Local research reveals the extent and cost to small businesses of late payers. Biggest issue are clients who make slow payment a standard strategy

Local research reveals the extent and cost to small businesses of late payers. Biggest issue are clients who make slow payment a standard strategy

Research carried out for Kiwibank shows that New Zealand’s small business staff are spending 18 million hours a year chasing unpaid invoices, worth some $2.5 bln each month.

18 million hours is equivalent to 2050 years !

The survey was completed in September among 411 businesses with 19 or fewer staff.

Two thirds of them are waiting for payment on overdue invoices each month.

Most have terms requiring payment fall within a month of an invoice being issued, but the survey shows the biggest issue is clients who make slow payment a standard strategy.

On average, each has 7 past due invoices with each invoice averaging $823 owed.

Across the national 456,000 businesses in this SME category that would total $2,553,079,200 unpaid across each month.

The research gave no indication about the extent to which large clients are a problem; however the Government has committed itself to making payments promptly.

International research indicates slow payers remain a issue, although this latest study suggests it is less a problem here than in countries like the UK where research shows that small companies spend 130 hours a year chasing unpaid invoices.

In New Zealand it is about 40 hours per year*.

Reasons for unpaid invoices include:

customers who are just regularly slow 61%
customers with cash flow problems 47%
administration delays 30%
disputes about the work undertaken 17%
customers going out of business 14%

Unpaid invoices also affect productivity.

Kiwibank’s head of Business Banking, Mark Stephen, said the economy could perform better if people paid bills speedily. 

“Unpaid invoices cause cash flow problems, which make it tougher for companies to stay in business. That has serious consequences for New Zealand.” 

“Eighteen million work hours a year is wasted just getting people to pay their bills. That’s time which would be better spent selling more goods and services,” he said.

The survey was conducted by Perceptive between 14-20 September 2013. It was completed online by 411 business owners / decision makers in companies with 19 or fewer staff, and those involved with collecting payment and invoices within a business. Results have a margin of error of 4-5%.

* These results are also consistent with our reader poll on this subject.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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2 Comments

Good on the state services for recommending prompt payments.  It promotes an effective system and not least, is the right thing to do.
But one has to to be sceptical about their management ability to pull it off.   Chiefs might decree, but the indians still often do what they think clever.
Some time back our local hospital board had a system of paying four or five months out.  As it was the biggest industry in town the effect went right across the board.  And all the small contractors experienced great stress and had to manage a lot of things they should not have had to.  A shocking case of the big leaning on the small.  With negative effect on the areas economic health.
Is this still happening somewhere?  I would like to hear.

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