Late payments put SME resellers at risk of collapse

SME resellers are facing financial meltdown in 2007 as outstanding payment days for smaller IT firms more than doubled in 2006.

Research exclusively revealed to CRN by Siemens Financial Services last week, found that IT firms with less than 50 employees waited an average of 152 days for their customers to pay up, compared with 70 days in 2005.

Peter Austin, general manager for flow business at Siemens, told CRN: “We had to check the findings twice. If this figure increases any more the channel will see a lot of insolvencies. It simply isn’t sustainable.”

In comparison, mid-sized firms – those with 50 to 249 employees – saw debtor days increase from 48 in 2005 to 51 in 2006.

“This shows that the larger firms are able to keep a tighter rein on getting money in,” Austin added. “The majority of small firms wouldn’t have a credit-control division and they don’t have the resources to chase outstanding payments.”

Austin said that VARs could use receivables finance, where finance is raised against the reseller’s outstanding invoices to unlock immediate funds, to ease cash-flow.

Mark Ancell, head of intelligence at credit reference agency Graydon, said: “If debtor days are drifting this much, then it is the distribution channel that will lose out because they are the ones that extend credit for VARs. Late payment is a growing problem and it’s not going to go away easily.”

Sam McMaster, managing director of VAR Questmark, told CRN: “We have 22 staff so we’re a small firm, but our debtor days are between 30 and 40. Outstanding payments of 152 days would send us out of business.”

John Carter, managing director of E-business Credit Manager (e-bcm), said: “What a lot of people don’t realise is that outstanding debts can be retrieved up to six years later. E-bcm offers a no-win-no-fee debt collection service for resellers. This is not complicated.”

Larger companies taking longer to pay up