Small businesses who deal with government departments are set to be paid faster and have improved cash flow as a result, under a new strategy released today.
The Government is backing recommendations from the Small Business Council (SBC) and has agreed to implement three initiatives immediately to support business and a growing economy.
- The Government will take the lead on prompt payment practices. It is setting a target for government departments to pay 95 per cent of domestic invoices in 10 business days by June 2020.
- Access to finance will be facilitated via a new online tool on the business.govt.nz site. The Funding Explorer will be an interactive resource to help business owners identify the right finance options for their circumstances. It is a partnership with the banking industry and business and accountancy specialists.
- Efforts to build capabilities and skills amongst small business owners, particularly digital skills, will be supported through new resources on business.govt.nz. The resource launched today covers the fundamentals of business strategy, and was developed in partnership with technology leaders from Duke University in the U.S.
Stuart Nash says prompt payment practices by 34 core government departments will make a real difference for small business owners. “It sets an example for improved business-to-business payment practices too,” says Mr Nash.
“New data released today by Xero shows one of the most important things we can do to support the economy is to keep money moving efficiently around small businesses. On any given day more than half of small businesses are owed at least $7,000.
“Every year government agencies spend tens of billions of dollars on goods and services, almost one-fifth of New Zealand’s GDP. Many small businesses rely on this work to make a living. We can help by ensuring government agencies pay as fast as they can.
“The prompt payment initiative will be supported by the use of e-Invoicing, which gets underway later this year. The government has established the structure to enable automated and direct data exchange between accounting systems of buyers and sellers.
“Businesses should prepare now for e-Invoicing by adopting a New Zealand Business Number (NZBN). The NZBN enables e-Invoicing and can be fully integrated into procurement and finance systems.
“We know late payments and long payment terms are some of the biggest sources of stress and cash flow problems for small and medium enterprises (SMEs). The prompt payments target will be monitored by Treasury and MBIE who will report to Ministers.
“New resources are also being rolled out on the business.govt.nz site in response to the SBC recommendations designed to help lift business performance.
“Small businesses are very diverse, and often rely on one person performing many roles. As business owners juggle competing priorities they may not know how or where to find the latest expert advice.
“Having strategic advice and resources in one in place can be the difference between surviving and thriving – and it might not be as hard as businesses imagine. The new resource, Business Strategy, will connect local SMEs with global best-practice advice.
“Around 10,000 small business owners use business.govt.nz resources every day, and its new tools and resources will help them navigate the often tricky areas of strategic development and sourcing new avenues of capital.
“The Funding Explorer is a smart tool and tailors recommendations on 23 different funding options based on a SME’s circumstances.
“The remaining recommendations from the SBC are being incorporated into a programme of future work. The small business work programme will align with our broader Economic Plan and support the vision of a productive, sustainable and inclusive economy.
The Government has already announced it is progressing another SBC recommendation, to look at the tax rules around the loss continuity test, to facilitate investment in start-up businesses.
“The work programme is being developed with further private sector input. It will reflect four themes; understanding SME’s needs and experience; ensuring access to affordable finance and capital; building capability and skills; and shifting the regulatory focus from risk and rules to enabling compliance.
“Small businesses are a vital part of our economy and employ over 600,000 people. We want to enable these businesses and people to achieve their goals and objectives. That’s why we formed the Small Business Council last year to gain a perspective about the realities for small business,” Stuart Nash said.
The SBC strategy released today adds to the momentum on other business-friendly initiatives such as new incentives for research and development; action on unfair commercial practices; improving access to venture capital; greater fairness to the tax system; and improved infrastructure in the regions.
For more information about the SBC, including the SBC strategy, head to https://www.mbie.govt.nz/business-and-employment/business/support-for-business/small-business/