Long gone are the days of the verbal and "handshake" agreements.
Long gone are the days of verbal and “handshake” agreements.
With liquidation rates at their highest, as well as heavily saturated building and construction industries, Australia’s tradies are the most vulnerable they have ever been.
Over 500 builders went broke in Victoria alone in 2019. A crazy stat that saw thousands of unsecured creditors writing off huge amounts of money and being subject to preferential payment clawbacks.
Big business bullies as well as companies phoenixing to write off debt are two large contributing factors. As well as companies growing too quick and quoting minimal margins to keep in touch with competitors. One variation or a botched job and it creates a huge ripple and snowball effect.
Don’t get me wrong there are still bulk businesses operating without any terms of trade and purely doing the work then invoicing, but it’s impossible to be fully confident that you will get paid regardless of the relationship. It could be the case of good at the trade bad at business, people are too trusting, or maybe they just think there is nothing they can do about it.
A handshake and someones word used to be binding and trusted. It’s now turned into a complete unknown with so many game players taking advantage of small business owners.
The collapse of project group saw multiple one man band operations write off 100k plus. It’s devastating.
The government brought in the Personal Property Security Act legislation in place in 2012 to help small businesses secure themselves against their clients. I hope they decide to start promoting it better so that these guys can start protecting their businesses and understand they can do things to minimise risk. Most accountants don’t even understand the protection it can give a business and regularly give the wrong information.
By Damon Earp, Area Manager, EC Credit Control
Damon Earp is a Credit Management and Debt Prevention Specialist. Damon is an expert in the PPSR and his biggest goal is to build awareness of this legislation. So many businesses don’t understand the full extent of how the PPSR can protect each and every business from debtors that go into liquidation. Or they take wrong advice from people that don’t understand it. With thousands of clients Damon assists small business protect themselves through legally binding terms and conditions and sub contractor agreements to ensure they have a consistent cash flow and minimise risk.
Damon can be contacted on 1300 362 070 or at info(at)creditcontrol(dot)com(dot)au.