“I don't need the PPSR as it is only for companies that hire and lease equipment”.
“I cant do anything to get money owed to me by someone that liquidates”
If I had a dollar for every time I heard this, I would be rich.
Sadly, this often is not coming from small business owners themselves but rather from their accountants and solicitors. Whilst some advisors get it, others unfortunately provide advice without properly understanding how the register works.
What businesses these days need to be concentrating on, is using the PPSR to register against the monetary value and the credit you are extending your clients.
As many readers will be aware, the Personal Property Securities Act 2009 (the PPSA Act), the Personal Property Securities Register (PPSR) is a national online noticeboard which lists security interests over a company or piece of equipment.
If you are not using the PPSR to register against your clients you are considered an “UNSECURED CREDITOR”. This often results in a write off of ALL money owed to you by that company at time of liquidation.
What many may not know, however, is that if you are classified as “UNSECURED”, you may be exposed for money which you have already received for payments in respect of any work or service you have provided if your client enters insolvency.
Under the PPSR Act, a liquidator may claw back amounts you have been paid over the last six months in cases where these are deemed to be unfair preferential payments.\
Accordingly, where you don’t use the PPSR register, not only do you lack protection in respect of amounts owed to you but you may also face the prospect of needing to repay any cash which you have already received. This may be the case notwithstanding that you have paid for the material, performed your job to a satisfactory standard, paid your own staff and otherwise acted in good faith.
This happens. I recently met with a chippy who ran a small business with a few workers. Not only was he forced to write off around $100,000 when the builder went bust, he also received a clawback letter for $80,0000. It read, ’here are our bank account details. We require payment by EFT or check within 14 business days’.
These letters are ruthless, but the liquidators are usually backed by the legislation. If you extend credit, are an unsecured creditor and are paid late, you may be vulnerable to clawback.
The solution. Become a “SECURED CREDITOR” by using the PPSR legislation to your advantage. If you have properly written PPSR and surrounding clauses in your terms and conditions, And you use the PPSR Register correctly, you can ensure that clawback is blocked and potential for getting outstanding amounts paid increases.
If you are not using the PPSR you need to start. Or speak to an expert.
But do not listen to anyone who tells you it is not applicable.
It is ALWAYS applicable.
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 do not 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 do not 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.