Credit Management in Australia - May 2020 by AICM

Volume 27, No4 May 2020

The Publication for Credit and Financial Professionals

IN AUSTRALIA

COVID-19 READ WHAT THE EXPERTS SAY

l Enforcing your security in the pandemic l Identifying trends in small business defaults and debt collection l How the crisis is impacting your customers and thereby, you

Recoveries

Sydney

Insolvency

Melbourne

TurksLegal is delighted to announce our national partnership with the AICM! We look forward to working alongside AICM and its highly respected national and divisional partners to support the Australian Credit Management Profession during uncertain times. TurksLegal is a leading commercial law firm with teams in Sydney, Melbourne, Brisbane and Newcastle. We specialise in portfolio debt recovery offering clients access to our proprietary client reporting portal. We are the go-to firm for creditors defending liquidatorsâ&#x20AC;&#x2122; claims on creditors and known market leaders in PPSA recoveries. Contact us now to access our monthly training programs for credit managers.

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Brisbane

CONTACT

Daniel Turk, Partner 0408 667 220 daniel.turk@turkslegal.com.au www.turkslegal.com.au

Contents Volume 27, Number 4 – May 2020

Message From the President

54 Qld: Winners “Holly Rollers”: Rebecca Ryan, John

COVID-19

McEniery, Steven Staatz and Krystal Gleeson.

The impact of the health care crisis on the health of your business

Channelling the ANZAC spirit to fight the coronavirus crisis

By Andrew Spring

Leveraging credit insurance to protect your working capital in uncertain times By Kirk Cheesman

Managing your cash flow in difficult times By Amer Qureshi

58 SA: SA Division President Nick Cooper with his family on Kangaroo Island.

“Business as Unusual” checklist By Trevor Middleton

Enforcing judgement debts during COVID-19 By Melissa Jarvin and Judith Hishon

Quarter 1 2020 Small Business risk review: The calm before the chaos By Patrick Coghlan

An overview on the Australian recoveries and investigation industries

59 NSW: Georgia Barbera and Priscilla Pillay.

By Steve Wallis

Working hard or hardly working? How the COVID-19 economic crisis is impacting Australians By Clare Venema

62 15 Andrew Spring

18 Kirk Cheesman

Melissa Jarvin

Judith Hishon

20 Amer Qureshi

29 Patrick Coghlan

Vic/Tas: Catrina Galanti and Sunny Sharma.

Trevor Middleton

32 Steve Wallis

34 Clare Venema

64 WA/NT: Tamera Parker.

Available now This report has been produced by the AICM with contributions and data from Australian Financial Security Authority (AFSA), Australian Restructuring Insolvency and Turnaround Association (ARITA), Australian Securities and Investments Commission (ASIC), Equifax, National Credit Insurance (NCI) and CreditorWatch.

CLICK HERE to access the report

AICM

Insolvency

RISK REPORT

2020

Robert Burns

Paul Burgess

Ellen Ferris

Stephen Mullette

ISSN 2207-6549

DIRECTORS

Credit Management What a balance sheet should mean to a commercial credit professional

By Robert Burns

The facilitation argument By Paul Burgess

Trevor Goodwin LICM CCE – Australian President Julie McNamara MICM CCE – Queensland and Australian VP Lou Caldararo LICM CCE – Victoria/Tasmania Rowan McClarty MICM CCE – Western Australia/Northern Territory Gail Crowder MICM – South Australia Peter Morgan MICM CCE – New South Wales Debbie Leo MICM – Consumer

CHIEF EXECUTIVE OFFICER

Legal A tale of two creditor’s petitions: Can the Court make a post-bankruptcy costs order apply retrospectively?

Nick Pilavidis FICM CCE Level 3, Suite 303, 1-9 Chandos Street, St Leonards NSW 2065 PO Box 64, St Leonards NSW 1590 Tel: (02) 8317 5085, Fax: (02) 9906 5686 Email: nick@aicm.com.au

PUBLISHER

By Ellen Ferris and Stephen Mullette

Decline of bankruptcy as an enforcement tool and why there is still a place for it

Nick Pilavidis FICM CCE | Email: nick@aicm.com.au

By Roger Mendelson

CONTRIBUTING EDITORS

Training Using your study time effectively during COVID-19

Division reports

50 52 56 57 60 62 68

Queensland South Australia New South Wales Western Australia/Northern Territory Victoria/Tasmania New Members

Credit Marketplace

For advertising opportunities in Credit Management In Australia

NSW – Chris Lagana MICM Qld – Carly Rae MICM SA – Clare Venema MICM WA/NT – Jeremy Coote MICM Vic/Tas – Michelle Carruthers MICM

EDITOR/ADVERTISING Andrew Le Marchant LICM CCE Phone Direct 02 8317 5052 or Mob 0418 250 504 Email: andrew@aicm.com.au

EDITING and PRODUCTION Anthea Vandertouw | Ferncliff Productions Tel: 0408 290 440 | Email: ferncliff1@bigpond.com THE EDITOR reserves the right to alter or omit any article or advertisement submitted and requires idemnity from the advertisers and contributors against damages or liabilities that may arise from material published. CREDIT MANAGEMENT IN AUSTRALIA is published by the Australian Institute of Credit Management, Level 3, Suite 303, 1-9 Chandos Street, St Leonards NSW 2065. The views expressed in CREDIT MANAGEMENT IN AUSTRALIA are not necessarily those of Australian Institute of Credit Management, which does not expect or invite any person to act or rely on any statement, opinion or advice contained herein (whether in the form of an advertisement or editorial) and neither the Institute or any of its employees, agents or contributors shall be liable for any opinion contained herein. © The Australian Institute of Credit Management, 2020.

