Market slump takes its toll

Beware of willful payment defaulters. The slump in demand and pressure from vendors to step up sales, has led unscrupulous elements in the market to resort to unethical means of doing business.

The willful payment defaulters are on the rise and you could be the next victim if you are not careful. Several suppliers in major metros including Delhi, Bangalore, Hyderabad and Chennai have already burnt their fingers. The Trade Association of Information Technology (TAIT) in Mumbai has alerted its members not to fall victims to defaulters.

These defaulters do business by discounting prices on fast-moving, encashable products like Samung 15" monitors or HP 640C printers. Their modus operandi is simple. Buy in bulk and sell products at a small loss. Pay back the supplier and gain credibility for higher credit.

Then rotate the cash among three to four suppliers. After selling goods worth Rs 20-25 lakh, the defaulters do the vanishing act leaving suppliers to fend for themselves. This is what has happened in Delhi and Hyderabad and to a lesser extent in Bangalore and
Chennai.

TAIT officials in Mumbai are concerned because unlike other metros, business volumes are high in the city. A willful defaulter can easily sell goods worth Rs 1 crore and then disappear from the scene.

Given this scenario, partners need to take concrete measures to ensure that they do not get entrapped by defaulters. First of all, suppliers should be mindful of those who consistently buy the same fast moving product. A normal dealer would always buy a mix of models and brands and would not go only for a single product like the Samsung 15" monitor. A buyer would also look for 17" monitors from Samsung or monitors of other brands like LG or
Viewsonic.

Secondly, distributors and sub-distributors should be careful about buyers who buy encashable products in bulk. For instance, if a buyer is consistently going for large number of HP 640C printers, questions should be asked why is he not buying other models from HP itself or other brands like Epson or Canon.

Thirdly, the genuineness and credibility of the buyer should be cross-checked in the market before supplying goods. This can easily be done by talking to other suppliers as news about payment defaulters or bulk buying spreads quickly in the market.

Finally, the credit criteria of every buyer should be evaluated every six months. Credit limit should never be linked to successful turnover. A close scrutiny of how much capital does a buyer have would lead to the correct assessment of the credit-worthiness of the concerned party.

If partners adhere to these measures strictly, there would be lesser chances of falling for the guiles of tricky operators at a time when business is under tremendous pressure from all quarters.

(CNS)