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The New Zealand government has announced new regulations mandating that all government departments pay their invoices within ten business days. This move is set to take effect on January 1, 2025, and addresses the long-standing issue of late payments that has plagued businesses dealing with public sector entities.
The government recognises that timely payments are crucial for maintaining healthy cash flow, especially for small enterprises operating on tight margins. With approximately 1.6 million invoices processed annually by 33 central agencies, the impact of these new rules is expected to be substantial.
A key feature of this initiative is the mandatory ten-business-day payment timeline, which will require 135 government agencies to pay 90% of all domestic invoices promptly. This requirement will increase to 95% by January 2026. Central to this effort is the push towards digitisation, as the government has mandated that all agencies transition to electronic invoicing.
Since March 31, 2022, all central government entities have been required to accept e-invoices in the Peppol BIS 3.0 format. This shift streamlines the invoicing process and reduces administrative burdens associated with traditional paper invoices, making it easier for businesses to submit and track their payments.
The expected impact of these changes is significant. Small businesses can maintain better cash flow by ensuring faster payments from government entities, which is essential for their operations and growth. Moreover, quicker payments enable businesses to reinvest funds into their operations sooner, potentially leading to increased productivity and economic growth.
The digitisation aspect of this initiative encourages businesses to adopt digital solutions that enhance efficiency across various sectors, ultimately creating a more modern and responsive public procurement process.
However, challenges remain in effectively implementing these new regulations. Robust monitoring and compliance mechanisms will be necessary to ensure that all agencies adhere to the new payment timelines.
Additionally, there may be resistance from sectors accustomed to longer payment cycles. Nevertheless, the government’s decision to enforce strict late payment rules represents a great leap towards supporting small businesses while embracing the benefits of digitisation.