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Editorial: Keeping an eye on the prize

Editorial: Keeping an eye on the prize

Business conditions are tough, but smart businesses can thrive

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Dun & Bradstreet’s new Quarterly Trade Payments Analysis reports Australian businesses are under increasing financial pressure as a blow-out in trade payments takes its toll on cashflow.

According to the credit and debt collection organisation’s findings, businesses took an average of 56.5 days to settle accounts during the last quarter of 2008, four days longer than the previous quarter and the highest level reported since 2001.

It also found larger organisations with over 500 employees were slowest to pay the bills, averaging more than double the standard term, or 61.5 days. Incidentally, firms with 6-19 staff are the quickest, paying 53.7 days on average.

Dun & Bradstreet blames the global economic downturn and a subsequent tightening of credit for the results: Given it has become more difficult to borrow cash, businesses have also struggled to repay on time.

Over the past few months, ARN has reported on the potential tightening of credit in the channel. A case in point: The managing director of credit provider MoneyTech, Hugh Evans, has witnessed a spike in credit applications, as well as more distributors putting resellers on hold for not paying their bills on time.

Last week, a distributor told me tougher insurance policies are one side effect of these added pressures on credit and debts. Any rise in the number of resellers defaulting on payments could make it harder for distributors to insure against debt through a third-party insurance agency. At best, it could trigger a policy price hike.

This week’s edition of ARN is full of examples of how the tough economic climate is hitting revenues and bottom lines.

According to ComputerCorp, slower spending in resource-rich WA was one example of customers reacting to the economic situation and putting the brakes on spending. itX’s managing director, Laurie Sellers, also told ARN that hardware sales had proved challenging over the last six months of the year, although its software licensing and virtualisation businesses experienced growth in comparison.

The most significant indication was Harvey Norman’s decision to close its OFIS stationery and supplies chain for failing to bring in adequate returns on investment.

A predicted increase in Federal Government tenders, as well as the government’s proposed $42 billion stimulus package and SMB incentives, are expected to improve conditions in the second half of the financial year (see page 1). And at ARN, we firmly believe there will be opportunities for those that stick to their guns and follow sound principles.

According to Dun & Bradstreet, the best thing businesses can do is establish strong risk mitigation practices and cash flow management policies. Those who are cashed up are then in a better position to capitalise on potential acquisition or expansion opportunities.

We’ve certainly seen organisations in the IT sphere looking to growth prospects in the current climate, as well as sticking with their business agendas, and I’ve no doubt there are going to be positive stories to tell later on this year.


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