Within the hiring and rental industry, the security of your assets can often mean the difference between profitability and bankruptcy. With insolvencies on the rise nationwide, and CreditorWatch’s Business Risk Review recently detailing a 9.25 per cent increase in external administrations month-on-month, any available protection against the credit risk of trading partner is crucial in this high-stakes trading environment.

Credit risk management for hire and rental businesses

As a hiring or rental business, your revenue is dependent on two key components. While the volume and value of trading represents one of these, the other is ensuring the security, maintenance and timely return of the goods loaned. Any risk to the goods represents a risk to your business as the purchasing entity. A key way to protect yourself is becoming a secured creditor by registering your security interests on the Personal Property Securities Register (PPSR).

There are a number of risks unique to the industry, and they rise in tandem with insolvency. When trading partners become insolvent, they may do so with your goods in hand. Further, they may demonstrate an inability, or lack of enthusiasm, to return them. They may have been installed into other products, rendering them indistinguishable. There have even been instances of companies selling loaned goods to pay other creditors, creating a spiral of credit risk and bad debt. This is all on top of the risk of default on lease payments, which depends on the insolvent trading partner’s remaining cash-in-hand, number of creditors owed, and their gross value owed.

A trading partner’s bankruptcy can be devastating, especially if your business is an unsecured creditor. Both the assets and the credit owed may be almost entirely irretrievable, which could result in a huge net loss to your business. Without the appropriate due diligence, such as a credit history check, you may be unaware of the risk exposure of this happening to your business.

Assessing the creditworthiness of partners, especially prior to high-volume or high-value agreements, is non-negotiable considering the trading environment within this industry. Failing to do so exposes your business in both asset security and payment default terms; you may have been able to flag the credit risk early with proactive action. To protect yourself, it’s all about having the foresight and detailed insights to improve your decision-making capacity in the face of elevated risk.

Protect your business with CreditorWatch’s credit risk management solutions

CreditorWatch offers a suite of industry-leading credit risk management solutions for your business, which help mitigate the credit risk of trading partners and protect your business against default and insolvency.

Automate credit checks during onboarding – ApplyEasy is an intuitive online credit application solution that automates credit checks and trade reference checks on trading partners, while easily integrating with your CRM or ERP of choice. Further, it ensures the accuracy of the information by verifying entity information instantly.

It streamlines client onboarding, replacing manual data entry and paper-based, error-prone processes with a simple online form. Its credit checking capabilities are invaluable in early identification of potential red flags, allowing you to make the most informed trading decisions. Secure and user-friendly, it provides both the efficiency and data-protection capacity that a hiring or rental business requires.

Assess a trading partner’s risk profile – CreditorWatch offers various tools to help hiring and leasing businesses analyse the creditworthiness, and likelihood of payment default, of any prospective partner. As the most predictive risk scoring product available, RiskScore utilises three extensive categories of data – tradeline behavioural data from 55,000+ customers, business demographic risk data, and traditional credit risk drivers. This gives you key insight into which customers are most likely to default within the next 12 months. This early default detection is critical in gaining invaluable decision-making time, and avoiding credit risk exposure.

Meanwhile, Payment Predictor provides a detailed payment history of an entity, including days taken to pay, and compares it against the industry average. This helps you identify business with a habit of slow or late payment, so you can take the appropriate precaution measures. 

In addition to this, our debtor management platform Debtor Logic provides a data-driven analysis of your entire aged-trial balance (ATB), to help you easily identify high-risk debtors and prioritise your collections. 

Get real-time alerts to stay informed – The sooner you are alerted to the risk of default or insolvency, the better – as you have more breathing room to make informed and calm decisions. CreditorWatch’s business credit monitoring provides this assurance, with 24/7 alerts on crucial information, including business status changes, ASIC and ABR changes, credit risk red flags, and adverse cross-directorships. With automated email alerting, it empowers your business to be proactive in its decision-making and credit risk management.

Register your security interests on the PPSR – As a business in the hiring and rental industry, it is essential to register your security interests on the PPSR in order to guarantee your status as a secured creditor. This instantly elevates you in the creditor hierarchy in the event of your debtor’s insolvency, increasing your chances of compensation. PPSRLogic simplifies all aspects of this process, from the registration of security interests through to the checking of any existing debt on an asset. It allows for registrations to be completed on one page, with one click. Registration with the PPSR can provide crucial protection for hiring and rental businesses, and must not be left by the wayside.

Link everything into your system –  CreditorWatch’s API is the solution you need to integrate each of these credit risk management tools into your existing ERP, CRM or third-party software. Your team can continue to use the infrastructure that it understands, whilst taking full advantage of our analysis and credit risk management capabilities on offer. Seamless and secure, our API provides the protection required while ensuring minimal disruption to your business and its staff.

While hiring and leasing businesses may face unique challenges, there are intuitive solutions that can be put into place to mitigate credit risk and preserve cash flow. Contact us today for a free demo and learn more about how our suite of digital credit tools can help you protect and grow your business.