Terms of trade in NZ: the clauses that get deposits paid and invoices cleared

Most owners treat their terms of trade like the small print on a car park ticket: something a lawyer wrote once and nobody reads. That’s a missed track. On the funding mixing desk, your terms set how long you carry the cost of every job before the customer pays. Slide that fader the right way and the gap a loan has to fill shrinks, sometimes to nothing.

This guide goes through the clauses that move cash, one at a time, rather than reading like a legal checklist.

Why do terms of trade matter more in NZ now?

Because nobody else is setting the rules for you. New Zealand briefly had a Business Payment Practices Act 2023, which would have made large businesses publish how fast they pay suppliers. It was repealed in 2024. MBIE confirms the repeal Act “has come into force” and that large entities no longer have to collect and disclose their payment practices (MBIE).

So outside a couple of specific areas (building work and government buyers, covered below), there’s no statutory payment term between businesses. A customer who pays in 70 days isn’t breaking any law unless they’ve agreed to something shorter. The terms they accepted are the terms you can enforce.

What should your terms of trade include? The cash-flow clauses

Here’s the core set, in the order they affect your bank balance.

Clause	What it does for cash flow	The usual mistake
Deposit	Customer funds materials and booked time upfront	Asked for verbally, never written down
Progress payments	Cash arrives as the work does, not at the end	Stages tied to vague milestones (“when mostly done”)
Payment due date	Sets when the balance lands	Defaulting to the 20th of the month following
Credit limit	Caps how much any one customer can owe you	No limit, so one slow payer ties up a month of margin
Overdue interest and collection costs	Makes paying late cost the customer, not you	Added after the dispute starts
Stop-supply right	Lets you pause work when an account is overdue	Missing, so you keep working for free
Retention of title	You own the goods until they’re paid for	Not registered on the PPSR
Variations	Extra work is priced and paid as you go	Variations billed in one lump at the end

Two notes on that table. Retention of title only protects you properly once it’s registered. Our guide on supplier PPSR registration covers how that works from the other side of the counter. And whatever you put in, the customer has to accept it before you supply: a signed credit application, a ticked box on your online booking, or an accepted quote that clearly refers to the terms. Terms printed on the back of a final invoice arrive too late to count for much.

How big should the deposit clause be, and can it be non-refundable?

There’s no set percentage. A good deposit covers what you’d lose if the customer pulled out: custom materials, stock ordered in, time you’ve turned other work away for. For a custom job that’s often a large share of the materials bill. For a booked service, it might be enough to cover the slot.

Spell out three things:

1. The amount, and when it’s due. For example, “30% on acceptance of the quote; work is scheduled once the deposit clears.”
2. What happens if the customer cancels. Say which costs you’ll keep (materials ordered, work done) and when the rest is refunded.
3. How the deposit is applied. Usually it’s credited against the final invoice.

Be careful with “non-refundable, no matter what”. The Commerce Commission can challenge unfair terms in standard-form contracts with consumers, and with business customers in a trading relationship worth up to $250,000 in any 12-month period (Commerce Commission). A deposit clause tied to your real costs is easy to defend. One that lets you keep a big sum when you haven’t lost anything is the kind of one-sided term that invites trouble.

Deposits also bring a GST timing question, because receiving one usually triggers GST in that period. The customer deposits and GST guide walks through it, so ring-fence the tax portion as each deposit lands.

Which payment terms work best for a small business in NZ?

Specific and short beats long and vague. “20th of the month following” means a sale on the 1st waits about seven weeks for payment, and a sale on the 31st waits about three. Seven or 14 days from invoice, or payment on completion for small jobs, gives you a predictable date to plan around.

Make the method easy too. Put your bank account on every invoice, offer direct debit for regular customers, and send invoices the day the work is done. If you sell to government agencies, eInvoicing is worth setting up: since January 2026, mandated agencies must pay 95% of domestic eInvoices within five business days, and other domestic trade invoices within 10 (MBIE). That’s a real fader you can push without asking anyone for a favour.

Not sure how much your current terms are costing you in carried cash? Run the numbers through the size your funding gap steps first, then check your options with us. Asking doesn’t touch your credit file, and one person reads it.

