You did the work, sent the invoice and waited. Now the due date has passed, the customer has gone quiet and payday is on Thursday. It is one of the most common cash-flow squeezes in New Zealand business, and one of the most stressful, because the people you can’t let down are your own team.
The good news is that a late payer and a payroll date are both problems you can work on today. This guide sets out the order to do it in. It is general information, not legal, employment or tax advice. Your accountant, a lawyer or Employment New Zealand can help with your exact situation.
What to do in the next 48 hours
- Put payroll first in the forecast. List what is due before the customer pays: net wages, the PAYE and other deductions that follow, rent, suppliers and any IRD instalments. Then list the cash you have and what you can collect this week. That gap is the number you are really solving.
- Call the customer, don’t just email. Ask whether the invoice is approved, whether anything is in dispute and the date they will pay. Business.govt.nz suggests a clear chasing process: a short reminder soon after the due date, then a phone call if nothing comes back. Ask for a part-payment now if the full amount can’t move this week, and confirm any promise in writing.
- Chase everything else that is owed. Smaller overdue invoices, retentions, deposits on new work and any GST refund due can add up. Invoice completed work today rather than at month end.
- Ask for time from the people who are flexible. Suppliers and your landlord may agree to a short delay if you ask early and give a real date. Business.govt.nz recommends talking to the people you owe rather than going silent.
- Keep IRD filing on time. Inland Revenue says to file your employment information within 2 working days of each payday if you file electronically, even if you can’t pay the deductions yet. Filing late adds a second problem to the first.
What you can’t do with wages
Wages are not the place to find the money. Employment New Zealand explains that payday is set by the employment agreement or a workplace policy, and that you can only deduct from pay when the law requires it or the employee agrees in writing. If an employee’s hours are in their agreement, you can’t change them without their agreement, and cancelling a rostered shift without a valid clause generally means paying it anyway. So paying late, paying short or quietly cutting hours is not an option an employer can choose alone.
If you think you may genuinely need to talk with staff about changes, Employment New Zealand’s employer guidance says to talk to employees about changes that could affect their hours, and minimum rights can’t be reduced. Get employment advice before that conversation, not after.
Where HomeSec fits
HomeSec is a direct, open-term lender of business loans secured by New Zealand real estate. We lend $20,000 to $1,000,000 for genuine business purposes, including working capital while a large receivable is outstanding. Because we are the lender, not a broker, one conversation tells you whether a loan is workable.
Be realistic about timing. Funds can be available in as little as 24 hours once the scenario is complete and the security is acceptable, but a property-secured loan still needs the property details, the legal documents and sign-off from everyone on the title. If payday is tomorrow, start with the steps above. If the gap could last weeks, or the same customer pays late every quarter, a facility arranged now can stop the next payday becoming a crisis. Approved facilities can offer up to six months with no scheduled payments, although interest and fees can continue to accrue. Approval is never automatic. More on how we approach working capital finance and emergency business loans.
Is this a one-off gap or a structural problem?
A one-off gap looks like this: a reliable customer is late because of an approval process, a staff change or a dispute over one line item. The work was priced properly, the money is coming and you can name a likely date. Bridging that gap protects a good business from a timing problem.
A structural problem looks different. Payday is tight every month, not just this one. Several customers pay late, or one customer is more than half your revenue and sets its own payment terms. The job was priced too low to carry wages if anything slipped. Or the late payer may not be able to pay at all. In those cases a loan buys time but doesn’t change the pattern. Ask your accountant to look at margins, payment terms and how much depends on one customer before you borrow.
One test helps: if this customer paid in full tomorrow, would next month’s payday be comfortable? If the answer is no, the late invoice is a symptom, not the cause.
The official routes
Inland Revenue. If PAYE and other deductions will be late, talk to IRD before the due date. Small and medium employers pay deductions by the 20th of the following month, and large employers pay twice a month, according to IRD’s deductions guidance. If you can’t pay in full, IRD offers instalment arrangements that you can apply for in myIR. Interest is charged on overdue amounts, so an arrangement eases the timing but isn’t free. Our guide to what to do if you can’t pay GST on time covers the same conversation for GST.
Recovering the debt. If the customer disputes the invoice, the Disputes Tribunal can hear contract and disputed-debt claims up to $60,000. It is not a debt collection service, though. If the customer agrees they owe the money and simply hasn’t paid, the Tribunal says it can’t deal with that, and claims from $60,001 to $350,000 usually go to the District Court. A lawyer can advise on a letter of demand or other recovery steps. Recovery through any formal process takes time, so plan payroll as if the money will not arrive this week.
Your duties as a director. The Companies Register reminds directors not to agree to the company taking on obligations unless they believe it can meet them, and not to keep trading while insolvent. If the late payment means the company can’t pay its debts as they fall due, get advice from your accountant or a licensed insolvency practitioner promptly.
When borrowing is not the answer
Don’t borrow to cover wages if:
- the customer may be insolvent and there is no realistic date for payment
- payroll has been tight for several months and this invoice is only the latest reason
- the job or contract is losing money, so being paid won’t fix the margin
- a part-payment, a short supplier delay or an IRD arrangement would cover the gap at lower cost
- you would be offering property as security without a clear plan to repay the loan
In those cases, the better move may be repricing, changing payment terms for future work, reducing reliance on one customer or getting turnaround advice. Our guide to a supplier threatening to stop deliveries works through a similar decision from the other side of the invoice.
A useful first conversation
Tell us who owes you, how much and since when, what the customer has said about payment, what payroll and IRD need over the next two months and what property is available as security. That is enough for us to say whether a business loan would bridge the gap or just add a bill. See whether there is a workable funding option.
Frequently asked questions
Can I pay my staff late if a customer hasn’t paid me?
Payday is set by the employment agreement or a workplace policy, so paying late or short isn’t a decision an employer can make alone. You also can’t deduct from pay without the employee’s written agreement unless the law requires it. Talk to Employment New Zealand or an employment adviser before you change anything.
What happens if I can’t pay PAYE on time?
File your employment information on time anyway, then contact Inland Revenue before the payment due date. You can apply for an instalment arrangement in myIR. Interest is charged on overdue amounts, and penalties may apply, so the sooner you talk to IRD the better.
Can I take a customer to the Disputes Tribunal for an unpaid invoice?
If the debt is disputed, the Disputes Tribunal can hear claims up to $60,000. If the customer agrees they owe it but won’t pay, the Tribunal can’t help with that. A lawyer can advise on recovery steps, and larger claims usually go to the District Court.
Can I get a business loan to cover payroll?
Yes, if the loan has a genuine business purpose and you can show how it will be repaid. HomeSec lends against New Zealand real estate, so the security, the purpose and the repayment plan matter more than a single month’s bank balance. Approval is never guaranteed.
How fast can business finance be arranged for wages?
With HomeSec, funds can be available in as little as 24 hours once the scenario is complete and the security is acceptable. Missing documents or extra sign-offs slow things down, so if payday is very close, act on the other steps in this guide at the same time.
New Zealand sources
- Employment New Zealand: pay and wages
- Employment New Zealand: hours of work
- Employment New Zealand: employer rights and responsibilities
- Inland Revenue: payday filing
- Inland Revenue: paying deductions to Inland Revenue
- Inland Revenue: debt and insolvency
- Business.govt.nz: getting paid on time
- Business.govt.nz: signs of financial trouble
- Disputes Tribunal: what the Tribunal can help with
- Companies Register: what it means to be a director