The pervasive culture of late payments in the MENA region is impacting SMEs. While the global average for payment terms is around 60 days, if you run a UAE business, you'd often face wait times of up to 100 days or more. This delay can have severe implications on your business except it has the financial leverage to withstand extended periods without cash flow.

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As a smaller business owner, you often find yourself in a precarious position, with limited options for payment term standardization. The complexity of payment systems, or rather a lack of efficient systems and processes, aggravates this issue, leading many SMEs to simply accept late payments as an unavoidable cost of doing business. This normalization of delayed payments creates a cycle that hinders growth and innovation.

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In this article, we discuss:

• Scale of the Problem: Financial Burden
• Consequences of Late Payments
• Embracing Technology to Improve Cash Flow: 3 Ways Kema Can Help You Curb Late Payments

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Do you want to improve your business’ working capital? Speak to an AR automation expert at Kema today.

The magnitude of the late payment problem is significant. Recent data from the PWC Middle East Working Capital Study 2023 reveals that approximately $35 billion in payments are outstanding across 424 companies in the region. What's more, we recently conducted a comprehensive analysis that indicates that the problem is far more extensive, with an estimated $400 billion outstanding across 500,000 SMEs in the region.

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The combination of substantial overdue amounts and extended payment terms presents an obstacle to economic mobility for SMEs. The scale of outstanding payments impedes cash flow, restricts investment in growth and innovation, and ultimately threatens the viability of many small and medium-sized businesses.

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The present payment ecosystem for SMEs in the UAE is characterized by several inefficiencies:

• Manual invoicing processes that are time-consuming and prone to errors
• Limited visibility into payment statuses and cash flow projections 
• High transaction costs associated with traditional payment methods 
• Inefficient reconciliation processes that strain already limited resources

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These challenges not only impede the day-to-day operations of SMEs but also affect scalability and their ability to compete effectively in an increasingly digital marketplace.

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Are you thinking of reducing late payments in your business? Speak with an AR automation expert at Kema today.

The repercussions of late payments on businesses can range from stunted growth to potential insolvency. 

Even in the most optimistic scenario, late payments significantly affect business growth. Data from the PwC study indicated a disparity in growth rates between small and large companies. Small businesses experience a compounded annual growth rate (CAGR) of just 2%, while larger corporations enjoy 11%. This significant gap emphasizes how late payments disproportionately affect smaller entities, constraining their ability to expand or effectively participate in the market.

In more severe instances, persistent late payments can push businesses towards insolvency. Extended periods without incoming cash flow can lead to an inability to meet financial obligations, pay suppliers, or invest in necessary resources. What can easily follow is the risk of bankruptcy.

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While larger corporations may weather payment delays through diverse revenue streams or credit lines, SMEs often lack these safety nets, making each delayed payment a potential threat to their survival.

There are now significant technological advancements that SMEs can leverage without the need for any in-house development. With no-code to low-code integrations, you can essentially transform the B2B payment process into an efficient, streamlined process and see your cash flow improve almost immediately. Here’s how Kema enables you to tackle late payments by combining automation, visibility, and smarter payment tools:

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Kema automates your invoicing and follow-up workflows: It pulls invoices directly from your ERP and digitizes them instantly. Then, it sends customized reminders via email, WhatsApp, or SMS, ensuring your customers stay on track without requiring manual outreach from your team. This approach reduces errors and keeps collections consistent.

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Kema puts you in control of your receivables: You can track when customers receive, view, or open invoices, and your team can monitor progress through a centralized A/R dashboard. They log calls, view notes, and resolve issues faster, ensuring accountability and alignment across the board.

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Kema streamlines payments for your customers: It supports credit cards, bank transfers, and regional gateways like Sadad. Customers can click a secure link or log in to a payer portal to settle invoices quickly, even in bulk.

Capitalizing on the above helps your business address the pervasive issue of late payments, putting SMEs in a much better position to receive payments and removing time-consuming administrative tasks for your finance team.

While there's a significant gap in outstanding payments that needs to be bridged in the MENA region, which undoubtedly includes a push for more stringent payment practices, there are some quick levers that businesses can leverage to address the issue immediately: technology.

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Embracing and leveraging B2B payments technology to defy the status quo is one way to curb late payments. Your company can move a step closer to efficient payment journeys and practices. By doing so, you will not only increase their cash flow but also build a stronger, more resilient business. This shift can lead to a more dynamic SME sector in the MENA region, boosting economic stability and growth.