Given how long it takes to receive payment for provided goods, Kenya is one of the continent’s most difficult countries for suppliers.
Over 80% of Kenyan businesses take longer than a day to process invoices, and it might take some enterprises over a year to receive payment, according to a recent analysis by Duplo, an African payments platform.
Only 19.7% of Kenyan businesses process invoices within 24 hours, and 57% of them take up to a week to get them ready for payment, according to the most recent Duplo report, “Exploring The State of B2B Payments in Africa.”
The report indicated that 39.9% of South African businesses processed invoices in a day or less, compared to 39.7% in Nigeria and 38.4% in Ghana.
The most effective invoice processors are found in the agricultural sector, branding and communications, consumer goods and retail, and this is primarily due to streamlined operational processes, effective administrative procedures, or the nature of the businesses in these sectors, which may call for quick payment and transaction clearances.
“Companies with longer invoice processing times may need to think about modernization or automation, which could include employee training, internal process revision, and invoice automation. By assuring a healthy cash flow, boosting supplier confidence, and enabling more agile business processes, quick invoice processing can significantly benefit firms,” according to Duplo’s most recent report.
Given the billions that the State owes firms, Kenya would fare far worse in the study if it tracked the outstanding bills from the government.
Despite their overall efficiency, the engineering, beauty and wellness, and financial sectors all exhibit noticeable delays in invoice processing, with a sizeable portion of invoices taking over a week or even a month to process. This is partly because of the complex invoice procedures and high invoice volumes in these sectors.
Payment flow
Additionally, this poses a huge barrier for firms, who frequently face cash flow constraints brought on by complicated payment patterns, which prevent them from maximizing the opportunities at hand.
Similar to this, just 69% of payments made to firms in Kenya are received within a week of sending an invoice, and only 21.5% of those payments are resolved within a day, down from 42.1% the year before.
Furthermore, up from 4.4% the previous year, 22.1% of respondents reported waiting times longer than a week, and 8.9% reported wait times longer than a month, suggesting possible transactional complexity or cash-flow issues that could strain vendor relationships and restrict response to market developments.
“The process of sending and receiving payments is still largely manual, which costs firms money and is very inefficient. The paper states that because invoices are not standardized and are often issued and received manually, business owners must spend more time and effort on administrative tasks than they would like to.”
However, Kenya leads in terms of payment automation, with 83.4% of businesses reporting that their payment system is either fully automated or semi-automated, compared to 79.9%, 71.7%, and 67.2% for Nigeria, South Africa, and Ghana, respectively.
Although there is great potential, many firms struggle with significant payment delays and other problems with their payment systems, which have a detrimental impact on their cash flow and slow growth.
