Edge Retail Academy Blog

Elements of Good Credit. A Supplier’s Perspective.

by Tony Capuano

It is essential for jewelry companies to maintain a good credit profile, which will ultimately benefit them in better sources of supply, pricing, service and credit terms.

The key elements of a good credit profile include a positive track record and experienced management; a clean background on the business owners and principals, and a clear payment background with no collection claims and infrequent products disputes, returns and allowances; no past bankruptcies or business failures; and lastly a history of consistently paying bills on time. 

Maintaining a good credit profile depends on frequent communication, credibility and candor.  Be honest with vendors, keep promises and don’t promise what you cannot deliver.  If you do have bad news for a supplier, deliver it sooner rather than later. 

Suppliers look for evidence of a company’s ability to pay its bills.  Thus, disclosure by the buyer of business and financial information evidencing financial strength can make an important difference in gaining a supplier’s trust and approval of favorable or better selling terms.  Financial statements that demonstrate a profitable operating history, meaningful investment by the owner, access to outside financing and sufficient cash flow to pay debts as they come due, are all important elements which a supplier can use to assess a company’s financial strength and its ability to pay its bills.  Suppliers will want to be sure that there is sufficient support for the amount of credit being sought, that the company has adequate capital and, ideally, has access to outside financing so that the company is not totally reliant on vendor funding.

Other factors that influence a supplier’s credit decisions include the backgrounds of the principals and/or owners, and the company’s business background—how long it has been in business, whether there were failures or bankruptcies in its history, and its affiliations with other businesses in the industry.  Considerations of the principals or owners include their time in the business, education, prior affiliations, industry and managerial experience, credibility and integrity.

A prospective vendor will want to be comfortable with its customer’s competitive position in the industry, and know that it has a viable business strategy to survive and grow in its market.  The customer’s product line, pricing, target customer, location and business model all factor into an assessment of the company’s competitive strength.

All jewelers should be sure they are listed with the JBT. It is free, easy and gives the jeweler a presence on the industry radar.  The JBT will provide a capital rating, given financial information as provided by the jeweler, and a payment rating based on the most recent payment experiences of JBT members.   The jeweler’s credit report will also contain background information provided by the subject in phone interviews and by mail, as well as from other on-line resources and public records, such as UCC filings.   A complete JBT report, with a positive JBT capital and payment rating, can result in better terms, pricing and service, and will support a company’s reputation in the industry.

Good credit is an extension of a company’s reputation and a competitive advantage in an increasingly challenging marketplace.

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