Explains that agencies must pay suppliers promptly and encourage supplier to pay their subcontractors promptly.
- Each agency must pay suppliers’ invoices promptly. At a minimum, invoices must be paid at the time/s set out in the contract, or earlier if possible.
- Agencies must encourage their suppliers to pay their subcontractors promptly.
- Agencies should encourage suppliers to offer subcontractors no less favourable payment terms than the ones they receive from agencies.
More information on prompt payment
Prompt payment is critical to the cash flow of every business, and especially to small and medium-sized businesses (SMEs).
Payment certainty inspires confidence across the supply chain, which in turn stimulates investment and growth in the New Zealand economy. This confidence is good for agencies, suppliers and New Zealand. Slow payments can negatively impact a business’s cash flow, waste their time (having to chase up payments), and impact their ability to grow.
Improving payment times and practices is a priority for the government. Some things you can do that support prompt payment are:
- Set all suppliers to ‘immediate payment terms’ in accounts payable systems. This means that all invoices are paid in the next pay run after they are approved, even if the invoice is due at a future date.
- Have frequent accounts payable system payment runs. There should be at least one accounts payable system payment run each week.
- When procuring new finance systems, consider what technology is available to improve payment times with suppliers, such as purchase to pay systems.
- Consider the use of purchase cards for low value transactions.
- Where appropriate, consider including contractual or other legal rights that allow agencies to pay subcontractors directly in instances where the supplier is not paying their subcontractors.