Use Your Bookkeeping System to Communicate More Effectively with Wholesale Customers

Working with wholesale customers can increase a farms bottom line, but communication and thoughtful bookkeeping procedures are key.

This sample invoice from QuickBooks Online Test Drive shows all of the components necessary for a clear and accurate invoice.; Courtesy of QuickBooks Online Test Drive Sample Company.

As traditional direct to consumer markets, like farmers markets and CSAs, continue to saturate, many small farmers are looking for new sales channels for their products. Wholesale opportunities with restaurants, co-ops or institutions are becoming a larger part of many small farm’s profits.  There are numerous questions to answer when considering a move into business sales, like new regulations you may fall under or what the change means for your crop mix. Often not considered, are the effects on your bookkeeping procedures. You may have customers willing to pay on delivery, but in order to expand your wholesale channels you need to set up invoicing procedures that allows customers to pay at a future date.
An efficient bookkeeping system, that supports your wholesale business, is an important step in ensuring you receive accurate, timely payment. You will rarely find a wholesale customer who sets out intending not to pay, but without consistent communication and follow up, invoices get missed, your all-important cash flow is impacted, and positive business relationships can sour.
Everything I discuss below works with both a by-hand bookkeeping system, in Excel or a physical ledger, and software like QuickBooks. However, a system like QuickBooks, makes these processes much more efficient and offers deeper insight into your finances. If you are hesitant to work with a program like QuickBooks, I highly recommend seeking out a professional bookkeeper to help you navigate the setup and learning process. You can also reach out to your local Small Business Administration (SBA) for assistance or find excellent DIY information and online courses tailored for farmers through Julia Shanks Food Consulting.
When communicating with wholesale customers you must be prepared with consistent information presented in a professional way. There are three major points of contact with a wholesale customer throughout a single sales transaction.

1. An email or phone call with your customer to discuss your product availability or “fresh sheet”
2. Product delivery, where you present your customer with an invoice
3. Follow up (typically monthly) with a statement outlining the deliveries you made in a specific time period

There will be other times you are communicating with wholesale customers, like the time you take to develop a new relationship. I want to focus on these three interactions because they have a huge impact on how accurately and timely you receive payment.
Availability — Although the first step of this process, the “fresh sheet,” will never make it into your bookkeeping software, this initial communication allows you to set expectations for ordering, delivery, and payment. I will not go into detail here, but as a part of a weekly email informing your customers of your product availability, or as a onetime sales agreement, it is important to clearly layout you and your customer’s responsibilities. It is not necessary to fill this communication with formal legal language, but it is essential to have all expectations in writing and easily accessible for your customers. I highly recommend a free online resource from Farm Commons (http://farmcommons.org/) called “Writing a Basic Sales Agreement for the Direct Market Farm” for more detail on how to best set up this communication.
Invoice — Once an order is received, picked, and packed you need to create an invoice. An invoice must include a few key pieces of information. In the header of the invoice you must include the following.
Your business name and contact information – This should be an address where payment is sent if different from your businesses physical location.
Your customers name and contact information – Your customer may have both a mailing address and a delivery address. Both need to be indicated for your delivery driver and your bookkeeper (even if both of those people are you).
Invoice number – These are pre-established in the invoice booklets you can purchase or generated by your bookkeeping software. I recommend sticking with a simple numerical system that allows you and your customers to quickly see if any invoices are missing or need revision.
Date of delivery – Orders are often made several days in advance. On an invoice, include the date you delivered the product to the customer. This way, if there is an issue with the quality of the product, for example, it is simple to see when it was received by the customer.
Payment due date and terms of payment – Terms of payment indicate how long a customer has until they must pay for a product you delivered, the payment due date. Terms of payment are often shown as “Net 30.” In this example, the customer has 30 days from delivery to send payment. You may set your terms however you like, but it’s important to note, that established businesses often have a billing cycle they will not stray from. If you decide you would like to receive payment twice per month but the local coop only sends out checks at the end of each month, you may have to accept their payment terms or choose not to work with them.
Within the body of the invoice, you must include a list of products delivered, in what quantity, for how much, and a total dollar value. When making a delivery, this portion of the invoice should be double checked by your delivery person and the employee receiving the delivery. This is when you can communicate any changes to the order (if you did not have enough carrot bunches to fulfill the order, or the beets did not make it on the truck) and double check the quality of the product. The employee receiving the order should initial two copies of the invoice, one for their records and one for yours. If there are any changes to the invoice, notes should be made and initialed on each copy. This way, you can make the necessary changes to a digital version of the invoice in your bookkeeping system.

In this sample statement from QuickBooks Online Test drive, you can see that Amy’s Bird Sanctuary has made some partial payments on invoices that are currently overdue. Courtesy of QuickBooks Online Test Drive Sample Company.

Statement — Often forgotten, statements are a critical part of ensuring timely payment from wholesale customers. The difference between an invoice and a statement is important to note. An invoice represents one order and includes detailed information about what was delivered and the amount owed for that specific delivery. A statement is a list of all invoices from a certain time period. It does not go into detail about each invoice, but communicates to a customer the invoices they have yet to pay. A statement includes the following, as well as the same customer and vendor contact information as an invoice.
Invoice number – The invoice number lets you and your customer easily identify which invoice is being referenced.
Invoice delivery date – Another good identifier, it lets you and your customer know who to speak with if there are questions about the order.
Amount due – This indicates the original total for the invoice, not including any partial payments.
Amount received/payment – This shows if there was a partial payment for an invoice. If product was turned away, for example, but you weren’t made aware of the change your customer would have only paid for what they received. Better to see this error in your bookkeeping right away, rather than have a conversation with your customer months later when no one quite remembers what happened.
Total Amount Due – The total balance owed from open invoices.
When you send statements, typically at the end of each month, you should include all “open invoices.” An “open invoice” is an invoice that you have delivered but have not received payment for. I recommend including payments that are both overdue and not yet overdue. This is a great way to show your customer what their total balance owed is, and encourages quick payment of those invoices.
Sending monthly statements also gives you a chance to see trends in your customers payments. Maybe a local restaurant is consistently missing invoices. Through a quick email to the chef you discover that invoices are constantly getting lost. You decide to start emailing a copy of each invoice directly to their bookkeeper. Or in an unfortunate circumstance, a local business has consistently missed due dates for some time. After speaking with management, you may choose to only accept payment on delivery or not work with this customer at all. Without consistent check-ins with your bookkeeping by preparing monthly statements these unpaid invoices could have built up for some time.
The most important take away from this discussion is communication. A well thought out bookkeeping system is simply providing you the opportunity to clearly communicate with your wholesale customers. By using these documents and interactions with your customers to clearly explain expectations for everyone involved you are setting your business up to receive payment for your products on time and in the correct amount. All while building positive, professional, and profitable relationships with your wholesale customers.

Morgan Houk is the founder of Fishing Dog Consulting, and provides bookkeeping and QuickBooks support to farmers, food businesses and nonprofits. A farmer herself, Morgan works on a diversified vegetable farm on Bainbridge Island, WA. You can reach Morgan on her website, www.fishingdogconsulting.com or by email at morgan@fishingdogconsulting.com.
For more information:
Farm Commons – “Writing a Basic Sales Agreement for the Direct Market Farm,” https://farmcommons.org/sites/default/files/resources/Writing%20a%20Basic%20Sales%20Agreement%20v.2_0.pdf
Julia Shanks Food Consulting – http://juliashanks.com/
Small Business Administration – Local Offices, https://www.sba.gov/tools/local-assistance