Has your small business registered on the PPSR?
In Australia, small businesses account for almost 98% of all businesses, contribute to 35% of our GDP, and employ 44% of our workforce. However, more than 60% of small businesses fail within the first three years. To safeguard against this, SMEs have to adequately manage their credit risk and protect their security interests with the PPSR.
How does one maintain low credit risk? Many business transactions are conducted on credit – i.e. when products or services are provided without receiving payment first. Examples include goods and assets like machinery, crop, livestock, equipment, and intangible items like intellectual property and financial property like shares. When choosing a prospective customer or supplier, it is essential to assess their credit risk and protect your assets which you’re delivering on credit. If your customer or supplier liquidates, where do your assets go and how will you claim your debt?
This article explains how SMEs can protect their credit risks and security interests with the PPSR.
Introducing the PPSR
The PPSR Personal Property Securities Register) helps businesses manage their credit risk, protect their goods and assets, and recover debt in the event that their customer becomes insolvent or liquidates.
According to the Australian Securities and Investment Commission (ASIC), 7498 Australian businesses went into insolvency administration in the 2018-2019 financial year. If your business isn’t already on the PPSR, it’s time to do something about it.
The PPSR is a national database that lists all the security interests a business has and was formed in 2012 as a result of the PPSA (Personal Property Securities Act 2009). It benefits any business that supplies goods on credit terms; leases, rents or hires out goods; or accepts personal property as security for outstanding debt.
The PPSR was a welcome introduction to help businesses protect their financial interests. However, the system isn’t perfect. The PPSR is notoriously complicated and time consuming to navigate. Also, most SMEs are unaware of its existence. Businesses that aren’t taking advantage of the PPSR pay a high price when their customers or suppliers face liquidation.
Isn’t the Retention of Title clause enough?
Unfortunately not! In the event of a liquidation, the administrator will review the register and prioritise assets accordingly. If your goods are on the PPSR, your debt will take priority over unregistered debtors. Otherwise, you will be competing with all the other unsecured debtors and it is often impossible to claim anything at all.
The flow on effect hits SMEs the hardest
When a customer or supplier liquidates, SMEs experience a greater flow on effect in terms of financial loss, and therefore face a bigger risk of being pulled down together. SMEs generally have fewer resources, more volatile revenues, and lower survival rates compared to larger corporations. As a result, it is usually more difficult for them to recover compared to larger businesses. Such financial volatility increases their credit risk.
How CreditorWatch and PPSRLogic can help
CreditorWatch is a commercial credit bureau which provides credit risk information on every business entity in Australia. It is a leading authority in the field and works with over 50,000 businesses of all sizes to manage their credit risk and financial interests.
Their customer-centric focus and dedication to innovation led to the creation of PPSRLogic, the ABA100 winner for Business Technology in the Australian Business Awards 2019. Based on rigorous testing and customer feedback, PPSRLogic has made it easier to create, manage and renew registrations.
PPSRLogic makes PPSR management more efficient and cost-effective as it:
Provides a user-friendly interface.
Ensures compliance and accuracy.
Allows bulk registration of multiple ACNs and ABNs.
Contains tools which allow you to see what registrations are current as well as discharge or amend existing registrations.
Provides renewal reminders so that you never miss a renewal. This is especially useful for when securities have been registered for different terms and across different dates.
Enables more automation and data.
While larger companies may have financial and legal departments to manage PPSR registrations, SMEs often don’t have such resources or expertise. PPSRLogic makes the PPSR accessible and affordable for SMEs. Dedicated account managers eliminate confusion and offer ongoing support. CreditorWatch also constantly monitors your customers and suppliers for key indicators and provides alerts on credit issues that could impact your business.
This changes the landscape for businesses, especially SMEs who struggle to understand the PPSR or avoid it altogether.
Compliance and accuracy
A single wrong entry can void your entire PPSR protection. PPSRLogic ensures compliance and accuracy with registrations, amendments, and renewals. The PPSA advisory estimates that only 1 in 700 registrations are completed correctly! There are strict timeframes for different types of business structures, specific terminology is used, and terms and conditions need to be thoroughly reviewed.
CreditorWatch ensures that your entity information is accurate by conducting a DataWash. A DataWash provides a comprehensive review of your database, and empowers your business to easily validate information, identify high risk customers and suppliers, and perform due diligence on a database.
PPSRLogic → CreditorWatch → Your System
CreditorWatch’s API enables it to seamlessly and securely integrate directly into your ERP, CRM or third-party system. It provides an all-encompassing credit management solution to suit all businesses.
PPSRLogic is integrated with CreditorWatch and makes it easier than ever to import new and existing registrations.
Streamline your onboarding process for new clients by creating registrations on the PPSR once you approve an application on ApplyEasy. ApplyEasy is CreditorWatch’s online credit application form which increases efficiencies for credit teams. For existing clients, simply create a template in PPSRLogic, then create a registration directly from a client’s credit file in CreditorWatch.
“PPSRLogic was a game changer. The process is quicker, more efficient and we’re able to speak to someone directly if we need assistance. It has cut down at least 5-7 minutes [from 10 minutes] per registration, which as a collections agent really helps with our time management. It has also increased the accuracy of our registrations. The benefits are instant.”
– Zoe Treadgold, Collections Officer at Propsa
Have questions about the PPSR? Unsure about whether PPSRLogic is right for your business? Get in touch today with one of our in-house PPSR specialists.