By Emmanuel Obinne
This is a big topic of debate across multiple tiers in Nigeria today. With states reporting an inability to pay workers cum recently released financial positions showing low Internally Generated Revenue (IGR), and the need for federal government bailout, it will continue to be a hot topic. But unlike other topics that have been debated and abated, it is imperative that this topic receives proper analyses and solutions proffered by financial and economic experts, which government(s) can implement to be more effective at revenue collections and monitoring.
Understanding and recognizing revenue and its sources to a business or government is very important at all levels. Definition of revenue is heavily dependent on the accounting system being used. In cash-basis accounting, companies record expenses in financial accounts when the cash is actually laid out, and they book revenue when they actually hold the cash in or, more likely, in a bank account. In accrual accounting on the other hand, revenue is recorded when the actual transaction is completed (such as the completion of work specified in a contract agreement between the company and its customer), not when cash is received.
Looking at revenue in the context of the government, we consider money received from sources outside of the government entity e.g. taxation, fees, fines, duties, mineral rights etc. Agencies are usually appointed to be responsible for collecting these monies. For example in Nigeria, the FIRS (Federal Inland Revenue Service), SIRS (State Internal Revenue Service) and BIR (Board of Internal Revenue).
Revenue collections in government entails the conduct of iterative processes, the quality of which determines how sustainable revenue cycle management becomes. The primary objective of revenue cycle management is to foster accountability. In other words, to manage revenue collections in a manner that revenue lines, structure, eligibility criteria etc. can be explained or understood without much difficulty. There are similar challenges in revenue cycle management when discussed in the context of government. Some of these are: Diversion and/or incomplete remittance of monies collected by bodies and/or agents assigned to collect, Poor reporting which makes it difficult to ascertain who paid, what he paid for, through what payment medium or channel it was paid, where he paid etc., Difficulty with reconciliation, absence of a database to facilitate information retrieval, payment ratification, projection and planning etc.
However, with increasing rate of information technology adoption, the following processes or steps can be taken when setting up a revenue collection model:
- Identify revenue types, digitize and datafy them by appending revenue codes, sub-codes, defining classes and sub-divisions as may be required
- Select a scalable electronic platform to facilitate collections, monitoring and remittance
eTranzact created an electronic payments and collections platform called “PayOutlet” that was aimed at providing an integrated solution to the problem. The solution cuts across all payment channels; WEB, ATM, Mobile, KIOSK and Bank Branch.
No matter the collection platform government chooses, sustainability is highly imperative. So here are some strategies that could be employed to ensure continuity while operating at minimum acceptable standards:
- Eligibility Criteria: There is a huge loss of revenue emanating from governments’ inability to effectively identify persons eligible to pay taxes, levies, duties etc. The need for setting up of digital identities and a robust database for the formal and informal economy is a key requirement for sustainability in revenue cycle management. For instance, a database will aid easy and instant verification of persons doing business in a state and also whether or not that person has complied with payment of required levies and taxes
- Payment Outlets: In addition to mobile agents moving from shop-to-shop collecting levies and issuing receipts which may or may not be authentic, local businesses can be engaged to collect. These business are well known in their environs and people would be more comfortable paying their taxes and levies through them.
- Commission & Incentives: A dynamic commission structure for payment outlets and agents should be in place. Commissions can be a flat fee or percentage based. Different thresholds can be defined according to turnover.
The entire process as itemized above is what we call “digitizing the marketplace” and one of the biggest benefits will be increase and proper monitoring of Internally Generated Revenue. More states need to closely examine the argument for a more technology-driven marketplace and make renewed moves to make their environment more favorable for the Nigeria that is fast emerging.
About Emmanuel Obinne:
He is an e-payment, electronic collections and Financial Services Industry analyst with 8+ years’ experience, building winning revenue bases and structures for businesses. Emmanuel is a firm believer in the power of data in driving the growth of businesses, and this has fuels his passion for continued involvement in the provision of innovative e-Business and Technology Solutions, and facilitating training to different stakeholders. You can connect with him on LinkedIn here.
As an editorial policy, Breaking Times neither oppose nor endorse any opinion and contribution expressed by our writers and contributors. Contributions are strictly that of the writers only and do not represent the opinions of Breaking Times.
Our platform is for you. Want to submit an Op-Ed? If yes, kindly send your article and short biography to email@example.com.