Information can change the world, I have always believed, and even in this post-truth era of fake news and fictitious facts, efforts to inform debate and decisions lead to better outcomes.
A case in point was a report last week about the late payment problem in different nations. Sadly, no mention of Kenya in this one, but in an analysis of over 11,000 invoices issued by UK companies, the report picked up payment trends for ten nations and named the US as the world’s worst payer in 2019.
It only covered late payments, which is the time taken to pay after the contract terms, and not long payments, which is where companies agree to take a long time to pay. On that basis, asset-backed financier MarketFinance found that in 2018, in the US, 40 percent of companies were paying their foreign invoices late by an average of 13 days.
However, in 2019, the situation was far worse. By last year, 53 percent of US companies were paying later than was agreed in their supply contracts, and by an average of 51 days – which is nearly two months and that’s an average, not the worst, and an average across more than half of all the invoices issued to US firms.
That represents a sizeable deterioration and a high chance that any supplier to the US from Kenya will need to cover the cash flow for their supplies for an extra two months or more.
And that’s where information helps. These were all small and medium enterprise (SME) invoices, so we can leave SMEs alone to take hit after hit, maybe taken down by just one contract with a US company that takes an extra two months to pay, as the Kenya Revenue Authority (KRA) freezes its accounts without accepting this cause for a delayed tax payment.
Or we can let business owners know what’s happening, thereby immediately transforming their risk. They may still supply to the US, but only with a credit line in place.
Indeed, the initiative of sharing information can transform the outcomes themselves. Take the case reported this week of avocado growers selling to companies in Dubai that have paid down payments but then never paid the balance, moving from seller to seller with the same non-payment model.
For as long as we don’t share this information, every new avocado grower these companies approach is a farmer about to lose their 2020 crop. But as soon as we have broadcast the thieving to all our farmers, the door closes for getting Kenyan avocadoes for free: suppliers will be far more wary, seeking evidence that this company pays for its supplies.
For, no matter how weak we feel as SMEs, selling our crop for no payment is a step we never need to take. Better to keep the crop and eat it ourselves that give it to another who won’t ever pay.
And better to sell half our output to one buyer who pays on time than all of it to a company that still hasn’t paid us 50 days after the payment terms have passed by.
Unfortunately, in Kenya, most SMEs, most of the time, are in the dark on all such matters. If the egg industry becomes oversupplied because there are too many new entrants, or because we lose huge egg contracts supplying South Africa, most SMEs will find out as they sell – when they don’t. By which time it’s all too late.
They haven’t invested in egg-drying technology to give themselves a new way forwards before their income got halved. They haven’t bought a cock and moved to fertilised eggs as a way of getting twice the price supplying the meat industry instead of food consumers.
In fact, they didn’t know, and ended up hurt. Which is why it serves us all as a nation to share information on trends, to share information when someone isn’t paying, to join together and act together on business issues.
For which reason, good for those avocado growers: let us all follow their lead and share our woes and mitigate them, instead of going over the same cliff in wave after wave, never warning anyone.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
