Belco Global Foods Write-Up
Belco Global Foods
Summary
We at Belco Global Foods are an international food distribution company. We export to 125 countries across the globe and are nearing $1 billion in annual sales. 40 to 50% of our sales are done on open account terms. We thoroughly examine any customers’ financials before allowing them to purchase from us on open terms. It is important for us to maintain a strong financial position as our gross margins are very low (typically 2 to 4%). For this reason, any time a customer cannot make payments on time, it becomes very troubling and is an issue that must be dealt with immediately to keep our company in a strong financial position. We sell on terms of 30 days, and of our $100 million in average receivables, only 0.0001%, or $10,000 is usually written off as bad debt for our insurance to cover in a year. Our customers come to us because we have proven over many years that our products are the best, and as such we can exercise strict terms to keep our financials tight.
Problem One of our Russian customers, Kooritsa Kiev, is past due on $84,000 worth of food sold to them on open terms. Additionally, they have another $78,000 bill coming due in 15 days. We must figure out why they are not paying us on time and how to go about correcting this issue.
Analyze Issues Russia is our 3rd largest market, making up 14% of our annual sales. Kiev is a large client of ours. We have been selling to them for many years, and recently they were deemed access to open terms purchasing due to their good financial records. We have 8 customers located in Russia, and only 2 of them (including Kiev) purchase from us on open terms. The rest are required to wire transfer money in advance. Russia in general has been experiencing troubling GDP shrinkage, and though the drop in growth has declined, they are still behind where they were a year ago. Kiev currently has a past due account in the amount of $84,000 worth of meats purchased on 30 day
Summary
We at Belco Global Foods are an international food distribution company. We export to 125 countries across the globe and are nearing $1 billion in annual sales. 40 to 50% of our sales are done on open account terms. We thoroughly examine any customers’ financials before allowing them to purchase from us on open terms. It is important for us to maintain a strong financial position as our gross margins are very low (typically 2 to 4%). For this reason, any time a customer cannot make payments on time, it becomes very troubling and is an issue that must be dealt with immediately to keep our company in a strong financial position. We sell on terms of 30 days, and of our $100 million in average receivables, only 0.0001%, or $10,000 is usually written off as bad debt for our insurance to cover in a year. Our customers come to us because we have proven over many years that our products are the best, and as such we can exercise strict terms to keep our financials tight.
Problem One of our Russian customers, Kooritsa Kiev, is past due on $84,000 worth of food sold to them on open terms. Additionally, they have another $78,000 bill coming due in 15 days. We must figure out why they are not paying us on time and how to go about correcting this issue.
Analyze Issues Russia is our 3rd largest market, making up 14% of our annual sales. Kiev is a large client of ours. We have been selling to them for many years, and recently they were deemed access to open terms purchasing due to their good financial records. We have 8 customers located in Russia, and only 2 of them (including Kiev) purchase from us on open terms. The rest are required to wire transfer money in advance. Russia in general has been experiencing troubling GDP shrinkage, and though the drop in growth has declined, they are still behind where they were a year ago. Kiev currently has a past due account in the amount of $84,000 worth of meats purchased on 30 day