Fonterra appears to have seen the error of its ways when it come to paying its bills, if Small Business Minister Stuart Nash is to be believed.

Nash cited the dairy giant as one of the companies that "has confirmed it is seeking to accelerate payments to its 10,000 farming businesses and 5,000 small vendors who have business with Fonterra worth up to $300,000."

The government has asked government agencies, most of the companies within the S&P/NZX 50 Index, other significant private companies and the banking industry to participate in its plan to have 95 per cent of invoices paid within 10 working days.

"We have had a positive response from several companies in the banking, transport, energy and primary industries," Nash said in a statement.


However, Fonterra has been notorious for dragging its feet on paying its bills and was a frequent target of the ruling Labour Party before it won the Treasury benches.

In 2016, Damien O'Connor, who is now agriculture minister, criticised Fonterra for "spending millions of dollars on public relations and corporate communications" but refusing to respond to questions about overdue payments to suppliers and contractors.

O'Connor said that was "an absolute failure and dereliction of its basic industry responsibilities."

About a week later, Fonterra revealed it had gained between $50 million and $70m from extending payment terms by a month to about 1,000 New Zealand suppliers.

It had confirmed that it was making suppliers wait up to three months to have their invoices paid.

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Then-chair John Wilson said the policy had been introduced globally in 2011 but hadn't been implemented consistently.

He put the uproar that ensued when its extended payment periods became known down to Fonterra not having communicated its policy well.

"While the policy is right, we have work to do to ensure no errors occurred and there's a better understanding of what we have done," Wilson said then.


Today, Nash said that "all businesses across supply chains have a part to play in keeping cash moving and keeping the economy moving.

"SMEs – small to medium-sized enterprises – have been hit hard by the global pandemic. Now, more than ever, they need to be treated fairly as we emerge into a recovery phase."

Nash was responding to data released by accounting software company Xero which showed its small business customers suffered a 34 per cent drop in revenue in April compared with a year earlier following a 10 per cent drop in March, reflecting the nation's lockdown to fight the spread of Covid-19.

"We all know small businesses are feeling the pain of the economic shock caused by Covid-19 and spending habits completely changed," said Xero's New Zealand managing director Craig Hudson.

Xero is still compiling the data for May, which will show how small businesses fared as the lockdown restrictions began to ease, he said.

Xero had 392,000 subscribers in NZ at March 31, about 70 per cent of small businesses operating in this country.


Nash said Xero's data "highlights the urgency of prompt payment practices to small and medium enterprises as we move into economic recovery."

Xero's data showed the number of jobs in small businesses fell 4 per cent, or 24,000 employees, in March but the losses levelled out towards the end of the month as the government's wage subsidy kicked in.

"As much as it's easy to get lost in the numbers, every single job is precious. For those that can, shopping locally and paying invoices on time will be vital to our recovery," Hudson said.

"That's how we'll keep money circulating through the economy and give small businesses the confidence to employ again."

Nash also updated data on the government's wage subsidy and its small business loan scheme that bypasses the banks in favour of the Inland Revenue Department processing applications.

By late May, 214,000 self-employed business owners had received the wage subsidy and another 172,000 businesses with fewer than 20 staff had also received it.


And 69,000 small businesses have sought almost $1.2 billion from the IRD scheme.

Under the scheme, businesses with 50 or fewer full-time equivalent employees, and who were eligible for the government's wage subsidy, can apply from a $10,000 loan plus another $1,800 per full-time-equivalent employee.

The loans are for up to five years and are interest-free if repaid within a year but otherwise interest of 3 per cent will be charged.

New Zealand Bankers' Association data shows the other emergency loan scheme the government is subsidising, the business finance guarantee scheme, which is being administered by the banks, had lent $80m to 470 businesses as of Tuesday this week out of the $6.25b the government has allocated.

Businesses with annual turnover up to $80m are eligible to apply for up to $500,000 loans for up to three years under the BFGS and the government is guaranteeing 80 per cent of each loan.