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Distribution Mechanics: Your credit limit is not a vote of no confidence
Few topics are quite as reliable at putting people in a bad mood as this one....
Few topics are quite as reliable at putting people in a bad mood as this one. A reseller wants to place an order, the credit limit is not high enough, and from that point onwards, it gets personal. »Fifteen years as a customer, always paid on time – and now this.« I genuinely understand the frustration. But I still need to explain how the mechanism works – because if you understand it, you can make it work for you. If you do not, sooner or later you will lose a project to someone who does.
The most important point first: in most cases, your credit limit is not actually set by your distributor. It is set by the credit insurer. In Europe, the vast majority of trade credit insurance is handled by a small number of major providers – Allianz Trade, formerly Euler Hermes, as well as Coface and Atradius. In practice, they have a significant say in how much outstanding debt a supplier is allowed to carry for you. The sales rep you have on the phone – who, at that particular moment, may well have become your least favourite person – can tell you what the decision is. They cannot change it.
And now we come to what I consider the most important part of this entire article: those three companies are assessing you anyway. Whether you speak to them or not. If they do not have any up-to-date information, they work with whatever is available – your most recently published annual accounts, which could easily be eighteen months old, supplemented by general assumptions about your industry. A company that has grown significantly since then may therefore be assessed on the basis of its own past and end up with a limit that no longer reflects the size of its business. So my strong advice is this: actively provide all three with fresh figures, without waiting to be asked. Your latest annual accounts, current management accounts, a trial balance and a couple of sentences about your order situation. Do not wait until there is a problem. Do it once or twice a year, voluntarily, without anyone having to ask.
I am not preaching this from a textbook. I learnt as far back as 1988 that it is better to proactively keep banks, insurers and credit agencies informed than to wait and see what conclusions they draw for themselves. As a one-man operation back then, I would never have secured a credit line if I had not proactively talked their ears off. Unprompted, regularly and armed with figures nobody had even asked me for. It was tedious, it cost me evenings, and it was by far the best investment I made in those early years. If you stay silent, people estimate. And in this business, estimates tend to err on the low side.
You are guaranteed to discover why this matters at the worst possible moment. You are in the middle of a tender, you suddenly need €180,000 worth of goods, and your credit limit stands at €60,000. If the insurers already have your latest figures, an increase may be a matter of just a few working days – sometimes even hours. If they have nothing, the assessment starts from scratch: request documents, ask follow-up questions, wait. Two or three weeks is then perfectly normal. And in two or three weeks, the project is gone. Not because of your creditworthiness – because of a folder of documents you never sent.
There is a second level to this that has just as little to do with whether anyone likes you: your payment behaviour is reported, and it is reported by your suppliers. If you regularly pay one supplier ten days beyond the agreed terms, you may end up reducing your credit limit with others at the same time – word gets around without anyone needing to meet over a pint. The reverse is equally true. Paying on time is therefore not simply a courtesy to your supplier; it is an investment in your own purchasing capacity. I have already written in this series about payment terms as infrastructure – this is the same story, told from the perspective of those who ultimately give you the thumbs-up or thumbs-down.
The rest is simple, but it still makes a difference. Flag major projects early, even if they are not yet certain. A supplier who knows three weeks in advance that an order worth €200,000 might be coming in October has time to prepare. One who finds out on the day you place the order has little left to offer but their regrets and wishes for a pleasant day. And talk about your figures before they start to look bad. A reseller who proactively says, »The first half of the year was weak, here is why and here is our plan«, will be treated very differently from one who suddenly goes quiet. Silence is never a good sign in a credit assessment. It will always be interpreted to your disadvantage.
I know this sounds like bureaucracy, and I like bureaucracy about as much as you do. But this is not about forms. It is about how much room you have to manoeuvre when purchasing. If you keep your financial information up to date, you can place orders when it matters. If you do not, you will discover where your limit lies at precisely the moment when finding out is most expensive.
So remember: »A credit limit is not an opinion about you. It is the result of a calculation based on the figures available – and you decide which figures are available.«
Distribution Mechanics: Beginning 11 September, things get serious – the Cyber Resilience Act affects you too
Over the past few weeks, I have written about the grey market and why that bargain from a broker could end up being the most expensive device you ever buy....
Over the past few weeks, I have written about the grey market and why that bargain from a broker could end up being the most expensive device you ever buy. Today, we come to the legal side of the same story – and it is considerably less romantic than anything I could tell you about warranties. The European Cyber Resilience Act is already in force. On the 11th of September 2026, the first major requirement takes effect: the obligation to report actively exploited vulnerabilities. From the 11th of December 2027, all newly placed products with digital elements on the market will then have to meet the full requirements.
I know exactly how that sounds. Another regulation, another acronym, another thing for manufacturers rather than for you – straight into the folder where the GDPR and Supply Chain Act are already gathering dust. And that is precisely where the misconception lies. The regulation recognises three roles – manufacturer, importer and distributor – and all three come with obligations. As a distributor, you must, among other things, carefully check whether a product meets the requirements before making it available, and you must not sell it on if you have reason to believe that it is not compliant. And anyone bringing goods into the EU from third countries outside official channels may find themselves legally classified as an importer rather sooner than they would like – along with the considerably less pleasant obligations that entails. Suddenly, that bargain purchase from the other day takes on a whole new meaning.
