Improving our corporate payment culture

The crowning and expectant moment for every effort is the reward we receive for providing value added goods and services to our clients and customers. These are translated into payments in terms of cash, cheques, shares, equity and other forms of monetary/financial mechanism meant to reward our efforts as well as appreciate our contribution. We all smile to the bank at the end of every month in full hope and anticipation of our monthly contributions being rewarded accordingly (salaries) but what about our suppliers and contractors.

In Africa in general and Ghana in particular, we are already saddled with a stressful and frustrating business environment which is mostly constipated by excessive and cumbersome processes, compounded by unproductive bureaucracy and bottlenecks due the manual approach of executing transactions. It is therefore very expensive doing business in Africa not necessarily because our prices are high but also because other auxiliary cost and the frustrations involved further worsen the already precarious situation. After going through the hassle of raising requisitions, seeking approvals, analysing quotations and orders have been placed or contract issued; goods and services are delivered and when you expect to be appreciated and rewarded accordingly, the next level of stress and frustration begins when it comes to payment. Both the public and the private sectors need to improve to keep our businesses running and ensure growth in our economy.

The root cause of such delayed payments are institutionalised inefficiencies caused by outmoded processes with the intention of creating systems of internal controls but rather creates excessive bottlenecks. In some organisations, processes or procedures are not documented and communicated to all relevant stakeholders thus breeding “transactional snail movements” which necessitate the need for “appropriate lubrication” to move the processing. The people who are supposed to fast track the process and ensure speed, rather loss their customer service touch and then exploit the system to their advantage. In this era of ICT most organisations lack appropriate technology which can conveniently replace excessive signatures and stamps which further delays the processes due to the current manual systems being administered in most organisations. Some institutions sometimes deliberately delay payments in order to manage their cash flow and ensure enough resources are available to take care of the payments but this needs to be managed through appropriate communication.

The consequences of a bad payment culture puts the supplier or contractor in a tight situation and might resort to other desperate measures such as inflating the price the next time round in anticipation of possible delay, cutting back on quality to make up for the losses, diminishing the corporate image of the client which results in loss of confidence and sometimes results in withdrawn services in time of need. It should however be noted that most suppliers are reasonable and can cope with reasonable and legitimate delays but others unnecessarily goes overboard. It will interest you to note that most suppliers have developed a league table of all organisations and their commitments to their payment obligations and they are ranked accordingly (where do you stand?). Whiles most companies perception about their clients are worth mentioning, others have so much dented images that their respective corporate affairs departments might need additional resources to deal with the situation.

The solution to the above should not be the normal blame game but a genuine commitment and fact-finding with all internal stakeholders such as finance, supply chain, audit, and corporate affairs in consultation with external stakeholders to find a holistic solution to the problem. Some of the measures includes the redefinition and simplifying complex processes as well as communicating such processes to all stakeholders and ensure full compliance. Transactions should be better managed through consolidation to reduce the frequency of payments. Smaller and minor transactions could go through an established petty cash system with define limits. Outsourcing some aspects of the payment chain to competent partners such as the banks as well as the use of other contemporary payment mechanisms such as cards, direct debits and instant transfers could speed up the payment process. Suppliers could revert to legal protection by insisting on payments terms expressly outlined in their respective contracts with expressed penalties for non compliance to ensure they are not unreasonably abused.

The benefits of ensuring prompt and regular payments includes the potential of negotiating better discounts in the future, maintaining existing credit facility, enhanced corporate image, prioritising your orders in time of scarcity among others.

All organisations in both the public and private sectors must immediately take the bull by the horn and find a lasting solution to our current poor payment culture since the consequences go beyond issuing a cheque. We must all make a conscious effort to ensure that after we gracefully solicit for goods and services, we will also passionately insist they are paid on time and in full in order to justify continuous business.

Credit: Sam Buabasah
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