Payments regime aimed at helping small business
The Government is introducing new measures to encourage large businesses to pay smaller firms on time.
Small Business Minister Stuart Nash said a Business Payment Practices disclosure regime is being established which will require large businesses with revenue of more than $33 million a year to publicly disclose their payment practices.
‘‘Small businesses account for more than 97% of all businesses in New Zealand,’’ Nash said.
‘‘Late and overdue payments have a negative impact, causing unnecessary stress and uncertainty, while extended payment terms can cause real harm – particularly when a supplier has no choice but to accept them on a ‘take it or leave it’ basis.’’
Research released by cloud accounting firm Xero showed New Zealand small businesses were being paid, on average, 6.3 days late, costing the economy $456 million a year.
It showed 45% of invoices issued by small businesses in 2021 were paid late, with 8% paid more than a month after they were due.
New Zealand small businesses that received 60% to 80% of their payments late experienced 19% more cashflow crunches when compared with small businesses that were usually paid on time, according to Xero’s report.
Nash said small businesses were less resilient to poor payment practices because they were not as well-equipped or resourced, and many were reluctant to push for prompt payment because of fear of damaging relationships.
He noted poor payment practices could have flow-on effects for the wider economy, particularly in times of economic uncertainty.
In the early months of the pandemic, the Government called on big businesses to pay small businesses quicker to improve their cashflow and help the economy recover from the shock, asking that 95% of invoices be paid within 10 days.
Under the new rules, large firms will be required to publicly report on their own payment practices, particularly late payments, and the length of time between the receipt of invoices and full payment.
The information will need to be submitted every six months, which is consistent with similar regimes in Australia and the United Kingdom.
Large firms will also be required to publish payment practice information on their own websites.
Those who fail to disclose payment practice information may face compliance notices and penalties.
‘‘The Business Payment Practices disclosure regime will help small businesses make decisions on who to do business with and encourage larger firms to improve their payment practices to manage any reputational risk,’’ Nash said.
The regime will be administered by the Ministry of Business, Innovation and Employment.
Further consultation with business communities will take place in the coming months on the specific reporting measures, Nash said.