Several distributors claim they haven’t yet been affected by the crack down, but all agree the insurance issue is top of mind. itX general manager, Greg Newham, hadn’t seen any changes to its policies but wasn’t surprised insurers were getting tough. Alloys CEO, Paul Harman, said the imaging and printing distributor was managing its credit facilities tightly and kept limits low.
“In 2009, we’ve seen an extension of partner payments by seven to 10 days. That’s having a cashflow impact on distributors and therefore increasing risk for insurers,” he said. “I wouldn’t be surprised if we see more scrutiny from insurers. If they are smarting from the US and Europe, they’re going to clamp down regardless of what is happening in Australia.
“It will be interesting to see how the channel overall handles credit restrictions.”
Simms International managing director, Danny Moore, said it was imperative distributors stayed close to their insurers and remained open and honest with suppliers. The Sydney-based distributor has been using QBE insurance for most of the past 10 years.
“We are staying close to customers, and there’s definitely pressure there, but we’ve not experienced any wholesale cuts so far,” he said. “You don’t want to be making claims on insurance at the moment – you want to be prudent in this environment.
“Giving up limits not being used, is one way to help things across the board.”
However, Distribution Central marketing director, Nick Verykios, argued insurers were continually reviewing limits, and claimed the recent changes were not directly related to the global credit crunch.
“Insurers also track seasonality and peak buying periods, for example,” he said. “Resellers also don’t just shop around for the best price – they also shop around for credit.”
To combat any fluctuations, Distribution Central said it occasionally extended credit to resellers out of its own pocket, as well as offered customer financing options such as leasing and rental terms.
“We have seven different instruments we use – we can mitigate the risk, but also make sure the transaction occurs, which is a good thing,” Verykios said.
NCI’s Duffy said it was hard to predict whether insurers would instigate more credit cuts.
“We are in relatively unchartered waters and we don’t know what the next six months will hold,” he said.