spoilage records split by product and by stage, and see how they are booked.
• Read the credit-note log for concentration by customer, driver, supplier or product.
• Ask what the owner changed after the bad months.