Renee Joblin runs a small engineering company that has been built up through hard work over the years.

Right now, she’s waiting for $10,000 in payments that should have come in on the 20th of the month and she has suppliers “breathing down her neck” for $6000. “My family has to go without groceries because I have to pay my rent and staff wages.”

It’s often bigger companies that try to set their own payment terms, she said.

“Even though we ask those big companies for deposits on bigger jobs they don’t pay them, just wait until the whole invoice is due which creates a knock-on effect ... we have no debt older than 30 days but there is stuff owed to us that is older than 50 days and that’s why sometimes we don’t pay on time.”

Accounting platform Xero has released new data that shows an 81% increase in the cost of late payments to small businesses, from an estimated $456 million in 2021 to $827m in 2023.

Another business owner, who did not want to be identified, said late payments created a “vicious cashflow circle” that had been going on for more than a year.

People who were waiting for their bills to be paid ended up being late with their payments to other people. “A lot of people are owed a lot of money so they can’t service their debt. It only takes one business to throw a spanner in the works of a whole industry.”

He said many of his conversations with other business owners were about how much they were owed and how long they had been waiting.

Xero country manager Bridget Snelling said some big businesses were “using the small business community as a bank of easily accessible capital”.

She said when the Business Payment Practices Act was repealed, the Ministry of Business, Innovation and Employment acknowledged late payments were an issue for large market players.

A voluntary code is being considered but Snelling said that had not proved effective in Australia.

“The impact of these late payments is profound, locking substantial funds out of the small business economy, restricting growth, and preventing new businesses from thriving.”

She said big businesses should commit to paying their bills within 10 business days.

“In a high inflation, high interest rate economy, the cost of not getting paid on time is higher.

“Think about the fact that our economy is made up of 97% small businesses, they’re a quarter of GDP, if a small business is having a tough time it really does have a detrimental impact on the rest of the economy and the standard of living for many Kiwis. It’sreally important we do everything we can to help small businesses with cashflow.”

She said big businesses tended to have more bargaining power than their small counterparts.

“Often it’s the case that small businesses are held to ransom and have to abide by whatever the big business’s payment terms are. Sometimes they are really onerous and it’s a long time for a business between supplying the goods or doing the mahi and getting paid.

“Small businesses don’t usually have cash reserves on hand to get through ... we’re asking big businesses to think about their payment terms and commit to 10 days.”

Small businesses could also help by setting up invoice reminders and offering more payment options on their invoices, she said.

Employers and Manufacturers Association head of advocacy Alan McDonald said late payments had become more of an issue in recent months.

He said in regions where some small businesses were dependent on a large business, they would really struggle if payments were slow.

“It tends to be small businesses not paying small businesses. It’s all down to cash flow. There’s a knock-on effect, if someone doesn’t get paid then further down the track someone else doesn’t get paid.”

He said his organisation tried to communicate to members that late payments could be a sign of problems ahead.

“If you are starting to see customers become slow payers it could be a sign they are under stress and you are probably going to be under stress and need to do something about it.”

He said debt management was something that many businesses were not good at and they should be more proactive, particularly when things were tight.