Late payment interest and collection costs: why the clause has to come first

You can charge interest on overdue accounts, and pass on reasonable collection costs, if the customer agreed to it before you supplied. Write in when interest starts (for example, the day after the due date), how it’s calculated, and that the customer pays reasonable costs of recovering the debt, including collection agency and legal fees.

Without that clause, your fallback is much weaker. The Ministry of Justice explains that interest under the Interest on Money Claims Act is awarded by a court in a money judgment, and runs from a date the court specifies until the debt is paid (Ministry of Justice). In other words, you only get it once you’ve gone to court.

On that point: the Disputes Tribunal now hears small claims up to $60,000 (Disputes Tribunal). It suits a genuine dispute about the work or the price. Clear written terms are what you’ll be asked for first, whichever route you take.

Do building and trade businesses have extra rules?

Yes. For residential building work of $30,000 or more (including GST), the homeowner must have a written contract with the builder, and each contractor must hand over a checklist and disclosure statement before it’s signed (Building Performance). That contract should plan the payment schedule.

Here’s the funding catch. If the contract has no schedule, the Building Act defaults apply: the contractor issues a written payment claim, and payment is due 20 working days after it’s served, unless the homeowner replies with a payment schedule. If your quote template is silent, you could be waiting four working weeks per claim when your terms could have said seven days. Write the stages and due dates in.

Illustrative mix: a Tauranga cabinetmaker rewrites its terms

This example is made up and doesn’t describe a real business.

A Tauranga kitchen and joinery business takes on a $40,000 kitchen job. Under its old terms (quote, build, invoice on completion, payment due the 20th of the month following), it pays about $14,000 for materials in week one and around $10,000 in wages over the five-week build. The customer pays roughly three to seven weeks after the invoice.

Old terms: the business carries up to $24,000 for two to three months. Two jobs like that at once and the owner is calling the bank.

New terms:

• 30% deposit on acceptance ($12,000). Work isn’t scheduled until it clears.
• 40% progress claim when the carcasses are installed ($16,000), due in seven days.
• 30% balance on completion ($12,000), due in seven days.
• Interest and collection costs on overdue amounts, a stop-work right, and retention of title over the cabinetry until it’s paid for.

Now the deposit covers most of the materials, and the progress claim lands before most of the wages are paid. The cash the business carries drops from a couple of months of $24,000 to a few thousand for a week or two. That’s a gap small enough for the business’s own cash buffer.

The owner keeps a line of credit in reserve for the slower commercial jobs, where customers won’t pay deposits. That’s sized to what’s left after the terms have done their work, not to the whole job.

How do lenders and invoice funders read your terms?

If you ever want to fund your debtor book, your terms become part of the deal. Invoice funding providers look at who owes you, how old the invoices are and whether customers accepted clear payment terms. Signed credit applications, specific due dates and a credit limit per customer give you a tidier ledger, and a tidier ledger is easier to fund.

A lender sizing a cash-flow facility also looks at your bank statements. Deposits arriving before costs go out make your cash cycle look healthier, and they’re sometimes the difference between a loan that fits and one that strains the business.

When does a loan still belong in the mix?

Terms of trade won’t solve everything. A loan earns its place when:

• a big customer, such as a main contractor, chain store or government agency, won’t accept deposits and pays on its own schedule;
• you’ve won a big contract and need staff and materials before the first claim is paid;
• you’re moving existing customers onto new terms and need a bridge while old long-dated invoices clear; or
• a seasonal peak needs stock that no deposit will cover.

In each case, push the terms as far as they sensibly go first, then size any loan to what’s left.

Your terms are tuned: let’s look at the gap that’s left

Rewriting your terms of trade is one of the few funding moves that costs almost nothing and pays back on every job after it. Once the deposit, progress and due-date clauses are working, what’s left is usually a smaller, clearer gap. That’s the part we help with.

Telling us about it takes about 60 seconds, and enquiring won’t leave a mark on your credit score, because there’s no credit check when you first get in touch. We don’t send your details out to a pile of lenders, so your phone won’t light up with calls from people you’ve never heard of. A real person looks at your terms, your customers and your cash cycle, then calls you to talk through which piece fits.

Please fill the form in accurately: what the money is for, your turnover, how your customers pay and any existing lenders or IRD balances. Straight answers mean the first option we put in front of you is the right one.

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