Distributors can help you spread your costs

Sensible businesses are cutting back on overheads, so they may need some help in financing unexpected large deals, writes Eddie Pacey.

In a climate of suppressed business activity and reduced margins, many companies look to reduce overhead costs. Dealing with this problem while keeping a balanced view of what is required to carry the business forward is critical in determining future success.

Managing a business through good times is relatively easy; the real test of management is to see it through volatile market conditions.

Many businesses see this as an opportunity, a time to re-invest in key areas, clear out surplus costs and re-evaluate business activities that may have become excess baggage hidden behind a mist of familiarity.

Given a downturn in revenue expectations and erosion of margins, and having addressed budgets and forecasts for the coming year, businesses must be able to cope with sudden surges in order-intake activity and major deals. The difficulty, of course, is in amending budgets and forecasts.

Many firms are not well placed to accommodate and, more importantly, finance unexpected and very welcome large deals.

Credit remains a key issue and resellers are looked at it more closely than ever. If there is even the slightest concern that a business may not be able to pay amounts as they fall due, taking big deals may require some form of additional security.

There is still unwarranted suspicion and mistrust of distribution and a misplaced fear of 'losing face' by allowing an end user deal to be invoiced directly by the distributor, or indeed the vendor.

But with so many deliveries going direct these days, the identity of end users is known and the idea of losing face is not a readily accepted excuse.

Because distributors openly sell services, consultancy and other support functions to the channel, they frequently work closely with resellers in closing large contracts.

At all times the reseller retains the relationship and manages the contract, but falls back on the expertise and support provided by the distributor.

There should therefore be no hesitation in working those big, infrequent deals directly with the supplier. This means budgets and financing arrangements are not over-stretched and overhead costs are retained within pre-set, manageable parameters.

Taking the plunge with a DIY solution is not the best option. Think hard about using a distributor, look at the bottom line, and swallow misplaced pride.

Eddie Pacey is group credit services manager at Bell Microproducts Europe.