INDUSTRY VIEW
HOW CREDIT AND FINANCE DRIVES CHANNEL VELOCITY
GHASSAN ABOU RJEILY , REGIONAL CHANNEL SALES MANAGER , EMERGING EMEA , RIVERBED
It is imperative vendors and distributors extend sufficient credit and finance to channel partners to take care of supply chain and forex woes .
Channel financing schemes are a set of technology-enabled business and financial processes that provides flexible payment options for the partner community . In a typical channel financing arrangement , a vendor or distributor provides lower financing costs to resellers , solution providers and systems integrators based on their credit rating . Channel finance provides resellers , solution providers and systems integrators with flexibility , such as options for early payment discounts or to lengthen payment cycles .
Channel financing is what allows partners and distributors to bridge the gap in the payment terms between them and their customers . In the region , it is especially important for the large public sector opportunities which typically have longer payment processing cycles .
Credit facilities also allow partners to compensate for shipment delays that may occur , which in turn delays their invoicing to the customers and potentially affects their cashflow .
Currently , the biggest channel finance related challenge in the region relates to forex fluctuations in some countries . Because of dramatic swings , the committed prices in local currencies often significantly change their values against the US dollar . These fluctuations in countries like Turkey , Egypt , Lebanon among others are causing partners to incur losses at the time of payments .
Another challenge is the delivery delays that result due to the extended time needed to clear the goods from shipping ports . These delays impact the ability of the partner to invoice the customer on time and hence , perform their committed payments to the vendors .
Another major challenge is manpower related . Due to the growing IT skills gap , partners do not always have the resources they need to deliver professional services and carry out implementation on multiple projects simultaneously . This results in project delays which in turn delays the ability to invoice clients and impacts payment cycles with vendors .
Solutions
The solution to the financial challenges that partners face could be achieved through a combination of the following approaches :
• Sign contracts with remote affiliates of the resellers that are based in countries that have higher financial stability .
• Agree with customers on fixing the amount of the booked orders in US $ or their equivalent in local currency at the time of payment .
• Establish an open Letter of Credit with a value in US $ to execute at the time of the agreed payment
Distributors and vendors should be flexible in reshuffling deliveries pending at warehouses due to customer unavailability .
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