With the South African business sector heavily reliant on credit control, efficient financial management within the IT distribution industry can make or break a company.
This is largely as a result of the fact that the South African financial model differs substantially to the model employed in Europe. In SA, IT distributors are required to offer credit terms to resellers, as well as door-to-door logistics and deliveries at no charge. This expectation has been created as a result of resellers increasing focus on their customers` requirements, as opposed to focusing on what new technologies they are able to sell.
In terms of credit, roughly 90% of any local IT distributor`s business is done with some form of credit terms in place. A balance needs to be struck here, since the fact that the IT distributor is often expected to behave as a bank has taken its toll on the distribution market and the reseller space in the past - the Siltek liquidation in 2001 being one example.
Successfully managing credit terms and ensuring that the distributor balances its risk while providing adequate support to the reseller is no easy task at the best of times. It takes a measure of flexibility, since the reseller`s requirements are prone to change from time to time and require the distributor to foster an extremely close working relationship with its reseller customers. This comes with a high level of transparency and commitment from both parties. It`s no longer a supplier and purchaser relationship, but rather one that epitomises partnership.
Adding to the challenges faced by IT distributors is the fact that the IT industry is almost entirely reliant on products which are imported, which means that the instability of the rand affects the local business climate. This problem is one which can only be effectively managed through a close relationship between the distributor and the vendors represented locally by that distributor. Here again, the distribution and vendor relationship need to be deeper than a supplier and purchaser relationship - more of a real partnership, as between reseller and distributor.
Solving exchange rate issues also requires strong discipline from a stock management perspective and, once again, a measure of flexibility in the ordering of stock, since fluctuations can be used to the distributor`s advantage if managed proactively.
With the market facing continued serious challenges in terms of the exchange rate during the course of last year and this year, due to its instability and fluctuations of several percent in a day, this is something IT distributors need to keep a watchful eye on in order to maintain competitiveness without compromising the profitability of the business.
By working closer with resellers and exploring a wide range of options and alternatives that will assist with the success of their business, IT distributors can build a close network of customers, as Tarsus continually strives to do.
Above all, however, the distributor must have the reseller`s best interests at heart, while doing its utmost to ensure the best products are brought to the local market in the most affordable manner.
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