How SMEs can ease late payment pain to facilitate growth

As New Zealand continues to recover from the global pandemic, now is an opportune time for businesses to focus on growth.

Friday, July 2nd 2021, 6:05PM

However, late payment terms continue to be a point of stress for the SME community, hurting their cash flow and hampering growth opportunities.

Recent data from the Ministry of Business, Innovation & Employment shows that half of New Zealand’s 530,000 SMEs say that late payments hurt their cash flow and increase stress levels. Nearly a third say late payments restrict growth opportunities.

Financial stress is often very much part of running a small business, and the effects of cash flow instability can be vast. Waiting 30, 60 or even 90 days for invoices to be paid can cripple a business. Any squeeze on a business is also likely to be felt in their personal life too (particularly if assets are tied up with the business).

In order to combat this issue, Government departments are seeking to lead by example, setting themselves the target of paying 95% of all invoices within 10 working days. New legislation has been proposed by the Government, which sets minimum standards for payment terms. The Minister for Small Business Stuart Nash recently commented, “Cash flow is king, yet late payments or extended payment terms are undermining the small business landscape.”

While these are steps in the right direction, it’s important for SMEs to look to their specialist advisors when it comes to bridging the gap of delayed payment terms. Alternative finance options are fast emerging that provide the opportunity to take on new business, grow by hiring more staff, build inventory or purchase new equipment.

Apricity Finance CEO Linden Toll understands the cash flow struggles of SMEs dealing with delayed payment terms. “We support any initiative that challenges those that have been responsible for creating unfair payment terms to smaller suppliers. Every small business owner has experienced the anxiety of waiting for bills to be paid, but there are simple solutions out there” said Toll.

For SME businesses considering growth opportunities but have concerns about taking on additional debt, the solution can be found in unlocking tied up working capital. An alternative to bank finance, invoice finance gives businesses access to the funds from their invoices as soon as they are approved. The result is cash flow certainty, increased production capability and the ability to plan ahead.

Invoice finance is not a loan, the business is not taking on further debt, putting the house at risk or giving away control to an investor. This effectively closes the gap between when an invoice is raised and when the business receives payment.

Apricity Finance is ideal for businesses providing goods or services to high credit customers. With no lock-in contracts or personal assets required as security, Apricity Finance is the flexible funding solution to support SMEs growth needs.