Late payments cost Kiwi small business more than $800 million
Wellington — 3 October 2024 —Xero, the global small business platform, has reported a staggering 81% increase in the cost of late payments to Kiwi small businesses, jumping from an estimated $456 million in 2021 to $827 million in 2023.
This data is part of the Xero Small Business Insights programme, which uses anonymised and aggregated data to track the performance of, and improve understanding about, small businesses.
Bridget Snelling, Country Manager - Aotearoa New Zealand at Xero says these conditions have meant a lot of money that should be in the hands of small businesses is locked behind big corporations not making their payments promptly.
“We know many bigger organisations use our small business community as a bank of easily accessible capital, holding out on paying invoices to support their own operation,” says Snelling.
When the Business Payment Practices Act 2023 was repealed, the Ministry of Business, Innovation and Employment acknowledged late payments were an issue for large market players.
“The impact of these late payments is profound, locking substantial funds out of the small business economy, restricting growth, and preventing new businesses from thriving,” says Snelling.
Xero has long advocated for improving late payments and has previously called for all large businesses to commit to paying invoices within 10 business days - as Xero has with its small business invoices. This is in line with the New Zealand Government commitment - with 95% of government agencies meeting this benchmark.
Small business impacts of inflation
While late payment times were broadly unchanged between 2021 and 2023, small businesses faced the costly challenges of operating in a high inflation economy.
Snelling says: “When inflation and interest rates are high, the value of having positive cash flow is so much more important. In 2023, late payments hit small businesses especially hard.
“These factors are a big reason why the cost of late payments to Kiwi small businesses was more than three quarters of a billion dollars last year.”
Supporting payment habits through digitalisation
However, Snelling says while the challenging economic conditions persist, there are opportunities for the small business sector to grow.
“We encourage Kiwi small businesses to work with their accountant or bookkeeper to stay on top of rising costs and smooth out expenses, as well as investigate the plethora of digital tools available to help reduce the common barriers to late or missed payments, which in turn helps them recoup their costs faster,” says Snelling.
Financial modelling by the New Zealand Institute of Economic Research shows a 20% increase in the number of businesses adopting cloud-based business tools in the future could add up to $7.8 billion to Aotearoa New Zealand’s annual GDP through improved productivity.
“Digitalisation is a crucial piece of the payments puzzle for Kiwi small businesses. It’s essential we support small businesses to embrace digital tools, especially those that make the payment process simpler like eInvoicing and using pay-now buttons, to unlock their full economic potential,” says Snelling.
“At Xero, we’re committed to building payment solutions to make it easier for small businesses to make and collect payments more seamlessly, while maintaining a healthy cash flow.”
ENDS
Media Contact
Natalie Weber-Benning | Xero Communications | +64 21 02619604 | natalie.weberbenning@xero.com
About Xero
Xero is a global small business platform with 4.2 million subscribers. Xero’s smart tools help small businesses and their advisors to manage core accounting functions like tax and bank reconciliation, and complete other important small business tasks like payroll and payments. Xero’s extensive ecosystem of connected apps and connections to banks and other financial institutions provide a range of solutions from within Xero’s open platform to help small businesses run their business and manage their finances more efficiently.
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