Tuesday February 2 2016

Don’t give buyers excuses for paying late

By James Abola

The relationship between big buyers; such as supermarkets, government ministries or big corporations and small business suppliers is very lopsided. Many big buyers do not treat their suppliers with respect and equity. This kind of relationship enabled Uchumi to close down its operations and spirit away its top managers before paying thousands of local suppliers.
Often, suppliers are forced to wait for a minimum of three months before receiving payment for outstanding invoices. During the waiting period, the big buyer does not pay interest on the money owed to the supplier. The supplier, on the other hand, must find enough working capital for three months. This often means borrowing at high interest rates from money lenders which eats into any profit the trader could have got.

This lopsided relationship apparently occurs in the United Kingdom as well. In a recently released report, the UK small business ombudsman known as the Grocery Code Adjudicator found that Tesco, a UK supermarket chain, had knowingly delayed payments to its suppliers in 2015.
While there is similarity between the treatment meted out to suppliers in Uganda and UK, there is also one important difference; the United Kingdom government found it important to appoint an ombudsman to look into the concerns of small businesses. And here in Uganda “investors” are tightly cuddled by the government while small businesses are treated with a lot of suspicion and contempt.

The lesson for Ugandan small business suppliers is this: when dealing with a big buyer, first understand the terms of payment and do everything necessary for the payment to be effected; never give your buyer an excuse for delaying your payment.
The lesson for government is that small businesses need support when dealing with the likes of Uchumi or respect when checking for their compliance. Small businesses are very important for the economy because they are the source of income for the majority of Ugandans.

James Abola is the Team Leader of Akamai Global, a business and finance consulting firm. Email: james.abola@akamaiglobal.co.uk