In the meanwhile, businesses still have to run. With money only dribbling in and distributors knocking on the door, partners need to jumpstart their cash flows, which usually means an injection of capital. But that's got it's own problems too. "The cost of finance eats in to the wafer thin margins that our industry operates on," says Narayanan.
All of this is forcing solution providers to change the way they approach and engage customers. There's a lot for more focus today, for example, on ensuring they work with customers that can pay up, says Narayanan.
For some companies, that's actually meant turning down business, a tough call in this economy. At 3in Solutions, Arun says, they have some customers who only paid up after about six months--almost thrice the credit term offered by the company. "When they came back with a repeat order, we simply refused them. It is better to let go business than get embroiled in a delayed payment cycle," he says. "Today, recovering payments on time is more important than executing orders."
Late payments have also forced 3in Solutions to relook its sales approach. Today, it's willing to sacrifice big deals on the altar of on-time payments. "We would rather invest in smaller deals with SMB customers than block a big chunk of money with large enterprises. This ensures that we are not dependent on few big payments to make our commitments to distributors," says Arun, who adds that 3in Solutions now has a team dedicated to payment collections.
He also ensures that customers have skin in the game. "We work on a 50 percent advance, and the balance in the form of post-dated checks. The advance assures some payment fulfillment and post-dated checks come handy if promises are dishonored," he says.
Others like Shah from Orient Technologies have also been fine-tuning their bad-customer radars. Shah says that there are some large companies, like one of India's largest data connectivity service providers, which need to be avoided. He also says that an added level of due diligence is required to ensure that "we don't end up conducting bad sales where payments are stuck for years and recoveries are difficult."
"On-time collections from customers helps a partner's cash reserves swell, which they can then use for other activities. So we check our customer's credentials--specially the new ones--looking specifically at their track record, and how sustainable their business model is," says Narayanan.
Your vendor: Friend or Foe?
The Threat: Vendors are short-circuiting their own channels, introducing multiple partners to a single account, and setting unrealistic targets.
An understanding principal can be a partner's rock of Gibraltar; someone they can depend on for advice and to be a stepping stone to growth. But, of late, a rising number of solution providers say that their principals have started to feel more like ballast. They say more vendors are short-circuiting their channels, or are introducing multiple partners to a single account, or are setting unrealistic targets, all of which weigh down a partner's bottom line.
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