Xero sees 81% spike in late payment costs for NZ small businesses between 2021 and 2023, says big corporations aren’t making prompt payments

Xero says the cost of late payments to small businesses in New Zealand rose by almost $400 million between 2021 and 2023.

Xero says this data – which is from the software company’s Small Business Insights programme – found an increase of 81% in the cost of late payments during that two-year period, to $827 million in 2023 from $456 million in 2021. 

Xero's NZ country manager Bridget Snelling said much of that money 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,” Snelling said.

“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.”

Xero has previously called for all large businesses to commit to paying invoices within 10 business days.

Snelling said late payment times were broadly unchanged between 2021 and 2023 but small businesses had faced the challenge of operating in an inflationary environment and late payments had hit small businesses especially hard.

“When inflation and interest rates are high, the value of having positive cashflow is so much more important,” she said.

“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.”

Minister of Small Business and Manufacturing Andrew Bayly said there was a “major problem” with large market players routinely paying invoices late and imposing long payment terms when he announced that the Coalition Government was repealing the Business Payment Practices Act 2023 earlier this year. 

Bayly described the Business Payment Practices Act as not an “effective solution” towards this issue. 

He said the Government would be working with BusinessNZ to create an “industry-led voluntary code” that would ensure small businesses were paid on a more timely basis.