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Entrepreneur's Corner

How Delayed Payments Are Killing SMEs In Kenya

BY Juma · September 14, 2023 12:09 pm

It is in the middle of the month. As an SME, you haven’t paid your employees. They become demotivated. Some come to work. Some just hanging in there, hungry and angry. Your output starts to drop by the day. Employees continue to become angry.

Read Also: The Devastating Impact of Delayed Payments: A Looming Threat to SMEs In Kenya

Then you receive a text from your employees. One has had his/her house shut by the landlord. Another one has no fare to come to work. Another has a family member who is at the hospital. Another has nothing even to eat. What you pay them is their only hope.

You become overwhelmed. Because you want to help but you can’t. You as their boss are also hanging in there. You want to burst out and scream your frustrations out. But you can’t because people might think you are mad and book you at Mathare Mental Hospital.

Read Also: Promoting Equity, Fairness, And Justice In Taxation For Kenyan SMEs And Ensuring Parity With Foreign Firms; The Pesapal case

But here is the twist. Your clients are not paying. If your clients are not paying, then it means you will not have to pay your employees and it also means that the same clients will not have the value they need in terms of input and deliveries. But they seem to be less bothered.

The above scenario is just a snippet of what millions of SMEs in Kenya are facing. Statistics from the Kenya National Bureau of Statistics (KNBS) show that at least 450,000 SMEs in Kenya are dying annually, 30,000 monthly, and 1,000 daily. Most are on account of delayed payments.

The most depressing thing is that even the clients who should be paying you as an SME are also waiting for their clients to be paid, and their client is also waiting to be paid by their client too. It is a series of waiting to the top with no one to blame.

Read Also: 10 Challenges Kenyan SMEs Face In Market Access

Three ways SMEs can reduce on suffering the fate of delayed payments:

  • Have some more cash on standby. Have cash to pay your employees and run your operations as you wait for the clients to pay.
  • Ask for a deposit from your clients. This might work against you because most clients are often reluctant to pay part of the amount before even work is done.
  • Have an agreement that stipulates the exact payment terms of the client. This will help you keep track of payment maturity.

Now, never let the clients who haven’t paid affect work for those who have paid. In anger and frustration, you may tend to judge all the clients in the same basket you will end up losing. Remember that clients do not care about your problems. All they want is their work to be done.

Read Also: Kingdom Bank And Sinapis Partner To Train Local SMEs

Juma is an enthusiastic journalist who believes that journalism has power to change the world either negatively or positively depending on how one uses it. (020) 528 0222 or Email: info@sokodirectory.com

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