It’s safe to say that in today’s Budget there were very few surprises. The Government had done a good job indicating what the priorities would be and the winners on the day appear to be the health and education sectors.
If you listened closely though, you may have picked up Finance Minister, Grant Robertson’s, nod to increased investment into e-invoicing. Taking a deeper dive on this, we were excited to find that the funding will aim to deliver “an e-Invoicing framework which allows businesses in New Zealand to digitally transact across the entire procure-to-pay lifecycle using their New Zealand Business Number.”
As the Government revealed in its Summary of Initiatives, “e-Invoicing alone results in an estimated 80% productivity gain.” It also highlights that by using the framework used by our Australian counterparts across the Tasman, we should see boosted interoperability with both trans-Tasman and global businesses.
Now, if you’re a small business, no doubt you understand that getting paid on time can present a major challenge. According to Xero Small Business Insights, in the last 13 months 30 day invoices were paid on average 4.7 days late (at 34.7 days) with the worst months seeing invoices paid 8.5 days (March 2017) and 6.4 days (May 2017) late. The resulting issues with cash flow from these delays can stifle growth and even put entrepreneurs out of business.
The increased investment over the next year from $1.265m to $3.651m is good news for small businesses as e-invoicing will vastly reduce the cost of administration resulting in increased accuracy and and increased pace of payment.
Other announcements we thought worth highlighting include:
Increased R&D funding
Another key announcement we believe has the potential to support small businesses is the increased spend in R&D. The Government has set a target of increasing R&D expenditure to two percent of GDP by 2027 and today’s announcement, that one billion has been earmarked for innovation is a positive one. The key here though will be making sure that it is accessible for small businesses – from what we have seen, the proposed $100,000 annual spend requirements will be out of reach for many small businesses.
Drop in unemployment
The Government should be commended on their targeted unemployment rates. In 2017, total employment by New Zealand’s small businesses accounted for 30 percent of the working population and this is growing. Xero Small Business Insights also shows us that growth in the number of employees per firm is at eight percent and the month on month growth in the last year shows an overall 1.3 percent increase in the number of New Zealand small business employees. Looking forward we can see that it is clear that small businesses are going to be a key driver of job growth.
Provincial Growth Fund
Looking beyond a national view, the announcement of the Provincial Growth Fund is also music to the ears of small business owners. With over 500,000 small businesses operating across the country, we know that the provinces are at the heart of small business growth and we welcome support for those leading innovation and operating small businesses in these communities. We’ve seen the potential in these areas, like Hawke’s Bay, where we opened an office just last year. With a $1billion pot fuelling productivity, innovation and growth in the regions, it’s encouraging to see that businesses operating outside of the major cities will be rewarded for their contributions to our economy.
Increased funding for foreign policy and trade
The government has announced more than one billion of funding to boost New Zealand’s international presence to build foreign and trade policy. Xero’s latest Small Business Insights report, shows that the total dollar value of imports and exports for New Zealand small businesses from dropped 7.6p.p year-on-year to March 2018. The government’s continued push for world trade reform and liberalisation should potentially result in increasing New Zealand’s stamp on the global trading map (New Zealand currently ranks as 54th on the World Trade Organisation export ranking (2016)).
This announcement follows New Zealand’s all-time-high terms of trade index result – the ratio between a country’s export prices and its import prices – reaching 1,463 for the three months to December 2017. High terms of trade means more money to spend on imports, and there has been a clear link between the rise of terms of trade since the mid-1980s and our GDP growth over the same period.
Finally, we asked an expert on the ground, what this Budget means for small businesses. Peter Harris at Maisy Harris & Co says this budget lacked surprises as many of the announcements were flagged well in advanced.
“It looks to be a cautious first up budget with plenty of spending flagged for the future. Perhaps the biggest surprise was the scale of surpluses forecast being $600m more than previously expected. Labour are looking to spend six billion more in the next five years than they had previously flagged. They have done this by forecasting increased tax revenue through continued strong business profits and businesses employing more people.
“My advice for small businesses is to continue to focus on doing what you do. The moment you let other people or something you can’t control, like the Budget, affect you and your business – you’ve lost.”