South African government departments' unpaid bills to suppliers rises by 600% in just one quarter

The South African Public Service Commission (PSC) is worried about the impact of late payment of suppliers’ invoices by the government departments, and is urging them to quickly settle the outstanding bills to ensure that supplier SMEs can survive in this tough economic environment.

Its bulletin The Pulse of the Public Service, which is published every quarter, highlighted that number of unpaid invoices spiked by 600% in just three months, from 134 in March 2022 to 959 in June 2022.

The commission blames the Departments of Tourism, and Water & Sanitation for most number of unpaid invoices.

PSC Commissioner Anele Gxoyiya warned that the failure of many small businesses to survive and thrive due to late payment by government agencies may result in additional job losses.

"The growth and sustainability of the small business sector is regarded as one of the vehicles that can contribute to economic growth and employment, and since government is one of the main procurers of services from small businesses, its commitment must be matched with the timeous payment of invoices.

"Late payments at times affect these small businesses, to such an extent that by the time they get paid, the businesses have already collapsed. The late or no-payment of invoices has a deleterious effect on the financial health of the businesses that then may be forced to borrow in order to stay financially afloat," Gxoyiya said.

According to him, the challenging economic situation in South Africa has made borrowing more expensive, and in certain situations, cash flow issues would force firms to decrease operational expenses by laying off employees as a way to avoid going out of business.

PSC’s research indicates that invoices are not paid on time due to reasons like non-adherence to supply chain management processes, poor financial management, lack of capacity, incomplete documentation from suppliers to effect payment within 30 days, and disputes between government departments and suppliers.

While these reasons are also researched by RIABU and documented in our book Let the Cash Flow, which also provides solutions to SMEs on how to deal with late payments from customers.

One of the concepts discussed in the book is called the Virtuous Revenue Cycle, which is focused on service, trust-building and cultivating customer loyalty. At its heart, this approach is all about early and constant customer contact. You can read more about the eight components of the Virtuous Revenue Cycle here.

Managing your cash flow the RIABU way requires the investment of time, the introduction of team processes, and buy-in and ownership at all levels of the company.