The good thing about this regulation is that it finally makes one question mandatory that was always the right one to ask anyway: Will this device continue to receive security updates, and for how long? In the future, manufacturers will have to specify a support period and address vulnerabilities during that time. This turns something that was previously a matter of trust into something that can actually be verified – and finally gives you something tangible in a sales conversation that cannot simply be argued away.
Because this is exactly where professional-grade products separate themselves from those that merely look cheap. Take a device that your customer intends to use for five years. Option A: €900, with a stated support period covering the entire intended service life. Option B: €640, unclear provenance, and when you ask about updates, everyone along the supply chain simply shrugs. Your customer saves €260 per device and is delighted. But if the device has to be replaced after three years because it is no longer permitted to operate on their network, they have effectively written off €640 and have to pay all over again. Across 200 devices: €52,000 saved, €128,000 lost. Nobody wants to walk into their own management meeting with those figures.
There is a second level to this that will soon matter more to your medium-sized customers than any discount: companies that are themselves subject to stricter security requirements have to document their supply chain. The buyer who only asks you about price today will soon be asking about declarations of conformity, support periods and product provenance. If you have clear answers ready, you make the sale. If your answer is, »I’ll have to check that«, you have just buried your own offer – and I have already written at length in this series about what I think of phrases like that.
And now for the uncomfortable part – fortunately, it is a short one. Get hold of the conformity documentation and stated support periods for your most important products and file them properly – you will be asked for them, you can count on that. Buy from sources that are actually able to provide this documentation, and steer clear of goods whose origins nobody seems willing to explain. And make the support period a standard line in every quotation, right next to delivery time and warranty. It costs you nothing and shifts the conversation away from price.
I am not normally a fan of using regulations as a sales argument – it feels too much like selling with a wagging finger, and we have all had more than enough of that in recent years. But this particular regulation clears up something that has been troubling our market for a long time: comparing the prices of things that simply are not comparable. Until now, a device with guaranteed support and documented provenance and one with neither could sit peacefully next to each other in the same Excel column as though they were twins. That will soon be a thing of the past. And I freely admit: I am looking forward to it.
So remember: »A device without guaranteed security support is not a cheaper device. It is a device with an expiry date nobody told you about.«
Distribution Mechanics: The complaint that never was
There’s a figure in our business that nobody likes to talk about because it’s embarrassing for everyone involved: a significant proportion of devices returned as...
There’s a figure in our business that nobody likes to talk about because it’s embarrassing for everyone involved: a significant proportion of devices returned as faulty are perfectly healthy. No fault, no defective component, nothing. Incorrectly configured, incorrectly paired, the wrong power supply, no proper introduction – or simply a user who expected something the device was never designed to do. The industry has come up with a wonderfully forgiving abbreviation for this: »NFF – no fault found«. Anyone who runs a service centre knows their percentage pretty accurately. They just don’t say it out loud.
The instinct to blame the user is understandable, but it’s still wrong. Because the user isn’t the one paying for the process. You are. Do the math: outbound and return shipping together, €30. Testing, even if nothing is ultimately found, an estimated €45. Your own time spent receiving the return, logging it, asking questions and chasing up on people – let’s generously call it an hour at €75. And then there’s the week during which one of your customer’s workstations is out of action. Even if we generously ignore that last point, you’re already at €150. Twenty cases like that a year comes to €3,000. You’ll never see them in any report because they spread themselves neatly across twelve months – like all the really expensive things do.
And now for the uncomfortable part: most of these cases could have been resolved with a twenty-minute phone call. No training course, no process, no service contract, no project with a steering committee. Just a call where somebody asks: »What exactly happens when you press the button?« In the majority of cases, that’s enough to sort it out. That’s why I don’t see support as a cost centre, but as the most effective lever there is for reducing your returns rate. And, purely by coincidence, it’s also the cheapest.
There’s a second point that is almost always underestimated: a return is also a matter of trust. Your customer bought something, it didn’t work, they sent it back – and three weeks later the device comes back with a note saying that everything is perfectly fine. From their perspective, that note says: »It was your fault, and nobody helped you.« You can be completely right about the facts and still lose the customer. When the next rollout comes around, they won’t remember your good price; they’ll remember those three weeks. Being right and doing business are two different disciplines in our industry, and you can be a champion at one while getting relegated in the other.
What actually helps: first, an initial assessment with four questions that are always the same. Since when? Does it affect every device or just one? What changed most recently – firmware, network, location, accessories? And: does an identical device work at another workstation? Those four questions eliminate half the cases before anyone even touches a cardboard box. Second: where possible, provide a replacement device on site rather than having the faulty one sent in. Third – and this is the part that takes a bit of courage – review your own cases once a quarter and count how many were »no fault found«. The number surprises everyone. It surprised me too, back then.
I’m explicitly pointing the finger in our own direction here as well. A distributor that simply processes returns instead of trying to help first is making life too easy for itself. For the distributor, the case is neatly closed; for you, it’s a customer who now thinks badly of you. So the question to ask your supplier isn’t »How quickly do you process an RMA?«. It’s: »What do you do to make sure I don’t need one in the first place?« The answers can be remarkably revealing. So can some of the faces.
There’s a reason I’m going into so much detail here. A device that gets sent in and returned with no fault found generates no revenue, no margin and no satisfaction. It’s the only process in our entire chain where everyone involved loses – and the only one that could have been prevented by a phone call.
So remember: »The most expensive complaint is the one where it turns out there was nothing broken in the first place.«