While both the PFMA and MFMA require that organs of state must take all reasonable steps to ensure that all money owing by them be paid within 30 days of receiving the relevant invoice, one of the biggest risk SMMEs take when doing business with Government is that they will mostly likely not be paid on time. This is what SMMEs can do to mitigate this risk:
- Ensure that they always obtain an approved purchase order prior to delivering any goods or services.
- Take steps to confirm that the organ of state has followed the correct bidding process when awarding the contract. This is important as delays may be experienced while the organ of state tries to ratify deviations from the bidding process before payment is made to avoid audit findings.
- Check the financial health of the organ of state to ensure that they are able to pay you. If the organ of state is experiencing financial difficulties an SMME is likely to experience delays in receiving payments.
- Keeping the entity’s tax affairs in order. Just in case the organ of state checks your tax status before they process payment.
Doing business with Government presents great opportunities for SMMEs to grow but if the associated risks are not managed this could turn into a nightmare for the business owner.