Shanbag at Valuepoint Systems has introduced performance-based increments for employees, ensuring that he isn't giving the entire organization a raise in their salaries. "If an employee contributes to the company's profitability, then we give them extra payouts. All targets have become profit-defined," says Shanbhag.
The Threat: A weak economy is forcing more customers to pay their partners late, which affects a solution provider's cash flow, its ability to make payments to distributors, its investment plans, and its margins.
If the global meltdown taught businesses anything it's this: Cash is king. But a growing number of channel partners have begun to report that cash flow has become a challenge--and will continue to be one in 2013--as more of their customers pay late.
"These are difficult market conditions and recovering payments on time is becoming a huge concern for partner companies," say Jayesh Shah, director of Mumbai-based Orient Technologies.
Truth be told, getting paid on time is a challenge--difficult market conditions or not. But not being able to collect on time in a tough economy has deadlier ramifications for a channel partner given how difficult it's also gotten to come across new business. Combine that with the fact that many channel players have high operating costs and you get a nasty picture.
One of the ways late payments affect channel partners is its impact on their ability to pay distributors and suppliers. For 3in Solutions, a two-year-old solution provider based in Bangalore, late payments can easily have a long-term impact on its reputation among distributors, a large problem for the young and upcoming company. "For a start up like ours, credibility with distributors is important," says Arun SG, founder and director, 3in Solutions. "Delayed payments often hamper the continued support we get from distributors."
For a handful of solution providers late payments have gotten so bad with some customers that they're evaluating taking extreme measures. "We are thinking about filing a court case against a customer for dishonoring their checks. Regular follow ups (for payments) have yielded zilch and the payment is as good as lost," says a security-focused solution provider in Mumbai.
The impact of one late payment doesn't stop with one account, it also has a drag effect on the rest of the company. Solution providers report that following up on payments consumes too much of their bandwidth forcing them to be less focused on winning new deals.
Neither are solution providers getting any help from their principals. "Payment from some customers maybe a challenge as they want long credit periods. If this is not supported in parallel by vendor companies then the partner stands to suffer," says V. Anantha Narayanan, founder and MD, SBA Info Solutions.
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