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Using the Personal Property Securities Register (PPSR) to protect your small business

Reading Time: 3 minutes

In Australia, small businesses account for almost 98 per cent of all businesses, contribute to 35 per cent of our GDP, and employ 44 per cent of our workforce. However, more than 60 per cent of small businesses fail within the first three years.

But how does an operator of an SME (small and medium sized enterprise) maintain low credit risk exposure? 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, crops, livestock, equipment, and intangible items like intellectual property and financial property such as shares.

When choosing a prospective customer or supplier, it is essential for your business to assess your credit risk and protect the assets that you will be 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 goods and services sold on credit by registering these items on the Personal Property Securities Register (PPSR).

Introducing the PPSR

The PPSR helps businesses manage their credit risk, protect their goods and assets, and recover debt if a customer becomes insolvent or liquidates.

According to the Australian Securities and Investment Commission (ASIC),https://download.asic.gov.au/media/5416756/2018-2019-asic-insolvency-statistics-series31.pdf 271 Australian companies have already entered external insolvency administration and controller appointment in 2022 [Please update this number]. If your business isn’t already on the PPSR, it’s time to do something about it.

The PPSR was introduced in 2012 as a part of the PPSA (Personal Property Securities Act 2009) and is a national database that lists all the security interests a business has. 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, however, the system isn’t perfect. The PPSR is notoriously complicated and time consuming to navigate. Also, many SMEs aren’t even unaware of its existence. Businesses that aren’t taking advantage of the PPSR can pay a high price when their customers or suppliers face liquidation.

Isn’t the retention of title clause enough?

Many business owners are under the impression that having a retention of title clause in a contract for the sale of goods is sufficient protection if a customer goes into liquidation. However, in the event of a liquidation, the administrator will review the register and prioritise assets accordingly.

If your goods are registered 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.

How CreditorWatch and PPSRLogic can help

CreditorWatch’s provides credit risk information on every business entity in Australia incorporating credit reports and scored insights. Combining this data with CreditorWatch’s PPSR platform, PPSRLogic, your business will gain a comprehensive risk assessment and view of the credit worthiness of a customer and be able to more accurately assess the ability of your suppliers to meet their payment terms, repayment and commitments.

PPSRLogic has made it easier and more cost-effective to create, manage and renew registrations by:

  • Providing a user-friendly interface.
  • Ensuring compliance and accuracy.
  • Allowing bulk registration of multiple ACNs and ABNs.
  • Providing tools that allow you to see which registrations are current as well as discharge or amend existing registrations.
  • Sending renewal reminders so that you never miss a renewal. This is especially useful when securities have been registered for different terms and across different dates

While larger companies may have financial and legal departments to manage PPSR registrations, SMEs often don’t have the resources or expertise required. PPSRLogic helps overcome this by making PPSR registration accessible and affordable for SMEs. CreditorWatch’s Customer Success Team helps with set up and offers ongoing support.

CreditorWatch also constantly monitors your customers and suppliers for key indicators and provides alerts on credit rating issues that could impact your business.

This changes the landscape for businesses, especially SMEs who struggle to understand the PPSR or avoid it altogether.

Learn more about PPSRLogic

Compliance and accuracy

A single wrong entry can void your entire PPSR protection. PPSRLogic ensures compliance and accuracy with registrations, amendments, and renewals, reducing any potential risks to your business.

The PPSA advisory estimates that only one 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.

 “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 five to seven 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 Prospa

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.