Financial accord is the key

Last month’s Finance Summit, organised by the PCA, saw some 20 representatives from distributors, reseller groups and financial organisations meet with the aim of discovering what actions the IT supply channel might take to help itself in the current financial crisis.

Delegates were sufficiently encouraged by their discussions and planned actions that they have agreed to hold a follow-up meeting in July and aim to include more channel representatives.

We’re going to be putting in a lot of work over the coming weeks on the outcomes that will include a model for a Financial Accord. The objective of this is to encourage the highest standards of professionalism and transparency, in financial management within the channel, and applies to both resellers and their suppliers. There will also be a ‘Guide to the Calculation of Credit Limits’, a (financial) ‘Guide to Survival’ and a ‘Guide to Obtaining Funding’.

We seem to have become a market that relies on credit insurance. This has been made worse by the lack of person-to-person relationships in the financial chain. Banks used to have managers who knew their clients’ business inside out. But over the years a lot of business relationships have become mere statistics on a balance sheet, and decisions are taken according to a computer programme. The computer really does say "no" or indeed "yes".

A community, whether of individuals or of businesspeople, should not necessarily expect to have its problems solved by outsiders. Rather it should look close to home wherever possible, and call upon its own resources, whether intellectual or financial to provide the foundation of its ongoing health. Here are a few of the points raised during the summit:

• Well-run resellers that are heavily into services are often doing quite well, whereas any that are still heavily into shifting tin are being hit hard. Things will be worse next year.

• The biggest challenge facing most resellers is credit lines, allied with the distributors’ approach to credit. Disties mustn’t change the rules without informing resellers in advance; give them time to present their financials in the required manner, rather than saying that the arbitrarily changed rules don’t support the required line of credit.

• Truism: businesses that fail to produce timely or accurate accounts are those most likely to fail.

• The SME community generally requires education regarding finance, especially with the need to produce accurate accounts. If they are more transparent they’ll get better limits

• Don’t be critical of the distributors – the larger ones are bankrolling thousands of businesses. The key question is: will it (can they) continue?