Why do New Zealand businesses spend so much time chasing invoices?
Most business-to-business trade in New Zealand happens on credit. You deliver the goods or complete the work, you raise the invoice, and then you wait. Terms of 30 days from invoice, or the 20th of the following month, are common, and the date a payment actually lands is often later than the term you agreed.
That gap is structural, not a sign that anything has gone wrong. Your customer has their own approval steps, payment run and cash cycle. A single invoice can sit with a project manager for sign off, move to accounts payable, then wait for the next scheduled payment date.
The result shows up in your debtor days, the average number of days between raising an invoice and being paid. The longer that number, the more of your working capital is tied up in work you have already delivered and already paid for. Wages went out, suppliers were paid, materials were bought, and the cash to cover it is still sitting in somebody else’s accounts payable.
Chasing is what fills the gap. Statements, reminder emails, phone calls, another look at the aged receivables report on Monday morning. It produces no new revenue, and it usually lands on the owner or on one person in the office who already has plenty to do.
What does chasing invoices actually cost your business?
The obvious cost is time. Every hour spent following up an invoice is an hour not spent quoting, selling, hiring or improving the way the business runs. The larger cost is what the delay stops you doing. When your cash is committed to invoices you have already raised, it is not available for the next order, the deposit on new equipment, or the extra staff a bigger contract would need. Businesses in this position often slow down or turn down work they could have won, simply because the funding gap between delivery and payment is too wide to carry.
Smaller costs add up alongside it. Paying suppliers later than you would like and losing the early settlement discounts that come with paying on time. Holding less stock than demand justifies. And a relationship cost, because nobody enjoys ringing a good customer for the third time about the same invoice. A clear process for collecting unpaid invoices takes most of that pressure off the relationship.
None of it appears as a line in your accounts, which is exactly why it goes unaddressed for so long.
How long should you wait before chasing an invoice?
Sooner than most businesses do, and more systematically.
Send the invoice on the day the work is completed or the goods are delivered, not at month end. Confirm within a day or two that it has been received and entered into your customer’s system, because an invoice that never reached accounts payable will never be paid, no matter how long you wait. A short courtesy reminder a few days before the due date is normal practice and is rarely taken badly. It is a prompt, not a chase.
If the due date passes, follow up the next working day. Waiting a week signals that your terms are flexible, and a brief email restating the invoice number, the amount and the agreed due date is usually enough. From there, set an escalation you actually follow: a phone call at around seven days overdue, contact with a more senior person in the customer’s business at around fourteen, and a formal letter at around thirty. What matters is less the exact intervals than having the same process run every time, so following up becomes routine rather than a decision you make each week.
What can you do before you look at finance?
Plenty, and it is worth doing first. Finance works best on top of good invoicing discipline, not instead of it.
- Agree your terms in writing before the work starts. A quote or order confirmation stating the payment terms, and a purchase order number where your customer uses them, removes the most common reason invoices stall.
- Get the invoice itself right. A clear description of what was supplied, the correct legal entity name, the reference your customer requires, your bank details, and a due date stated as a date rather than as a number of days.
- Invoice promptly and consistently. Billing weekly instead of monthly shortens the wait on everything.
- Know who actually pays you. The person who ordered the work is often not the person who approves the payment. A named contact in accounts payable turns a chase into a quick call.
- For larger jobs, build the cash flow into the deal: a deposit up front, progress claims at agreed milestones, and a final invoice on completion.
Do all of this and you will be paid faster. What it will not do is close the gap entirely, because your customer’s payment cycle is still your customers to control. That is the point at which finance earns its place.
What is Invoice Finance and how does it work in New Zealand?
Invoice Finance allows a business to access the value of its unpaid sales invoices rather than waiting for the customer to pay.
In practice it works in four steps. You deliver the goods or complete the work as usual and raise the invoice. You submit that invoice to ScotPac. An agreed advance against it is made available to you, often within 24 hours. When your customer pays, the balance is released to you, less the facility fee.
Two things set it apart from most other business funding. The first is what secures it: your unpaid invoices, so property and other business assets are not required as collateral. The second is that it moves with your sales, because the facility is sized against your receivables rather than fixed at a number set on the day you applied.
It is built for New Zealand businesses that sell to other businesses on standard trade credit terms. It is not designed for businesses that sell directly to consumers or take payment at the point of sale, because there is no receivable to finance.
Factoring, discounting or selective: which one are you actually looking at?
