Late payments are a story as old as payments, yet there are new storylines all the time. In the latest ongoing chapters, and depending on where one looks, late payments by the various governments are having a ripple effect on private industry.
In what may be among the bigger stories of the week, Reuters reported that the Kenyan government has been remiss in paying many contractors in a timely manner. It’s a late payments cycle caused by corruption that has, according to the newswire, drained funds from government accounts that could otherwise be used to pay suppliers.
It’s not just suppliers that feel the pinch here, said Reuters, as the financial sector is witnessing its non-performing loans hit levels not seen in a decade. Minister of Finance Henry Rotich shed some light on the late payments issue, stating its importance at both the national and state levels. The impact is considerable, as some sources estimated as far back as 2016 that Kenya would lose a third of its government budget to graft. In addition, bad loans are 12 percent of banks’ totals and, of that, 10 percent was tied to payments from government contracts.
The newswire stated that small- and medium-sized (SMBs) firms in the country tend to vie for government business as that client is among the largest spenders. However, five sources told Reuters that late payments have, in turn, meant that they cannot make their own loan payments in a timely manner, which leads to poor credit ratings. The ripple effect? Further financing is hard to obtain.
Separately, at a higher level in reference to payments (specifically making payments more efficient), joint research from the NAPCP and Accenture has shown that supplier acceptance of card payments has been on the rise through the past nine years. Notable uptick in acceptance across spend categories has led to such payments getting a boost in verticals like professional services and utilities.
A survey of roughly 90 respondents at end user firms showed that supplier acceptance, which has seen an upswing in acceptance rate, has come with ongoing education about such options amid P-Card and ePayables programs. The findings indicated that utilities accepting cards have gained 12 percent in the past six years and, overall, 51 percent of utilities now accept those cards. Suppliers accept cards for office supplies, food service and computers. The data gathered by the aforementioned companies mean those categories increased 3 percent since 2013, and 10 percent as measured against 2009. About 60 percent of respondents have ePayables programs, and that compares against 40 percent in 2013.
In individual company news, with an eye on making payments speedier (and, thus, stanching late payments), MakerDAO said this past week that it has been working with Tradeshift to tokenize invoices that are unpaid, through what the firms said in a joint release comes as part of an experimental program. The firms said that MakerDAO has Dai in place, which is a stablecoin being tested in conjunction with the Tradeshift Cash solution. Under the test, a firm could change an invoice to the stablecoin, and a crypto investor could buy that coin. The funding from that transaction would be transformed into fiat currency and deposited into that firm’s account.
The linkup debuts as Tradeshift seeks to boost its B2B payments business, bring Tradeshift Pay to market and offer an early payments service tied to blockchain. Tradeshift stated in the release this past week that 50 percent of U.S. payments are check-based, and companies struggle when it comes to accessing finance and payments.