Small businesses owed billions
Paremoremo small business owner Craig ‘‘Jacks’’ Jackson estimates he has written off at least $5000 in debts owing to him since he started his artisan iceblock company Dr Feelgood in 2014.
‘‘People have gone out of business, some were just crooks,’’ Jackson said.
He said larger companies took longer to pay because they often had longer payment terms.
New data from accounting software firm Xero shows he’s not alone – New Zealand small businesses are collectively owed about $7.4 billion in overdue payments on any given day.
Xero NZ and Pacific Islands managing director Craig Hudson said cashflow was the No 1 killer of small businesses.
He said small businesses were caught between a rock and a hard place dealing with big businesses that often had 30 or 60-day payment terms.
‘‘Small businesses can’t cut ties with big companies because larger invoices are their bread and butter,’’ Hudson said.
‘‘Weak cashflow doesn’t just impact the financial stability of a business, there’s the human impact too, with financial stresses affecting employment, families and mental wellbeing.’’
Xero’s Small Business Insights showed more than half the 350,000 businesses on its platform were owed at least $7000 on any given day. Based on this, Xero estimated all small businesses were owed about $7.4b in unpaid invoices.
On average, half of the overdue invoices were at least 16 days past their due date and still pending payment, data showed.
Jackson said operating a seasonal FMCG (fast-moving consumer goods) business was hard enough but waiting for payments added strain on the venture.
‘‘Small businesses like ours live month to month and if they don’t pay us on time, it can have quite a large impact on us.’’
Jackson, a former film-maker working in advertising, said he was selling the business because he could no longer afford to fund its growth.
‘‘I don’t have the resources to take it to the next level and don’t have the business acumen to do that.
‘‘I know where my strengths lie – and that’s brand and product development.’’
Accommodation and food service businesses were the most affected by late payments, Xero said.
Hudson said big businesses needed to walk in the shoes of a small business to understand the pressures and rethink their terms.
‘‘Small businesses are a big part of our economy.’’ It’s easier and quicker to build a house than it is to get building consent, some builders say.
And since the leaky homes scandal and the Christchurch earthquake, building consents have become onerous to the point of being ‘‘encyclopedic’’ in the amount of information and level of detail required.
Latitude Homes managing director Marc Hunter said while the statutory time frame for consents to be completed was 20 days, his company waited on average eight-to-12 weeks for approval because councils frequently asked for more information at the last minute, known as a Request for Information (RFIS).
‘‘The issue is that on the 19th day, 98 per cent of the time we will receive an RFI letter from the council,’’ Hunter said.
RFIS stop the clock on the 20-day consent process and resume once the information is received.
Councils were sitting on consents over ‘‘silly stuff’’ that should be sorted out when lodged, while many RFI queries were insignificant or already contained in the documentation provided, he said.
A1 director for the Lower North Island, Bruce Martin said when he first started out a consent application contained about eight pages with maybe 50 pages of documentation. Now, he said, it was thousands of pieces of paper.
‘‘Fifteen years ago it was a piece of cake but now it’s easier to build a house than it is to get building consent,’’ he said.
Auckland Council manager project assessment south, Peter Laurenson said it took an average of 15 working days to process building consents, but when the clock stopped for an RFI, on average it took the customer 19 days to respond, taking the average number of days for consent to 34.
Laurenson said 77 per cent of all applications required the council to request further information.
Christchurch City Council said the average time for residential building consents to be approved was 10 working days, and 13.5 for commercial, while 72 per cent of building consents issued required further information.
Institute of Architects Auckland branch chairman Ken Crosson said that councils had become the ‘‘last man standing’’ after the leaky house crisis.
‘‘What we’ve got now are very gun-shy councils and a building sector beset with problems largely because of poor legislation,’’ he said.