Invoice Finance is the umbrella. Underneath it sit several ways of structuring the same idea, and the terms are not used consistently across the market. Three questions separate them.
Who manages collections?
With invoice factoring, your funder manages your accounts receivable and follows up payment on your behalf. That suits a business without a dedicated accounts function, or one that would rather put the time into growth. With invoice discounting, you keep the ledger and the customer contact, and your accounts team runs collections exactly as it does now.
Will your customers deal with your funder?
This follows directly from the first answer. Under a factoring arrangement your customers are aware of it, because collections are handled by the funder. Under a discounting arrangement it stays confidential, because nothing about the way your customers are contacted changes.
Whole ledger or selected invoices?
Most facilities are set up across the receivables ledger as a whole, which gives the most consistent funding line and the simplest administration. Selective arrangements finance particular invoices instead of the full ledger. That can suit an occasional need, though it usually costs more per invoice and gives you a less predictable funding position.
You will also see debtor finance and debt factoring used for the same family of products. They describe the same thing: funding raised against money your customers already owe you for work you have already done.
None of these is a step down from the others. They are different operating models for the same outcome, and the right one depends on how you want your accounts function to run. A ScotPac lending specialist will work through that with you rather than fitting you to a standard structure.
How is Invoice Finance different from an overdraft or a business loan?
The difference is in what secures the funding and in how it is repaid. A traditional overdraft or business loan usually requires real estate or other assets as collateral, and it is sized on your past financial performance. Invoice Finance is secured against your accounts receivable, so it is sized on what your customers already owe you for goods and services you have delivered.
Repayment works differently too. A loan of a set size gives you a lump sum on day one and a fixed instalment schedule of principal and interest, whether or not that matches your cash cycle. Invoice Finance has no fixed monthly repayments. You draw funding when you need it, and repayment happens automatically when your customer settles.
An overdraft is closer in spirit, because it sits there until you need it, but the limit is fixed until you renegotiate it. An Invoice Finance facility is designed to grow as your invoicing grows.
Access is often easier as well. Most lenders want a long trading history and a strong credit record. Here the central question is whether your customers can pay their invoices, because your accounts receivable provide security.
What do you need to have ready to get started?
Nothing unusual but having it ready will move things along.
- An up-to-date accounts receivable ledger. Whether you run cloud accounting software or a spreadsheet, an aged receivables report reflecting your current position is the starting point.
- A business-to-business customer base on standard trade credit terms. This is the core requirement because the facility is built on invoices raised to other businesses.
- At least six months of trading, showing consistent invoicing and collections.
- Customers who pay reliably. Their creditworthiness matters more here than it would for most other funding, because their invoices are the security.
- Clean documentation behind your invoices. Signed orders, delivery dockets, timesheets or approved variations, depending on your sector.
- Recent financial statements and your usual company details for the application itself.
If some of that is untidy, it is not a reason to hold off. It is a very common starting point, and a lending specialist can tell you quickly what would need tightening.
How long does it take to set up?
Less time than most business owners expect. The sequence is a conversation about your business and your customer base, a review of your receivables ledger, indicative terms, then documentation and verification before the facility goes live. Once it is live, funding against a submitted invoice can be available in as little as 24 hours.
The overall timeframe depends on the size and complexity of the facility and on how quickly the information comes together. Ideal Electrical, an electrical supplies business with 38 branches across New Zealand, had a facility in place within four weeks, with several parts of the process run in parallel to compress the timeline.
The most common cause of delay is not the lender. It is waiting on financial information from your own accountant, so it is worth flagging early that you will need it.
What does Invoice Finance cost?
Pricing is tailored, so any figure quoted in a guide would be misleading. What you can understand in advance is the structure.
There are generally two components. A facility or service fee covers the running of the arrangement, including the collections service where that forms part of your facility. A funding charge applies to the money you actually have drawn, for the period you have it drawn. What moves the price is straightforward: the size of the facility, your sector, the spread and quality of your customer base, your average debtor days, and whether ScotPac manages collections or you keep them in house.
The comparison worth making is not against the headline rate on a term loan. Funding you draw only when you need it costs less than funding you carry whether you use it or not, and businesses that move to paying suppliers on time frequently recover part of the cost through early settlement discounts and better buying terms.
Ask any lender for the total cost of the facility as you expect to use it, rather than the rate in isolation. It is the only number you can compare.
