By Muli wa Kyendo

Today I held an interesting discussion with a businessman that I bumped into at a kiosk – very unusual place to meet a serious businessman. The businessman – shall we call him Edward, set next to me as he talked into the phone, “You should put on your uniform. It’s a serious thing. You can be arrested by the police and it will take you months to be released or years in prison, if there is a theft.”

He placed the phone on the table, scratched his chin and studied my face. “The man I was talking to is a guard. I have told him many times not to bring me problems when I have mine. And he can’t listen!”

I tried to understand what he was saying. ”Yes, I am the supervisor. Actually it is my business. And when you have a business you have many problems. Like these cheques which have bounced. I have to think: Where do I get money to pay the debts I have. To pay the employees…:

Bounced Cheques

I reminded him that it was illegal for anyone to give a cheques that bounces – that is returned unpaid. He smiled. “That’s okey for large business such as G4S. When I worked for them, we had a form that had conditions. Your payment must cover several months in advance and you must sign a standing order with your bank. If you don’t do that, no one will even look at you. It’s different for small businesses like mine. Customers bounce cheques and I have to plead with them. I need them.”

Payments for small businesses present a dilemma to all small businesses. At the forum to promote investments in Kisii County, a panel of prominent business men and women and large enterprise managers discussed this problem.

The government – including county governments – was seen as the worst offenders. In many cases, it was difficult to get payment until a bribe was paid. In many others, small suppliers have to demonstrate in the streets to get paid. In the meantime their debts are pilling up. If they had loans, there are risks that their property will be auctioned.

Edward told me of an interesting case where he borrowed a loan to pay his workers salaries from a bank which owed him exactly the same amount of money as he was borrowing. The bank charged him an interest rate while his money, which the bank was, of course, now lending him, stayed the same.

If Payment is Delayed…

The London Freelance Organisation has this advice for its members: “If payment seems to be delayed, do not hesitate to chase it up.” But then it goes on to state that “Clients who pay late must by law pay compensation and penalty interest. The Late Payment of Commercial Debt (Interest) Act (1988) was amended in 2002 to include fixed penalties in addition to interest. For debt of less than £1000 the penalty is £40, rising to £70 for debts up to £9,999.99 and £100 above that. Interest is payable at 8 per cent over Bank of England base rate. The penalties and interest now apply to all businesses regardless of size.”

Payment Clock

The payment clock starts ticking when you deliver the work, or on the day when your client has notice of the amount they owe you, whichever is the later. The client then has 30 days to pay – unless the freelance and the client agree on a reasonable alternative period. Clients must not pressure freelances or attempt to impose unreasonable payment terms. Should Kenyans do the same? What What can small businesses actually do?

My view is that start an association which can blacklist offending large companies – and government departments. The association can campaign for boycotts of such arrogant businesses and they can require directors and other bosses of government departments and organizations to be sacked because they are saboteurs of the economy.

Do you have an opinion? Please let us hear it!