Firms urged to use digital procurement systems

Companies need to use transparent digital procurement systems to speed up payments to suppliers and improve cash flows and tax compliance by small businesses.

Safaricom Head of Supply Chain Management Francis Murabula said delayed payment for goods and services had been a problem for many firms.

“We have had our own experiences, at times payments delay for no clear reason. What I see as the solution is adapting a digital transparent system that can track when a purchases order is issued, the supplier can confirm services rendered or goods shipped and we can confirm on the back end and the whole system is tracked,” he said.

Mr Murabula was speaking at the Barclays Enterprise Supply Development initiative for SMEs, where the lender announced the launch of a web portal for automation of loan processing.

Small and medium enterprises have been facing challenges in keeping their businesses afloat due to the late payments.

The problem has been exacerbated by the National Treasury’s decision to punish those who delay in filing taxes even as the firms struggle to meet basic administrative costs.

In the Finance Act, an application for extension of time to file a return must be made 15 days before the due date in case of monthly return or 30 days in the case of annual returns.

For value added tax (VAT) and excise duty, late submission of returns now attracts a penalty of five per cent of the amount payable under the return or Sh10,000, whichever is higher.

“This provision is aimed at encouraging compliance and harmonising the provisions under the Tax Procedures Act,” tax advisory firm Grant Thorton said.

Treasury Cabinet Secretary Henry Rotich had initially proposed to amend the Tax Procedures Act to increase the rate of late payment interest to two per cent, and also introduce a 20 per cent late payment penalty.