Will your customers know you are using it?
That depends on the facility you choose, and it is a fair question to ask early. If ScotPac manages your accounts receivable and collections, your customers will be aware of the arrangement, because they will deal with the ScotPac team on payment. Many businesses actively prefer this, because it moves the collections conversation off their desk and onto a team that does it every day. If you would rather keep the arrangement confidential, a facility where you retain the ledger and the customer contact does exactly that, and nothing about the way you deal with your customers changes.
In either case your customers are given new bank account details for payment. That notice can be issued on ScotPac letterhead or on your own, depending on the confidentiality you have asked for.
Invoice Finance is a mainstream way for established businesses to fund growth, and it is understood as such by anyone working in a credit or accounts role. When Ideal Electrical moved to a ScotPac facility, the only visible change for its customers was a new bank account number.
Which New Zealand businesses use Invoice Finance?
It suits businesses that invoice other businesses and then wait to be paid, which in New Zealand covers a wide range of sectors.
Exporters, where the wait between shipping and payment can be long and the order sizes are large.
Importers, who pay for goods well before they sell them, and for whom an Invoice Finance facility also opens up Trade Finance.
Labour hire and recruitment, where wages go out weekly and client invoices come back on monthly terms. The mismatch is structural and it grows with every placement.
Manufacturing, where materials, plant and wages are committed long before the finished goods are invoiced.
Wholesale and distribution, where holding the right stock is the whole business, and every dollar tied up in receivables is a dollar not sitting in inventory.
The common thread is not the industry. It is a business to business model, credit terms, and a growth ambition currently limited by the gap between delivery and payment.
What does it look like in practice?
Ideal Electrical is a good example of the pattern. Founded in 1936, it sells electrical supplies to electricians through 38 branches across New Zealand. In February 2025 a United States private equity firm acquired the business, and because the new owner had no previous operating history in New Zealand, traditional banks were reluctant to lend. The business also needed working capital to replace stock lines previously supplied by its former owner, and to fund the growth its new leadership was planning.
On its advisor’s recommendation, Ideal Electrical came to ScotPac. The facility was structured so the business could unlock the capital tied up in its unpaid invoices while retaining control of its debtor relationships and invoicing processes, and it was in place within four weeks.
The outcome was consistent cash flow through the transition, the ability to replace key supply lines, confidence for the incoming directors that no further funding would need to be injected from offshore, and the room to focus on growth. As the company’s Financial Controller put it, ScotPac invested time in getting to know the business model and were more flexible with their terms than the bank lenders they spoke to.
Can you use Invoice Finance alongside other funding?
Yes, and for many businesses it works best as part of a combination. Trade Finance is the most common pairing for importers. It funds payment to overseas and domestic suppliers so you can secure stock and extend your own payment terms. At ScotPac a Trade Finance facility always operates in conjunction with an Invoice Finance facility, because the receivables generated when you sell the goods are what complete the cycle.
Asset Finance covers plant, vehicles and equipment, which sit on a different timeline to working capital and are better funded separately rather than out of your day-to-day cash.
A Line of Credit can also sit alongside an Invoice Finance facility. It is assessed separately and on its own criteria, so it is worth a conversation about which combination suits your position rather than assuming one facility has to do everything.
The principle is simple. Match the funding to the cash cycle it covers. Invoice Finance covers the gap between delivery and payment. It is not intended to fund a capital purchase, and a term facility is not the right tool for a receivables gap.
Is Invoice Finance right for your business?
It is likely to be a good fit if most of the following are true.
- You sell goods or services to other businesses on standard trade credit terms.
- You have been trading for at least six months, with consistent invoicing and collections.
- Your customers are creditworthy and pay reliably, just not as quickly as you would like.
- The gap between delivering the work and being paid is holding back what you could take on.
- You would rather secure funding against invoices you have already raised than against property.
- You want funding that grows with your sales rather than a limit fixed on the day you applied.
It is less likely to be the answer if you sell directly to consumers, take payment at the point of sale, or need funding for a specific asset purchase. In those cases there are better suited options and a lending specialist will tell you so.
If you recognise your business in that first list, the next step is a conversation rather than an application.
Talk to a ScotPac lending specialist
Every business runs its invoicing and collections a little differently, so the best next step is a conversation rather than an application. A ScotPac lending specialist can talk through your receivables, your customer base and the terms you trade on, and set out what an Invoice Finance facility would look like for your business.
