3/23/2009 9:53:00 AM
Managing cash and credit exposure is crucial in current climate
Dealers need to do credit checks on their distributors amid uncertainty over the future of a handful of distributors.
They are being advised to take pre-emptive steps to avoid losing money if their distributor goes bust.
Dealers are also being advised to spread their risk across a number of distributors rather than put all of their exposure on one supplier.
Thirdly, dealers must demand better assurances on the financial health of distributors and go deeper into their businesses, say experts.
Finally, one distribution expert said: ‘Dealers should start managing their cash through an escrow account to limit their risk.’
Speculation has intensified in recent weeks over the future of three major airtime distributors.
Dealers said last week (12 March) that the industry was rife with rumours of cashflow problems at airtime distributors, raising concerns that dealers could lose money owed to them if one goes into administration.
One dealer said: ‘You can’t help but be worried, every penny counts for us at the moment. We are also looking at our costs, so we simply can’t afford a distributor to take a few thousand of our cash, if it went down.’
There has been an upsurge in dealers applying for credit checks on their distributors to ensure their financial stability.
Credit insurance companies have increased premiums or completely pulled cover in volatile sectors, creating further panic for some dealers.
One London-based dealer added: ‘I got shafted by Unique, European Telecom and then Dextra. I lost money on all of them and I’m not going to let it happen again, so we are managing our cashflow very tightly.’