From faster payments to ‘burden hunters’ that will hunt down and cut red tape, the government has announced a set of initiatives to make life easier for SMEs.
Given it was actually quite good news the government’s announcement of measures to help small businesses flew surprisingly under the radar this week. Its biggest early Christmas present is a commitment that government departments will pay invoices within 10 working days from next June, a godsend for small firms which find themselves living hand to mouth thanks to slow payers. It has also set up an online tool to help SMEs find funding, plus resources to learn digital skills and business strategy. If you’re an SME doing battle in the trenches of New Zealand commerce here’s what you need to know.
Will I get paid sooner?
If you have state sector clients the answer is yes. The government is taking a lead on prompt payment practices by promising that its departments will pay 95% of domestic invoices within 10 working days by June 2020. Not to put too fine a point on it, but getting paid is a pain in the butt for small firms. Accounting software platform Xero says small business invoices are paid on average a week late, and at any given point in time more than half of its SME clients are owed at least $7000. Small business minister Stuart Nash says the prompt payment targets will be monitored by Treasury and the Ministry for Business, Innovation and Employment (MBIE) who will report to ministers.
Is the government doing anything else to make sure this happens?
Government spending accounts for almost a fifth of New Zealand’s GDP, so if it can streamline its processes it will grease the wheels of commerce considerably. To help with this it is bringing in e-invoicing so that the accounting systems of the client and the supplier can talk to each other directly. Nash is warning firms to get themselves a New Zealand Business Number (NZBN) if they haven’t done so already, so that they’re prepared for e-invoicing.
Does all this mean other clients will pay faster?
It remains to be seen but there has been a lot of pressure on firms to shorten what have become heinously long payment times in some cases, and the government setting an example has gone down well. The challenge now is for big companies to step up and follow suit, Business Central chief executive John Milford says. Small businesses make up 97% of New Zealand enterprises, employing 29% of workers and accounting for 26% of our economy, so improving their cash flow can only be a good thing for all of us, he points out. “If government departments can do it I can’t see any reasons why most big companies, which often have the capacity, can’t do the same.”
What’s this tool to help SMEs find funding?
A new tool on the business.govt.nz site will help firms source funding. The Funding Explorer will be an interactive resource owners can use to identify the right finance options for their circumstances. It is a partnership with the banking industry and business and accountancy specialists. Like the other announcements, it’s a recommendation that came out of the Small Business Strategy released in July. Kiwi SMEs have few options other than the major banks for borrowing money, and finding the alternatives that do exist can be a matter of good luck rather than informed choice. So the strategy recommended some technological help.
What else was announced this week?
The business.govt.nz site will also host new resources for learning digital skills and the fundamentals of business strategy. The resources have been developed in conjunction with Duke University in the US. The theory is that it’s often just one person in a small firm juggling a number of roles and they need to have knowledge across a whole lot of different areas from payroll to compliance.
Is there more to come?
Most certainly. Last month Cabinet signed off on the Small Business Strategy’s 20 recommendations. It’s now announced action on three of them, and will continue working on the rest, Stuart Nash says.
One of the more popular ones is to appoint official ‘burden hunters’ who track down and eliminate excessive red tape stopping SMEs from being more productive. It’s based on a Danish initiative and Canterbury Employers’ Chamber of Commerce chief executive Leeann Watson is a particular fan. Central government-appointed burden hunters could help “create a systemic shift from an environment of compliance to one of enablement,” she says.