Our credit control team is good at its job. Before a builder is given a trade account, they look at his filed accounts, his credit score, any county court judgments and how promptly he pays other merchants, and they review the larger accounts every year. It is one of the reasons our bad debts are low.
Our Microsoft 365 licences, our email security service and our endpoint protection were bought through a small IT reseller, chosen in 2021 because its prices were about four percent below the next quote. We paid it monthly. It paid a distributor, and the distributor paid Microsoft and the other vendors. Nobody thought of it as a supplier that could fail, because what it sold us came from some of the largest software companies in the world.
In May the reseller went into administration. A week later the distributor wrote to say that it had not been paid for our subscriptions for March and April, and that unless the arrears were settled it would suspend them at the end of the month. We had paid the reseller for both months, on time. The administrators told us we were an unsecured creditor. To keep email and protection running for eight hundred people we paid the distributor directly, which meant paying for those two months twice, about fifty one thousand pounds. We expect to recover a few pence in the pound.
The second discovery was worse. When the reseller set up our tenant in 2019, it was given delegated administration, the older kind of partner access that Microsoft has since replaced with a narrower, time limited one. Ours had never been reviewed. It still gave the reseller's staff the rights of a global administrator over our email, our files and every account, and those staff were being made redundant by the administrators that week. We removed the access the same afternoon, went through the audit logs back to January and found nothing we did not recognise.
Afterwards someone in finance looked up the reseller's filed accounts. They had shown net liabilities for two years running, and the latest had been filed late. Our credit controllers would have turned it down for a trade account.
Technology suppliers now go through the same supplier risk review as any other supplier we spend more than fifty thousand pounds a year with, including a financial check before we sign and every year after. Where software is bought through a reseller, the contract has to say who we pay, who they pay, and what happens to our subscriptions if they fail. We moved our licences to a larger partner that buys directly from Microsoft. Partner access to our tenant is reviewed every quarter with the rest of our privileged accounts.
The company in the middle of a purchase is a supplier in its own right, and it can fail even when what it sells cannot. Use the checks your business already knows how to run on its own customers.
– Serguey Shinder
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