Analysis of the problems of vendor payment in relation to procurement procedures: a case study of the Ministry of Environment.

Abstract

This research project presents an overview of payment systems in the ministry of Environment and transitional socialist economies. The research project does not intend to make the reader an expert in payment systems. The paper intends to raise awareness of the challenges faced by suppliers and commercial banks and the buyers in developing or modernizing payment systems. The project paper addresses the following questions, which is the causes of the problem: A payment system is actually quite simple; it defines the procedures, rules, standards and instruments used to exchange financial value between two parties discharging an obligation. Although the purpose is simple, payment systems evolve over a period of years. The different conditions in each ministry i.e. size, legal systems, business practices, communications and infrastructure make each payment system unique. Emerging economies do not have to "re-invent the wheel" to develop their own payment systems. They can adapt successful systems and practices from more developed government ministry to suit their own needs. Emerging ministry can learn from the mistakes made in other ministries and avoid them by introducing preventive measures early in the processing procedures. What are the key attributes of a successful payment system? Payment transactions have two parts the flow of information providing payment instructions and the flow of funds. These two flows are always related, but may follow different paths and have different timings. Each payment transaction has four common elements: an obligation to discharge; a party to make the payment i.e. payer and a party to receive the payment i.e. payee, a payment instrument, such as cash or a check, to convey the information about the transactions; and one or more financial intermediaries (usually banks) to transfer the value by drawing funds from the payer's account depositing funds into the payee's account. Sometimes a third party i.e. commercial bank facilitates exchanges of value between the two participants banks. Each transaction has different requirements depending upon the customers i.e. consumers / vendor, the nature of the financial obligation (bill payment or purchase at the point of sale) and the speed, security and cost required for the transaction. Developed countries (and many emerging ones) use several different payment instruments and processing systems to satisfy the country's payment system needs. Study further attempted to find the causes of delayed payment in the ministry of Environment, in relation to its vendors after the delivery of goods and services, taking into consideration the lead-time posed by the delayed payment causing unnecessary tension. The research took the form of inquiry. Questionnaires were used to solicit information from the respondents i.e. ministry staff and vendors' employee. The data collected was analyzed using percentages tables; pie charts and figures were necessary. All these were perceived to be important when it comes to compare with the factors identified in the literature review. The data collected proved right the research alternative hypothesis that states' Without reliable, efficient and timely payment systems, companies cannot conveniently acquire raw materials, pay wages and promote economic growth".