Kenya is one of the most painful countries for suppliers on the continent given the time it takes to get money paid for goods delivered.
A new report by Duplo, a payments platform for African businesses, shows that over 80 percent of Kenyan companies are taking more than a day to process invoices and the waiting can take nearly a year for some firms before the money is received.
This highlights the struggles suppliers are facing to get their dues after delivery of goods.
The latest Duplo report: Exploring The State of B2B Payments in Africa shows that only 19.7 percent of Kenyan companies process invoices within 24 hours, with 57 percent of them taking up to a week to prepare them for payment.
South Africa has a better showing after the report found 39.9 percent of firms taking a day or less to process invoices compared with Nigeria’s 39.7 percent and Ghana’s 38.4 percent.
The agricultural sector, branding and communications, and consumer goods and retail, stand out as the most efficient invoice processors, mainly attributable to streamlined operational procedures, efficient administrative practices, or the nature of the businesses in these sectors, which may require prompt payment and transaction clearances.
“Companies with longer invoice processing times may need to consider modernisation or automation, including invoice automation, personnel training, and revising internal processes for greater efficiency. Quick invoice processing can greatly benefit companies by ensuring healthier cash flow, enhancing supplier confidence, and facilitating more agile business operations,” said Duplo in its latest report.
The report does not track the pending bills from the government, which means that Kenya would perform much worse given the billions of companies owed by the State.
Despite their overall efficiency, the engineering, beauty and wellness, and finance sectors showcase noticeable delays in invoice processing, with a significant proportion of invoices taking over a week or even a month to process partly due to the intricate invoice procedures as well as high invoice volumes in these sectors.
Payment flows
This also presents a significant challenge for businesses that are often unable to maximise the opportunities available to them due to cash flow restrictions induced by complex payment flows.
Similarly, only 69 percent of payments made to businesses in Kenya are received within a week of sending out an invoice, whereas 21.5 percent of these are settled within a day, down from 42.1 percent the previous year.
Additionally, 22.1 percent reported waiting times exceeding a week, and 8.9 percent over a month, up from 4.4 percent last year, indicating potential transactional complexities or cash-flow constrains which strain vendor relationships, and limit responsiveness to market changes.
“The process of making and receiving payments remains largely manual, which makes it expensive and highly inefficient for businesses. Invoices are also not standardised and they are typically issued and received manually, which increases the administrative burden on business owners, taking more time and effort that can be invested into their businesses,” reads the report.
Kenya is, however, leading in payment automation, with 83.4 percent of businesses indicating that their payment system is either fully automated or semi-automated, compared to Nigeria, South Africa, and Ghana at 79.9 percent, 71.7 percent, and 67.2 percent respectively.
The World Bank disclosed that Africa’s share of the global B2B payment opportunity is $1.5 trillion.
However, despite the promising potential, many businesses grapple with considerable payment delays and other issues with their payment processes that negatively impact their cash flow and slow their growth.
