How resellers get into financial trouble

As the economy continues to have its effect, channel veteran Chris Jagusz (ex of BT’s Indirect Channel in its glory days, Eurotel and BT’s Openreach division) and Anthony Silver (reseller back office specialist) offer a solution to some of the channel’s payment problems. The serious challenges facing the sector arising from the economic downturn will, economists believe, get considerably worse in the short to medium term.

Contracting economies lead to falling demand – putting pressure on sales order volumes. Even worse, for PBX vendors, leasing acceptances have dropped from 80% to 50% – a visible effect of the credit crunch. With expensive sales forces to keep on the road this pain cannot be borne much longer. Number translation services (NTS) pricing changes are a further contributing factor now beginning to hit home due to the slow rate of adoption of the new NTS numbering ranges.

Larger players – in an attempt to maintain volumes – are cutting prices to attract more business, thus reducing margins. As the recession continues there is an increase in end user insolvency. For lines and call providers this means that bad debt will rise and this goes straight to the bottom line. And protecting against increased bad debts costs more either in credit insurance or resources to chase payment.

Revenue and profit shrinkage hit cash flow and – with end users taking longer to pay – cash collection slows down. At the same time suppliers get nervous and offer less credit under shorter terms, seriously impeding resellers’ ability to trade. Banks and factors are pulling in their horns and are actually reducing overdrafts.

Against this backdrop, Jagusz & Silver have found a way to bring suppliers and their distressed resellers together, to keep the reseller functioning even when network carriers or equipment suppliers are on the verge of cutting them off for non-payment. If you’re getting close to terminating a reseller, or as a reseller are struggling to pay your bills, it’s time to contact them at c.jagusz@jsdta.com or a.silver@jsdta.com.