Proactive credit management can boost revenue

11 June 2008

With government's IT procurement strategy firmly focused on developing and nurturing South Africa's smaller resellers, SMB sized VARs are well positioned to effect a healthy increase in their revenues over the coming year.

That is, of course, provided they are able to fulfill on government's requirements - one of which might be the extension of credit terms beyond the industry norm of 30 days.

"Besides being technically capable of handling the job, resellers must be both creditworthy and have sufficient credit secured with their distributors to cover their government deals," explains Alan Hawkins, national sales manager at Tarsus Technologies.

Thankfully it is a relatively easy task to accomplish.

"Financially sound resellers that have a recent set of financial statements and good relationships with their banking institutions shouldn't struggle to qualify for credit," he says.

"However, because the process of applying for credit takes longer than a couple of hours, resellers wanting to capitalise on these public sector opportunities should be re-evaluating their available credit limits regularly and increasing them where they can; thereby tuning their credit exposure so that it resides with the right suppliers.

"Often resellers will apply for an increase in their credit limit with a distributor without taking a closer look at their credit portfolio," Hawkins says.

"Instead, they should move their credit around to where it makes most sense. That means moving credit to the distributors that they're doing most of their business with," he adds.

As a last resort, Hawkins says that resellers who aren't able to get their credit situation rectified can apply to Tarsus for assistance. He stresses, however, that these arrangements are made on a deal-by-deal basis and cannot be done on short notice.

"This brings me back to the point about resellers being proactive about managing their credit," he says.

"If they work towards securing the necessary credit long before a deal is signed and are unsuccessful, at least there's still time to ask us for help. If they leave it too late, however, they have a strong chance of losing the deal.

"Judging by the size of the deals due to follow from government over the coming year, that would be unfortunate," he says.