Cash crunch continues in channel dealings

With customer delaying payments by 15 days to two months, the cascading

effect is being increasingly felt in channel dealings. Added to this, the lack

of revival signs in the immediate future, have kept the channel spirits low at

Nehru Place in New Delhi.

The cash crunch is partly caused by distributors who are sticking to their

guns that resellers have to pay within 14 days. Explains Jatinder Pasricha of

Skope Computers, "The liquidity problem has happened because distributors

have reduced credit periods." He points out that majority of the dealers

have still not adapted their business processes to the reduced credit periods

and limits.

The absence of clear signs of revival has added to the woes of partners who

find stocking and inventory management a difficult task. "Stocking problems

have hit margins badly," says Ashish Agarwal of Trifin Techno-logies.

Understocking leads to loss in business, while overstocking many a times forces

the reseller to undercut to meet his credit deadlines.

The move by distributors to cut limits is being seen as a trigger. There is,

however, unanimity in the channel that the long-term results will be in the best

interests of all those involved. Resellers and distributors are developing

mechanisms and putting processes in place to ensure better liquidity.

Many are limiting business to a select few partners to avoid payment

problems. Says Rajeev Sood of Cyberstar, "We do business with only those

partners who have been with us for a long time now." Distributors too tend

to give better credit terms to those partners, whose credit worthiness is well

known.

MOHIT CHHABRA