Business Payment Practices Act 2023: New Reporting Obligations for Large Businesses

To follow up on our previous update, the Business Payment Practices Act 2023 received royal assent on 26 July 2023 and will come into effect on 25 May 2024. This marks a significant step forward in addressing payment delays that have long impacted the cash flow of small and medium-sized businesses in New Zealand.

Implications For Businesses

Transparency and Accountability: All large businesses (the definition of a large business is discussed in our previous article) are required to report information on their payment practices to the Registrar of Business Payment Practices (Registrar). This information will be available to view on a publicly available register. The information required is set out in the recently announced Business Payment Practices Regulations 2023 and includes:

• the average time to pay supplier invoices;
• the percentage of invoices paid in full within the required timeframe; and
• a description of a business’s standard payment terms (if any).

Strengthened Cash Flow: Faster payments are expected to be a flow on effect of the new reporting requirements. This may reduce the need for small to medium businesses to obtain loans to cover short-term cash flow shortages.

Increase in Business Confidence: The new reporting requirements will assist businesses (in particular small and medium-sized) in making better and well-informed decisions when engaging with large businesses.

Enhanced Reputation for Compliant Businesses: As payment practices will be publicly available, businesses that consistently meet their payment practices obligations will likely earn a reputation for reliability.

Due Diligence: Small to medium-sized businesses could consider searching on the new Registrar when completing due diligence on new large customers that fall under the Act to assess the payment practices of the customer.

Penalties and Enforcement: Where large businesses fail to comply with their reporting obligations, depending on the nature of the offence, fines ranging from $1,000 to $9,000 will be imposed. If a business intentionally provides false or misleading information, they may face penalties of up to $500,000.

The Business Payment Practices Act 2023 represents a long-awaited reform which emphasises the importance of transparency and accountability in business transactions. If strictly enforced, the Act will have a positive impact on the financial stability for many businesses.

If you would like any further information on the reporting requirements and what this may mean for your business, please feel free to contact us.