The Government is changing procurement rules to speed up invoicing payments in an effort to lead by example on e-invoicing initiatives that support small businesses. Photo / Mark Mitchell
The Government is changing procurement rules to speed up invoicing payments in an effort to lead by example on e-invoicing initiatives that support small businesses. Photo / Mark Mitchell
The Government hopes to save more than $4 billion over 10 years and accelerate payments to New Zealand businesses by moving all government departments to electronic invoicing and making it mandatory to pay within 10 business days.
Cabinet has signed off on re-writing Rule 51 of the Government Procurement Rules,which sets invoice repayment expectations of government agencies.
As an explicit requirement, approximately 135 government agencies will be expected to pay 90% of all domestic invoices within 10 business days from January 1, 2025, with this number to increase to 95% from January 2026.
This will exclude certain specified agencies such as the pharmaceutical management agency (Pharmac).
Small Business Minister Andrew Bayly is spearheading changes to government procurement rules in an effort to speed up invoice repayment times to small businesses and support the digitalisation effort in switching to eInvoicing. Photo / Mark Mitchell
Under the current rules, departments must pay invoices promptly and in line with contract agreements.
But Small Business Minister Andrew Bayly didn’t believe the current expectations were strong enough and hoped the new changes would lead to more actionable outcomes.
“There are times the Government should lead things, especially in difficult times when people are struggling to get cash,” Bayly said.
“The Government, particularly as a large procurer of services from the private sector, should be making an obligation of paying them on a timely basis, and this will make sure that that occurs.”
The central government agencies currently send and receive 1.6 million invoices annually, with the total number for all 135 government agencies likely many millions more.
Government agencies spend approximately $51.5 billion a year on procurement, with a significant portion spent on small businesses which make up 97% of all firms in New Zealand.
According to the Ministry of Business, Innovation and Employment (MBIE), the New Zealand Customs Service and the Department of Conservation are particularly underperforming, with only 74% and 70% of invoices paid within 10 business days, respectively.
Digitalisation effort key
To help speed up repayments and return cash flow to small businesses, the Government will accelerate agencies’ adoption of electronic invoicing (e-invoicing) technology, as part of wider ongoing digitalisation across government.
E-invoices enable secure and direct digital invoice exchanges, which helps reduce fraud and manual inefficiencies.
Once fully implemented by January 1, 2026, government agencies that send or receive more than 2000 domestic invoices a year must have e-invoicing systems in place.
Agencies will also be required to pay all domestic e-invoices within five business days.
Bayly said it’s estimated adopting e-invoicing could generate productivity savings of $4.4 billion over the next 10 years.
These productivity savings are driven by reducing administration costs, with invoice costs dropping from $26 for paper and $23 for PDF, to $10 per e-invoice received and $2 per e-invoice sent.
The call for e-invoicing adoption is one of many digitalisation efforts being pursued by the Government, with Bayly recently launching the Unmask Cyber Crime programme.
The programme offers a series of short, educational videos designed to raise awareness and provide small to medium-business owners with the confidence to adopt effective cybersecurity practices.
Bayly hopes to see widespread digitalisation, acknowledging that New Zealand businesses are not utilising technology to its fullest potential.
The Ministry of Business, Innovation and Employment is consulting with businesses on further changes to e-invoices, including whether certain government suppliers should be required to be eInvoice capable. Photo / Mark Mitchell
Small business sector to be heard
The minister has also recently formalised a small business advisory group, which he hopes will bridge the gap between industry and the Government.
The group serves as a direct channel for small businesses to provide practical, time-bound recommendations to the Government.
It also serves as a source of insights, ideas, and accountability while helping to disseminate critical information to small business owners.
The group, comprised of 50 members from at least 20 small business owners/operators, is chaired by David Downs with Paul Retimanu as deputy chairman.
Downs is formerly of New Zealand Trade and Enterprise (NZTE) and the Department of Internal Affairs, while Retimanu has championed minority business representation through his business Manaaki Management.
Downs and Retimanu said that the group’s first meeting on November 4 was building momentum for the sector, highlighting their intentions for the group.
“Right at the beginning, the point that Paul and I were making is that we want, in the nicest possible way, to flip it around,” Downs said.
“This is not a Government-led thing, actually business needs to be the leaders and then the Government can enable what the right topics are to work on.”
Chairman of the Small Business Advisory Group David Downs was optimistic about the group's first official meeting, acknowledging Minister Andrew Bayly's open challenge for direction and accountability.
He believed that the group would help the sector focus on its key issues, specifically how small businesses deal with the Government more effectively, and how they can be more productive themselves.
Retimanu highlighted the energy that small business attendees brought to the group’s first official meeting.
“Having the small businesses in the room as well makes them feel part of it, and they’ve asked some fantastic questions,” Retimanu said.
“When groups come together for the first time normally there is a bit of hesitancy, but today they’ve pressed the minister.”
Downs welcomed the minister’s message to the room on accountability, asking the room what they directly wanted him to do over the next six months.
Bayly is hopeful that the group can serve as an interactive opportunity to engage with the small business sector, with plans to meet two to three times a year.
Tom Raynel is a multimedia business journalist for the Herald, covering small business and retail.
