'Power to cripple small business': SMEs paid average of 8.3 days late

Late payments is a big issue for New Zealand small businesses. Photo / 123RF

Small businesses were paid an average of 8.3 days late in June, according to new insights from software company Xero.

When broken down into the most common pay periods, data shows seven-day payment terms were paid 10.3 days late, 14-day payment terms were paid 8.2 days late, 20-day payment terms were paid 9.5 days late and 30-day payment terms were paid 3.1 days late.

Late invoice payments have long been a challenge small and medium-sized firms have had to navigate.

Xero New Zealand managing director Craig Hudson said late payments were an issue for Kiwis.

"The biggest impact we could have on the success of small businesses in New Zealand is to improve our payment practices to increase cash flow.

"Eight days late for one invoice has the power to cripple a small business, let alone what it will do to them if every invoice is paid eight days late," Hudson said.

"For those small businesses with seven-day payment terms, it means they are waiting more than double the term for payment and that's not good enough."

Economist Cameron Bagrie said getting paid and cash flow were key indicators of the wider economy.

"From an economic standpoint, downturns are associated with pressures on cash flow and delays in getting paid. When a downturn hits, everything slows as less business is done, people take longer to pay and cash flow pressures mount.

"The average invoice is overdue by 8.3 days which is down on a year ago [8.8 days]. Every small nudge in the right direction helps, however, more work could clearly be done."

Hudson said New Zealand was better compared to Australia and UK when it comes to late payments, both of which have had Government step in to regulate.

"I'd like to think that we aren't at that stage yet, but if we don't do anything to reduce this 8.3 number then the small business sector - comprising 97 per cent of our workforce and the driving force behind our economy - will continue to suffer."