‘It's something that you will stress about every day’
Small business owners across New Zealand are facing an invisible crisis that's costing the nation thousands of jobs and untold emotional distress: late payments.
Late payments from larger customers are creating a devastating ripple effect through the small business economy, preventing hiring, consuming valuable time, and leaving owners in a state of chronic stress, according to experts.
The numbers tell a troubling story. An estimated 600,000 small businesses operate in New Zealand, and according to recent research, one in 10 of these entrepreneurs view late payments as an inevitable cost of doing business.
More than 1 in 10 (14%) of New Zealand small businesses say they would hire additional staff if they were paid on time, according to data shared with HRD by Ian Boyd, GoCardless ANZ General Manager. That translates to approximately 82,000 businesses ready to expand their workforce, but held back by cash flow constraints caused by late-paying customers, he says.
Kristy Chilman, Director of Marketing & Growth at The Brand Architects, understands this reality intimately. When her service-based business faced significant late payments from clients, the impact cascaded through every aspect of operations. "If the outstanding money owed is significant, that would impact a business in terms of their ability to operate," Chilman explained. "In that case, it could mean that operational changes have to occur, including who they have in terms of their staff."
Businesses are hiring again but are showing signs of caution amid ongoing cost pressures ahead of the Christmas period, according to a recent report from Employment Hero.
The productivity cost of late payments
Beyond recruitment, late payments are quietly gutting small business productivity. According to Boyd, 20% of New Zealand small businesses spend between six to 12 working days per year simply chasing payments. That's nearly two weeks of labour consumed not by growth, innovation, or customer service, but by pursuing money that should have already been paid.
"If I'm spending six to 12 hours a month chasing payments, that six to 12 hours, I'm not spending growing my business doing the things that I love to do," Boyd noted. "So I think that is a fundamental impact."
Perhaps most concerning is the psychological impact on business leaders themselves. According to GoCardless research, at least 40% of New Zealand small business owners actively avoid having conversations with customers about late payments due to power imbalances in the relationship. Among those who avoid these conversations, 48% report experiencing extreme or severe personal stress.
The consequences are profound. Chilman described the experience of pursuing overdue invoices as causing sleepless nights, daily stress, and a cascade of emotional impacts that can last for months or even years.
"It's something that you will stress about every day and you spend all this additional time trying to recoup that, whether you're going through official processes or whether you're trying to liaise with them yourself," Chilman said. "It's just these layers of impact that actually take a huge toll on you across the time in which you're trying to recoup that invoice."
Boyd emphasised that this burden of financial distress falls across the economy broadly. "In New Zealand, it affects everyone. And that mental wear and tear, not being sure about when the bills are going to get paid, both paid in and then very quickly paid out. That's across the board."
Previously, the Employment Relations Authority (ERA) ordered an employer to pay a worker over $17,000, including penalties and interest, after a breach in a settlement agreement by late payments before stopping payments entirely.
Protections from late payments
What makes the late payment crisis particularly frustrating for small business owners is the apparent lack of systemic protections. Chilman pointed to a loophole that allowed a debtor to simply establish a new business structure and write off debts, leaving creditors with no recourse.
"There's got to be some responsibility around the whole process of starting and finishing businesses, particularly where money is owed, particularly when they have debts outstanding," Chilman argued.
Despite the situation, employers can do something to address the problem.
The first step, according to Boyd, is assessment. "Understand your problem, understand how many late payments you have. And if you're not able to get to that information easily, then think about what systems will help you to do that," he advised.
Modern accounting software—whether Xero, HubSpot, or similar platforms—can automate much of the invoicing and chasing process. "That 6 to 12 days that is getting sucked up by your staff or by you as a business owner can be automated," Boyd explained.
He also notes that direct debit arrangements—where customers authorise automatic payments—eliminate friction and reduce the likelihood of late payments becoming a problem in the first place.
Chilman emphasised the importance of establishing clear boundaries from the outset. "You need to make sure that you have a process in which you—particularly if you're a service-based business—invoice in advance and also have a particular boundary around how long you will continue a service without payment being received," she advised.
