Technology has created an advancement not seen in previous generations. In the 1990s, when cash was not present, consumers would pay shops by writing a check. The check would then take a few days to process and go through as payment received. But today things are much different. With the introduction of the credit and debit card and direct deposit, businesses can receive payment almost instantly.
With such an advancement, the question then becomes this: Why does it still take large corporations 60+ days to pay small businesses for services and products received? According to a recent Stuff article, accounting software firm Xero has been tracking the payment process of small business in New Zealand, which make up about 300,000 businesses. This tracking has looked at “businesses’ cashflows, invoicing, overseas trading and cloud adoption” and found that for March, “30-day invoices were paid, on average, 4.7 days late.”
While this may seem as nothing big, almost 5 business days accounts for an entire business week (remember Saturday and Sunday do not count for banking transactions). This means that small business can be up to a week late on payments for their employees, which can be a big pain for business owners.
“Minister for Small Business Stuart Nash spoke at the launch held at Xero’s Wellington headquarters” expressing concern for small business payment plight. According to Nash, there is “no reason at all why small businesses can’t be paid with 7 or 14 days” instead of the current standard policy for most government and private corporations of up to 60 days.
In New Zealand, small businesses make up 97 per cent of businesses, and a third of the nation’s workforce. “Cameron Bagrie, chief economist of Bagrie Economics, has been working with Xero to analyse some of the data. He noted 40 to 60 per cent of small businesses’ bills went unpaid for longer than 30 days.”