How New Zealand Government Agencies Can Improve Their Payment Practices with eInvoicing - Link4 eInvoicing

The latest payment data for the April to June 2024 quarter from New Zealand’s Ministry of Business, Innovation and Employment (MBIE) highlights both progress and ongoing challenges in government payment practices. While the adoption of eInvoicing has led to notable improvements—95.3% of invoices were paid within 10 working days, up from 93.6% in the previous quarter—some agencies are still struggling to meet the 95% target. However, many others have successfully surpassed this benchmark, demonstrating that with the right systems in place, such as eInvoicing, timely payments are achievable.

Improving Payment Efficiency

At the heart of recent improvements in payment practices is the growing adoption of eInvoicing. This technology is a game changer, streamlining the way invoices are submitted, processed, and approved. By automating key steps in the invoicing process, eInvoicing reduces manual errors, eliminates bottlenecks, and ensures faster processing times. For government agencies handling thousands of invoices, this has led to a more efficient, transparent, and reliable payment system.

eInvoicing is particularly beneficial for agencies that manage large volumes of invoices. Traditional paper-based or manual processes often result in delays due to errors, misplaced documents, or lengthy approval times. With eInvoicing, invoices are transmitted digitally, allowing for real-time submission and tracking, ensuring that they are processed faster and more accurately. As a result, the shift to eInvoicing has been instrumental in helping agencies pay suppliers within the designated 10-day window.

The efficiency gains from eInvoicing are not only felt within agencies but also extend to suppliers. When payments are made on time, businesses—especially small and medium-sized enterprises (SMEs)—experience smoother cash flow, enabling them to operate more effectively, pay staff on time, and reinvest in their growth. For SMEs that rely heavily on government contracts, timely payments are critical to maintaining business stability.

Ongoing Challenge of Late Payments

Despite these advancements, some government agencies continue to fall short of the 95% on-time payment target, causing challenges for suppliers. Late payments, even if only a small percentage of total invoices, can have a substantial impact on SMEs. These businesses often operate on tighter margins than larger corporations and rely on predictable cash flow to cover operational expenses, salaries, and future projects.

When government agencies delay payments, SMEs are forced to absorb the financial strain, which can lead to cash flow disruptions, strained supplier relationships, and, in some cases, financial instability. In industries where government contracts represent a significant portion of a business’s revenue, these delays can put businesses in precarious positions, leaving them with limited leverage to negotiate better payment terms or enforce timely payment agreements.

This is why the drive for eInvoicing is so important—it has the potential to not only improve administrative efficiency but also bring about a cultural change within agencies, emphasising the importance of paying suppliers promptly. The shift toward eInvoicing is already showing positive results, but the cultural change needed to prioritise on-time payments must continue to be reinforced.

Agencies Leading by Example

Several government agencies are leading the way in meeting or exceeding the 95% payment target, proving that timely payments are possible with the right systems in place. Agencies that have adopted eInvoicing and integrated it into their processes are seeing significant improvements in their ability to process payments on time.

These top performers demonstrate that it is not a matter of capacity but of prioritisation and culture. Agencies that consistently achieve on-time payment targets send a clear message: meeting the 95% threshold is not only possible but can be exceeded. These high performers provide a roadmap for other agencies that are still lagging, offering lessons on how to integrate eInvoicing effectively and make timely payments a core part of their operational strategy.

Driving Better Payment Practices

As more government agencies and suppliers adopt eInvoicing, the benefits of this technology are becoming increasingly clear. One of the key advantages is the reduction of manual errors and delays that often occur in traditional invoicing processes. eInvoicing enables invoices to be submitted, approved, and processed digitally, cuttingdown on the time it takes to get from submission to payment. This helps both the agencies and suppliers, particularly when it comes to high-volume invoice processing.

Additionally, eInvoicing provides greater transparency and accountability. Suppliers can track the status of their invoices in real-time, reducing uncertainty and improving their ability to manage cash flow. This transparency benefits agencies as well, allowing them to identify quickly and address any issues that might arise during the payment process.

Beyond the technical efficiencies, eInvoicing can support a broader cultural shift within government agencies. By adopting this technology, agencies are committing to modernising their operations and prioritising timely payments. This shift in mindset is essential for ensuring that suppliers, especially SMEs, are paid on time and that government contracts remain a reliable source of revenue for these businesses.

Encouraging Progress and the Path Forward

The improvements in payment practices observed in the latest data are encouraging, but there is still work to be done. The increase in timely payments from 93.6% to 95.3% suggests that the government’s efforts to promote eInvoicing and streamline payment processes are having a positive impact. However, the gap between high-performing agencies and those still struggling to meet the 95% target must be addressed.

To close this gap, government agencies need to fully embrace eInvoicing and the cultural shift required to prioritise on-time payments. As more suppliers become eInvoicing-enabled and more agencies integrate this technology into their operations, the number of invoices paid within the 10-day time frame is expected to continue rising.

Ultimately, the move towards eInvoicing represents a critical step in creating a more efficient, transparent, and reliable payment ecosystem. By embracing this technology and making timely payments a priority, government agencies can support SMEs, strengthen supplier relationships, and contribute to a healthier business environment for all.

Find out how you can benefit from using eInvoicing by booking a discussion with us now: https://link4.co/nz/