A recent article in AB stated that SMEs represent 94 percent of the total companies and institutions operating in the country and contribute more than 50 percent to the country’s GDP, making them a key player in building a competitive knowledge-based economy.”
Therefore we can safely say that SMEs play a vital role in the UAE economy.
Now ask any SME owner what the biggest constraint to growth is in the region and the common theme will be these two words – “late payments”. This will often come ahead of a shortage of capital, frequent macroeconomic shocks, political turbulences and market instabilities.
Paying suppliers late seems to be a sport, especially in the GCC.
I was sat with our CFO last week looking at our client payment schedule. It was unsurprising to see that in our Hong Kong and Singapore business, were all up-to-date with payments, we actually didn’t have anyone paying us beyond 30 days. In our Dubai office, the opposite, approximately 60 percent of our invoices were tracking as being paid beyond 30 days, unsurprisingly.
I regularly meet up with owners and founders of technology and service business in the UAE. We all say the same thing, it’s like it’s an accepted pastime in the Middle East, people pay late. But why should it be accepted? Why go to all the effort to promote the UAE as a safe hub to do business, but make it so hard for companies to get paid on time? It just doesn’t make sense.
When I lived in Singapore, I would speak with other business owners and promote the UAE as a business hub and encourage them to set up in the UAE. Many were interested by what I had to say, but they were also cautious, as they had heard of the late payment challenges SMEs and startups face.
A culture of late payments impacts individual organisations as well as the economy as a whole, fact.
Here are some other things to keep in mind when paying suppliers late:
– Paying late damages your business’ reputation (especially if it’s with recruiters as they talk to everyone in your industry).
– Gives a negative picture of your company finances
– It gives you less favourable terms and pricing for future deals
– Restrict the growth of both businesses
– Puts stress on your team
– Means you get charged interest or late payment charges
We need to breed and promote a professional culture of paying on time and paying fair.
If the business hubs of the GCC region are to attract the best firms, entrepreneurs and talent and really help build great businesses, then dealing with this culture of late payments will greatly help.
Justin McGuire, co-founder and CEO – MENA & APAC, DMCG Global.
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