That sluggish supply chain, as no one need’s reminding, spells trouble for channel pros. Most customers won’t pay for gear they’ve ordered until they receive it, and many hardware resellers are experiencing cash flow challenges as a result.
“You get paid when the goods get delivered and installed,” says Doug Westervelt, CEO of Portland Internetworks, an Oregon-based MSP and solution provider. “We’re carrying the paper on a lot of stuff, waiting for products to get delivered.”
In fact, for many TechSelect members, the cash flow challenges that began two years ago at the start of the coronavirus pandemic never went away. The only difference is that the problem now is logjammed ports rather than plummeting GDP.
“It’s still part of my weekly hygiene,” says Dave Brown, CEO of Charlotte, N.C.-based solution provider ROVE, of cash flow management.
Same goes for InaCOMP Technical Services Group, according to Michael Boone, the Southfield, Mich.-based integrator’s executive vice president. “We’re scrutinizing collections and invoicing at a much deeper level than we did pre-pandemic,” he says.
TD SYNNEX is well aware of the problem. “We recognize that between the pandemic and supply constraints and long lead times, it’s tough for partners,” said Americas CFO David Jordan (pictured) during yesterday’s panel discussion.
Jordan, who noted that TD SYNNEX has made an incremental $1 billion of credit available to ease some of that pain, offered two pieces of advice for coping with the situation. First, he suggested, consider billing customers for the portion of an order you can fulfill now and the rest later.
“I remember when the topic first came up, it was like, ‘no end user will accept that,’” Jordan said. “What I’ve witnessed through multiple partners now is there’s a much higher propensity of accepting a partial shipment than there was in the past.” The benefit for you, of course, is a shorter cash conversion cycle.
“It doesn’t make you wait 12 or 18 months to get your cash off of the project because one piece is delayed,” said Jordan, whose second recommendation was to guard the cash you have now closely and consider borrowing some more. Debt, he noted, is still relatively cheap despite rising interest rates, and getting another secured line of credit may be viable as well.
“If you’re worried about cash, well, make sure you have adequate liquidity—liquidity being defined as untapped bank debt plus cash on hand—because all it takes is one big project delay, one big payment not coming in, and you can quickly run out of cash,” he said.
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