Many Fonterra suppliers have negotiated payment terms that are better than Fonterra's standard terms, but many of them should still benefit from its new policy.

Fonterra will roll back a controversial policy that saw it wait up to 90 days to pay invoices from its thousands of trade suppliers.

The dairy giant will in August return to "an industry norm" of paying small businesses on the 20th of the month following the end of the month in which an invoice is received.

Small Business Minister Stuart Nash welcomed the change, which he said would mean faster payments for more than 4000 firms.

Fonterra attracted widespread condemnation in 2016 when it changed its standard payment terms to make suppliers wait until 61 days after the end of the month to be paid. Those terms applied to the likes of tradespeople and contractors and not to farmers who supply Fonterra with milk.

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The 2016 move came when milk solid price forecasts were wallowing in the doldrums at about $3.90 and was labelled "classic bully-boy tactics" by former National MP Chester Burrows.

Rob Spurway, Fonterra's chief operating officer of global business, said Fonterra was revising its stance after listening to what its smaller suppliers had been saying.

"This is doing the right thing. It is about providing them with that transparency and certainty."

Fonterra's change of heart appears to have been sudden.

The company said as recently as January that it had no plans to review its standard terms, pointing out six months could pass between it starting to manufacture a product and it being paid itself.

Nash said then that he was disappointed by those comments, and said on Monday that he had also raised the matter directly with Fonterra.

"I do not generally seek to single out individual businesses but this positive change by Fonterra deserves to be acknowledged," he said.

The new, faster payment terms will apply to suppliers that provide Fonterra with up to $300,000 of goods or services each year.

Spurway said some medium-sized suppliers would stay on the older payment terms explaining it "had to draw the line somewhere", while most big suppliers are understood to have negotiated bespoke arrangements.

ROSS GIBLIN/STUFF Small Business Minister Stuart Nash says more than 4000 firms will benefit from Fonterra's change of heart.

Even most smaller suppliers had negotiated terms of 31 days after the end of the month, or better, he said. None would be disadvantaged by the new policy, he added.

Nash said he hoped Fonterra's decision would encourage other large organisations to ensure prompt payment of their suppliers and contractors.

Payment terms could vary widely, he said.

"The Government is looking at what support it can create for a business climate where prompt payment of invoices is the norm rather than the exception.

"Timely payments are essential for good cash-flow and, for small businesses, cash-flow is commonly a number one concern."

Accounting software company MYOB also welcomed Fonterra's announcement, saying any changes that reduced payment times for small businesses were good for the whole economy.



"We've long advocated for businesses and government to sign up to a prompt payment protocol that would see small businesses paid quickly," spokesperson Conor Roberts said.

MYOB's most recent survey of small business owners found 18 per cent felt late payments from customers placed them under "extreme" or "quite a lot of" pressure.

The Australian government has been attempting to improve payment culture across the ditch.

Australian Prime Minister Malcolm Turnbull announced in November that federal government agencies would pay invoices for contracts worth up to A$1 million (NZ$1.1m) within 20 calendar days – an improvement on their previous policy of paying within 30 days.

Australian Ombudsman Kate Carnell has gone as far to suggest paying invoices within 30 days should be mandatory.