The Causes and Impact of Late Payment’s To Suppliers In Local Government Authorities in Tanzania

Abstract

The issue of delayed payments to suppliers is becoming increasingly prevalent on a global scale. This problem arises due to a range of factors encompassing both organizational and individual elements, as well as factors related to the suppliers themselves. This study aimed to find out the causes and impact of late payments to suppliers in LGAs in Tanzania, using Mbinga Town council as a case study. A descriptive study design and a qualitative approach were applied for this study. Quantitative data analysis involved a sample of 78 suppliers who experienced late payments in Mbinga Town Council, utilizing descriptive analysis and multiple linear regression, while qualitative data for objectives 1 and 2 were analyzed using thematic analysis, reaching saturation point for sample size. The analysis of suppliers' payment procedures in Mbinga Town Council uncovers a well-structured and comprehensive approach to financial management, encompassing sequential payment workflows, meticulous documentation, effective communication, and a commitment to continuous improvement. However, the study on the causes of late payments to suppliers within the council identifies several key issues contributing to delays, including prolonged bureaucratic procedures, budgetary constraints, divergent priorities, inadequate inter-departmental communication, and accountability shortcomings. Furthermore, the research reveals that late payments have a substantial impact on Mbinga Town Council's performance, with 62.6% of variability in performance explained by the considered factors. Poor financial management, bureaucratic processes, political influences, and skill deficiencies emerge as significant factors leading to adverse performance outcomes. In contrast, issues related to cash flow, administrative inefficiencies, and motivation did not attain statistical significance in this context. To address these issues, LGAs must prioritize transparent and efficient financial management, streamlined procurement processes, and robust communication with suppliers. Timely supplier payments are crucial not only for maintaining healthy relationships and service quality but also for upholding the credibility and effectiveness of local government operations