Big businesses to be made to disclose how quickly they pay invoices

Small Business Minister Stuart Nash hopes sunlight will promote prompt payments. Photo / George Heard

The Government is committing to requiring large businesses, government departments and agencies to publicly report on how long they take to pay their invoices.

The aim of the proposal is to encourage prompt payments, particularly to the benefit of small businesses susceptible to being left out of pocket.

Small Business Minister Stuart Nash is working towards introducing legislation to create the disclosure regime by end of the year, with the aim of having it up and running by 2024.

“The Business Payment Practices disclosure regime will help small businesses make decisions on who to do business with and encourage larger firms to improve their payment practices to manage any reputational risk,” Nash said.

He proposed the reporting requirement apply to businesses that generate more than $ 33 million of revenue a year, as well as all government departments and agencies.

Nash said he would consult with businesses on the specifics of the types of payment practices they’d be required to disclose. These could include reporting on late payments, and the length of time between the receipt of invoices and full payment.

Nash said disclosures would need to be made every six months to the Ministry of Business Innovation and Employment (MBIE).

While the regime would need to fall within New Zealand’s privacy laws, and businesses wouldn’t be made to reveal commercially sensitive information, Nash committed to their reporting being publicly available.

Businesses and agencies would also need to publish the information on their own websites.

Nash noted there are similar regimes in Australia and the United Kingdom.

He said late payments was a key issue that small businesses, which account for 97 per cent of businesses in New Zealand, had raised with him.

“Small businesses are less resilient to poor payment practices because they are not as well-equipped or resourced to endure such practices,” he said.

“Many businesses are also reluctant to push for prompt payment because of fear of damaging relationships.

“Poor payment practices can have flow-on effects for the wider economy, particularly in times of economic uncertainty.”

Nash said MBIE could work with Inland Revenue to identify businesses large enough to fall within the regime. He said those that failed to make disclosures would be penalized.

Speaking to the Herald, he said the Government considered requiring businesses to pay invoices within set timeframes, but decided more transparency would likely sufficiently encourage prompt payments. If not, he didn’t rule out imposing more heavy-handed regulation.

While firms with poor payment practices risk losing businesses, Nash clarified they wouldn’t be reprimanded by the Government.

The introduction of a formal reporting regime follows the Government in May 2020 (in the throes of Covid) writing to more than 40 big businesses requesting they promptly pay invoices from small to medium-sized enterprises.

It also has a target of getting 95 per cent of invoices across the public sector to be paid within 10 working days.

Given the rise of electronic invoicing and payments, Nash said there was no excuse for late payments. He said businesses awaiting payments shouldn’t be used as banks.