My friend Jack is at his wits end for what to do for his business. While the rest of us entered the job market, Jack opted to go off on his own, starting a market research company at its core, he branched off into deliveries and event management. He has done everything in between.
He has made a better than average living for himself over
the years.
But lately he is beginning to feel the walls closing in on
him and long term survival seems to be fading away.
While URA the bane of every small businessman, have something
to do with it, it’s more to do with the payment cycle of his big clients.
For many of his clients he does the work and then invoices for the job after it is done. The problem is that the big companies pay for work done up to 120 days after invoicing. So his life is an unenviable cycle of looking for financing to do the job, then chasing payments from the big companies (it is not paid automatically during the stipulated time) and then ducking and dodging from URA, money lenders and any number of debtors...
After all is said and done, and yes there is the company official
who wants his cut to get the job and the one whose palm you have to grease to ensure
payment, he barely breaks even.
For the amount of stress and worry he juggles it is a wonder
he has not greyed yet.
Government’s cash squeeze is causing a general slowdown in
economic activity especially in the retail sector.
Not only is government cutting back on spending they owe the
private sector over sh4trillion shillings, with some suppliers going unpaid for
up to three years...
Government being the biggest consumer of goods and services,
when it sneezes we all catch cold.
But my friend Jack
argues that that should not affect him. Many of his clients already have the
cash; the telcos have most of their services prepaid for. The breweries? Try
getting beers on credit at the depo. The banks are not only seating on stacks
of money deposited with them but charge fees to keep that money, so cash is not their problem.
I suspected that these 45-day plus delays of payment are a throwback
to a time when company accountants used to pore over oversized legers,
reconciling accounts from far flung reaches of the company and therefore need
time to reconcile and then pay suppliers. It seems to me then, that with
improved technologies, where reconciliations are done in real time, these time
savings should have done away with these long waiting times suppliers are
suffering.
But industry players say that is not true. Companies are managing their own cash flows to the detriment of the small man selfishly, plain and simple. A company holding on to monies for even a day can see them earn a point or two by placing those monies in a bank or conversely would mean they do not have to draw down their overdraft with the bank and incur additional financial costs.
And URA? The law is that you should pay your VAT on any
invoice issued by the middle of the next month. So small businessmen are having
to dig into their pockets or worse, borrow money to meet their tax obligations,
invariably looping them into a vicious cycle of debt and tax default leading to
tax evasion.
It is true that all over the world it’s the small
businessman who is the biggest employer. But you have to fear for the fate of
the worker in the small business if the big businesses, not to mention government,
is treating small businesses like unwanted orphans.
In corporate Uganda and the world over the buzzword is
ESG (environmental, social and governance). At its core is the realization by businesses that profit is not everything and that they have a wider responsibility beyond their shareholders, to ensure that more stakeholders benefit from their good fortune...
It common sense that of you are affluent in a see of poverty
in the short term your progress will hit a ceiling and in the long term
the impoverished will eat you –
literally and figuratively. So it make sense to ensure in your pursuit of profit
everybody around you ´get a fair shake.
So, featured prominently in your glossy sustainability
reports can you, big companies, spare space for the improved treatment of the small
businessman, preferably ahead of the new boreholes you have installed in some obscure
village or the new lick of paint at XYZ primary school. Thank you.
