EACS boss: 'Clients' furloughed staff impacting late payments'

Customers furloughing staff has led to late payment issues for resellers, according to EACS boss Kevin Timms.

Speaking to CRN, Timms said he is experiencing difficulties in getting through to the appropriate people at customer organisations due to them being on furlough, exacerbating an issue that was already a problem in the channel pre-pandemic.

"It does vary; some of the companies that are very good have got good processes in place and they're the clients that are pretty good at paying, but we are seeing - particularly where organisations have furloughed an awful lot of people - it becoming more difficult to get hold of them," he explained.

"We've already seen companies that are fully furloughed, in other words, they've just shut up shop. These are clients who have said ‘we're not open for business at the moment' and they're impossible to get hold of, so the payments for the contracted business that we provide will just mount up.

"Our challenge is that we manage our cash flow daily, just to keep an eye on it, and then every week we issue our team a schedule of the large payments left in the month. Our revenue's £2m a month, give or take, and some of these payments can be £300,000 or £400,000. You don't need to have too many of them be late before you start to see an impact on your overall cash flow."

EACS has thrown its weight behind a Private Members Bill introduced in January this year to the House of Lords which addresses the issue of late payment and strengthens the power of the Small Business Commissioner.

Timms supports the bill because he believes it can sometimes feel like the SMB community is held "to ransom" by some larger organisations and that these companies can take advantage and implement payment terms of up to 90 days.

"Our experiences has been that the larger the organisation then the more difficult it is in terms of matching our terms with the suppliers that we have," he stated.

"Smaller companies are usually okay; you can negotiate and deal with them. But the larger companies can be a little bit pushy and say ‘if you're going to work with us, then you're going to have to accept 90-day terms'.

"Ninety days is by far the worst we got from one of our enterprise multinational companies. But our terms with the suppliers that we've got going into that company is only 30 days, so we have to fund that gap and I just think that's unfair."

The government has allowed businesses with VAT payments due between 20 March and 20 June to defer the bill until 31 March 2021, which Timms hails as a big help to the business.

"Our next VAT bill is due at the beginning of May, and not having to pay that will be a significant benefit for us by ensuring that we've got plenty of cash around for the foreseeable future," he said.

"Late payments - exacerbated still further by the pandemic - are harming business cash flow, hampering investment and, in extreme cases, risking business solvency. Anything that the government can do in terms of legislation must be supported. If not now, then it has to be addressed when normality returns."

The managed service provider recently closed a "record" year, with revenues breaking the £24m-revenue barrier and EBITDA "just shy" of £1m, and the chief exec hinted that the pandemic might lead to some acquisitions.

"[That success] was despite the issues of both Brexit in the first half of the year and COVID-19 to close it out, so we're really happy," Timms said.

"In three years, we've taken the business from £16m to £24m; we're comfortable with that level of growth. We feel very confident of coming through the other side of this in good shape, and time will tell what that does to the cost and the value of other businesses and whether we can start to pick some further ones up.

"We're looking to continue to grow the business, we put a lot of investment into the company to improve it and to change it, and so we feel very well-positioned that we've got the cash to be able to ride this out."

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