Govt Initiatives Aim to Enhance Productivity and Cash Flow for SMEs

The ministers emphasized that government agencies, as major clients to suppliers across the country, have a significant role to play in supporting small businesses by paying their invoices promptly.

Small Business and Manufacturing Minister Andrew Bayly and Economic Development Minister Melissa Lee have announced new requirements for government agencies to expedite their invoice payments and adopt eInvoicing. This initiative is a key part of the Government’s plan to enhance New Zealand’s economic productivity and support small businesses.

The ministers emphasized that government agencies, as major clients to suppliers across the country, have a significant role to play in supporting small businesses by paying their invoices promptly.

“Government agencies work with a wide range of suppliers, from office supplies to essential services like software and security. Delays in payment can severely impact small businesses, many of which operate with limited cash reserves,” Mr. Bayly said. “With 97 per cent of New Zealand’s businesses being small enterprises, timely payments from government agencies are vital for their sustainability and our broader economic success.”

Benefits of eInvoicing and Payment Reforms

The Government plans to implement eInvoicing technology to replace traditional paper or PDF invoices, aiming to reduce errors, fraud, and inefficiencies. Adopting eInvoicing could generate an estimated $4.4 billion in productivity gains over the next decade.

“eInvoicing allows invoices to be processed digitally, reducing human error and expediting the payment process,” Mr Bayly added. “This technology represents a crucial step forward in improving efficiency for both government agencies and their suppliers.”

Ms. Lee noted that paying invoices on time is especially critical for small and medium-sized businesses, which rely on regular cash flow. "Government agencies should set the standard, which is why we’re updating Rule 51 of the Government Procurement Rules to make eInvoicing mandatory for high-volume agencies," she said.

Key Timeline for New Payment Standards

Starting January 1, 2025, approximately 135 government agencies will be required to pay 90 percent of all domestic invoices within 10 business days. By January 1, 2026, this requirement will increase to 95 percent, while all agencies that process over 2,000 domestic invoices annually must adopt eInvoicing.

For eInvoices, these agencies will be required to make payments within five business days, accelerating cash flow to suppliers and supporting the economic ecosystem.

Leveraging Government Procurement for Economic Growth

Government procurement currently totals approximately $51.5 billion annually, a spending power that the Government believes can drive innovation and productivity in the private sector. “By leveraging this purchasing power, we’re fostering an environment where small businesses have a reliable revenue stream and are more resilient to economic fluctuations,” Ms. Lee said.

The ministers are confident these changes will create a positive ripple effect, circulating funds more efficiently across the economy and delivering productivity gains for New Zealand businesses.