Large companies are “killing” New Zealand’s small businesses by making them wait too long for payments, accounting software company MYOB says.
“You hear of some businesses waiting 60, 90, 120 days or more to get paid for work done. It’s not good enough. Everyone in our economy benefits if cash moves around faster,” MYOB NZ general manager Carolyn Luey said.
Pressure is mounting on large companies to make life easier for small businesses who have been described by advocate Small Business Voice as the “lifeblood of the economy”.
Critics say New Zealand ought to have a voluntary code of conduct under which large companies would pledge to pay their bills in 30 days’ time or less.
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Figures supplied by software accounting firm Xero show that between September last year and February this year the country’s largest companies had racked up $1.7 billion in overdue invoices.
One in six invoices payable by NZX 50 companies to small businesses had been overdue by more than 30 days over the same time period.
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New Zealand’s largest firm Fonterra, the most high profile name involved, changed its payment terms for contractors and suppliers last year, so that now it can take a small business between 60 and 90 days to get paid.
Some larger suppliers have been offered the option of having their invoices paid immediately by a third party finance company, but at a cost of up to 1.4 per cent of the invoice.
A Fonterra spokesman said the businesses it works with came in all shapes and sizes, which is why it did not take a one-size-fits all approach.
“We liaise directly with our vendors on the terms of their agreement with us, and provide the opportunity to renegotiate different aspects, with the aim of ensuring our mutual needs are being met.”
The chief executive of Small Business Voice, Max Whitehead, said small businesses accounted for 40 per cent of GDP.
“They are the lifeblood of the economy, they are the mums and dads, the Kiwi battlers.”
Withholding payment from them was “almost theft”.
“Fonterra should know better, they are a national icon. It’s disgraceful,” Whitehead said.
Labour’s spokesman for Primary Industries, Damien O’Connor, said some directors on the Fonterra board were unhappy with the way management had introduced the extended payment scheme.
But it was not just Fonterra who were guilty – other large firms such as fuel companies were as well.
“This exposes the billing tactics that have small businesses struggling. Fonterra is a co-operative owned by farmers and they know in local communities that such bullying doesn’t go down well,” O’Connor said.
Xero New Zealand country manager, Craig Hudson, said he would like to see a voluntary code of conduct introduced, similar to what exists in the United Kingdom and United States.
In the UK a number of large companies pledged to pay their bills within 30 days, while in the US some were prepared to pay as early as 15 days.
“By withholding payments the large companies are affecting cash flows and restricting small businesses from thriving. For them cash is king.”
Hudson said he did not want to “name and shame” the companies involved, but described it as a broad, systemic problem.
He would not like to see legislation force reluctant companies to pay on time. New Zealand had a nimble and business-friendly environment, and legislation was “heavy handed”.
Luey said MYOB was calling for a “prompt payment protocol”, which would see large businesses and government agree to pay suppliers within 30 days.
In MYOB’s most recent Business Monitor Survey, one-in-20 small businesses reported that late payments from customers had placed their operation under “extreme pressure” in the previous 12 months, while 41 per cent of businesses reported being placed under “quite a lot” or “some” pressure.