Editorial: Credit where it's due

Editorial: Credit where it's due

Credit readiness is one of those issues most readily swept under the carpet in the IT distribution chain.

While it is vendors that generally determine what sort of terms and conditions distributors will be offering to the reseller, it is the distributor who is most exposed and vulnerable to bad debt. Resellers, meanwhile, have a hard time understanding why credit terms are becoming more and more stringent and payment options less and less of an option, and more of a dictate.

On the other side of the equation, vendors and distributors claim that credit is available to those who know how to manage it well. Their favourite line remains that it is the unethical minority amongst the resellers and those without much credit management-savvy that have trouble securing an otherwise readily available service.

But are things really as black and white as they seem?

As vendors impose shorter credit management terms on distributors - hoping to shorten replenishment cycles and increase sell-through rates - it is the disties who have to make some tough decisions on how to best deal with their customers' needs. Last week, we reported how Express Data's new venture, Express Online sought to deal with the problem by introducing the BPay facility for resellers purchasing product online. For many more, credit card or account facilities are the only way of managing cash flow. And access to these is becoming harder and harder.

Of course, it would be easy to find a scapegoat and blame it, for instance, on QBE, the insurance company which underwrites around 85 per cent of the channel's credit insurance business. For them too, the risk of bad debt is obviously too high to relax the rules and allow more flexibility in the way distribution credit terms are set or enforced.

The trouble is that, as channel relationships get more and more complex, the most active - and most credit-needy link in the chain, has less and less influence over how this complexity is to be negotiated.

Our Coast to Coast opinion poll this week (see page 10) indicates that resellers are finding it increasingly tough to negotiate favourable credit terms and payment options. And so it often seems that the resellers can count only on divine intervention to solve one of the most persistent problems plaguing their business.

On the other hand, reducing bad debt - or the risk of it - is obviously an economic imperative for every distributor. In the higher scheme of things it may also seem that those who are not deemed worthy of credit shouldn't be in the reseller business anyway. Yet, as the market remains flat and the channel keeps consolidating, tighter credit terms and conditions can hardly help the foot soldier get out there and sell more product. The buck may stop with the insurer, but vendors and distributors should stop passing it around nevertheless. The reseller, after all, is their most important customer.

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