Late payments put VARs at risk
Companies are taking longer than ever to settle their debts, research finds
Despite stringent government legislation to curb late payments, firms, particularly large corporates, are taking longer than ever to settle their bills.
These were the findings of market watcher Experian, which revealed that large UK corporates are taking an average of 78.3 days to pay bills, compared with 72.1 days in 1998. The average payment period for all firms was 59.5 days, compared with 57.5 in 1998.
This can be a huge problem for the channel; small VARs often fall behind in their own payments to suppliers because their costs have not been met. In the worst case, they go out of business. According to Experian, more than 4,000 companies folded in the UK in the first six months of 2004.
"Companies are paying on average a month late, and that causes cashflow problems," said Peter Brooker, a representative of Experian. "A large number could meet payments quite easily but either don't like paying [on time], are juggling payments or lose the payment in bureaucracy."
Nitin Joshi, partner at PKF, said this is a growing problem for the channel.
"Every time a company pays late it costs VARs money. Resellers are unlikely to pass their costs on because they don't want to lose the business. The vendor wants its money immediately, the distributor wants paying within 30 days, and the VAR ends up out of pocket."
Eddie Pacey, director of credit services at Bell Microproducts Europe, said larger businesses do take advantage of smaller suppliers, but he claimed VARs do not address the issue of payment from clients with the urgency they should.
"If they are worried about losing the customer, they should ask if it is worth keeping," he said.
Additional reporting by Ben Tudor.