MARKET SLUMP TAKES ITS TOLL: Wilful payment defaulters on the rise

Beware of wilful payment defaulters. The slump in demand and

pressure from vendors to step up sales, has led unscrupulous elements in the

market to resort to unethical means of doing business.

The wilful payment defaulters are on the rise and you could be

the next victim if you are not careful. Several suppliers in major metros

including Delhi, Bangalore, Hyderabad and Chennai have already burnt their

fingers. The Trade Association of Information Technology (TAIT) in Mumbai has

alerted its members not to fall victims to defaulters.

These defaulters do business by discounting prices on

fast-moving, encashable products like Samung 15" monitors or HP 640C

printers. Their modus operandi is simple. Buy in bulk and sell products at a

small loss. Pay back the supplier and gain credibility for higher credit.

Then rotate the cash among three to four suppliers. After

selling goods worth Rs 20-25 lakh, the defaulters do the vanishing act leaving

suppliers to fend for themselves. This is what has happened in Delhi and

Hyderabad and to a lesser extent in Bangalore and Chennai.

TAIT officials in Mumbai are concerned because unlike other

metros, business volumes are high in the city. A wilful defaulter can easily

sell goods worth Rs 1 crore and then disappear from the scene.

Given this scenario, partners need to take concrete measures to

ensure that they do not get entrapped by defaulters. First of all, suppliers

should be mindful of those who consistently buy the same fast moving product. A

normal dealer would always buy a mix of models and brands and would not go only

for a single product like the Samsung 15" monitor. A buyer would also look

for 17" monitors from Samsung or monitors of other brands like LG or

Viewsonic.

Secondly, distributors and sub-distributors should be careful

about buyers who buy encashable products in bulk. For instance, if a buyer is

consistently going for large number of HP 640C printers, questions should be

asked why is he not buying other models from HP itself or other brands like

Epson or Canon.

Thirdly, the genuineness and credibility of the buyer should be

cross-checked in the market before supplying goods. This can easily be done by

talking to other suppliers as news about payment defaulters or bulk buying

spreads quickly in the market.

Finally, the credit criteria of every buyer should be evaluated

every six months. Credit limit should never be linked to successful turnover. A

close scrutiny of how much capital does a buyer have would lead to the correct

assessment of the credit-worthiness of the concerned party.

If partners adhere to these measures strictly, there would be

lesser chances of falling for the guiles of tricky operators at a time when

business is under tremendous pressure from all quarters.