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Contact: Andrew Le Marchant Ph: 1300 560 996 E: andrew@aicm.com.au

Click Here EDITORIAL CONTRIBUTIONS SHOULD BE SENT TO: The Editor, Level 3, Suite 303, 1-9 Chandos Street, St Leonards NSW 2065 or email: aicm@aicm.com.au May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

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From the President

Trevor Goodwin LICM CCE National President

write at a time of uncertainly where we are in a trading landscape that is unfamiliar to us all. The unexpected COVID-19 pandemic has severely shocked the global economy. After an unparalleled run of growth, the Australian economy faces significant contraction. For almost 30 years credit growth in Australia has been a constant. The economic threat posed by the Coronavirus pandemic highlight’s the value credit professionals provide through their ability to navigate uncertainty whilst managing cashflow, the lifeblood of all businesses. These are economic conditions never before seen by today’s credit professionals. Due to the first nationwide mandatory closure of non-essential businesses in recent history, many firms are faced with the challenge of survival. The risk to businesses supplying goods and services on credit has greatly increased. Organisations, particularly in the industry most affected by the pandemic such as hospitality, retail and tourism are trying every possible approach to obtain funding, reduce outflow, and weather this unexpected pandemic. Meanwhile other industries such as the construction and resources industries remain under pressure. There is a reality that many businesses are already hopelessly undercapitalised and credit professionals are becoming fully aware their customers in those industries may be insolvent and unable to meet their commitments as they fall due. Change is now a daily occurrence and up to date market intelligence is even more important. Responding to this need, your AICM has been at the forefront in delivering credit information to the credit profession in addition to, keeping in contact with our members through our newsletters, LinkedIn page, webinars and online training. Many members

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

have been making use of the Credit Network forum to ask questions and seek advice to new situations and emerging trends and we expect that to continue as the economy responds to the different situations the pandemic presents. Despite the lifting of a number of restrictions uncertainty remains around the duration and severity of the impact, and whether there will be a second wave of the virus, and what the landscape will look like in the future. This makes medium and longterm decision making highly challenging. This phase is categorised by a focus on scenario planning, arrangements with key stakeholders and remaining responsive. Many organisations including the AICM are using this time to update financial forecasts and looking at opportunities to review business models and working online.

What’s the AICM doing to ensure we can continue to support the credit profession? The AICM Board has increased the frequency of meetings to ensure we are appraised on the challenges faced and agree the best approach forward to safeguard the Institute and the welfare of our members and the wider credit profession. We do not take lightly the responsibility placed upon us as a Board supported by our National Office team who have been working diligently from their homes, in what is a challenging period for the Institute. As with many businesses our operations have been tested but we are facing these challenges head on. While the path out of this economic crisis is uncertain, the board has established a range of budgets and plans to ensure the AICM continues to adapt quickly, proactively and positively. The board’s strategic planning day earlier this year came at an important time as we set our growth plans

From the President

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“The AICM Board has increased the frequency of meetings to ensure we are appraised on the challenges faced and agree the best approach forward to safeguard the Institute and the welfare of our members and the wider credit profession.”

for coming years and continue our focus on risk management and governance. Financially we have not avoided the impacts of COVID-19 however fortunately several years of strong growth and sound financial management means the AICM is still able to maintain a good cash and asset position. The Government assistant package available will also greatly assist the Institute. This period has at least been a time to innovate and the AICM continues to implement ways to best support, educate and communicate with our members to ensure our members and their employers are up to date with the latest in what is happening in business and credit management. The current situation has also given our National office team time to work on and improve and strengthen our online resources on what has been implemented in recent years and which will be an important part of future learning methods. The team has also been working on our member database to ensure our records are up to date. Similarly, organisations are using this time to ensure they have customer records up to date and confirming they are dealing with the correct legal entities and have relevant correspondence easily accessible and online. Many credit professionals are currently working from home and are unable to visit the office to access debtor files.

Leverage the AICM’s resources to ensure you’re best placed for the current uncertainty and beyond It is vital for businesses to be prepared and ensure their teams have the necessary knowledge, training and resources. It is also an important time to understand the human impact of the virus and how we can support our colleagues who may be finding the current

situation difficult. The AICM has various resources and means to support you and all levels of credit professionals through our credit management training options. AICM’s Learning and Development courses have become even more relevant and important. Investing in both your and your colleagues future through training and obtaining a credit management qualification is a great investment towards your career progression. Many credit professionals have made use of the extra time social distancing to undertake studies to work towards obtaining formal qualifications. During the pandemic period National Office have been conducting a number of relevant and informative webinars which have been extremely well attended as credit professionals take the opportunity to stay abreast of what is occurring in business and how to navigate these unprecedented times. I encourage you to attend the webinars which are held in real-time or can be accessed later through the published recordings.

Insolvency report released and ongoing dialogue with government and industry The AICM has been able to continue providing our short training options on the fundamentals of credit management through our Toolbox and Workshop courses which are being held via a virtual classroom. We recently have just released our first Insolvency report which has been extremely well received, with a second report aimed to be released in the second half of the year. The AICM is in regular dialogue with government authorities on the impacts of COVID-19. In this regard we need your insights on how the pandemic is impacting your ability to supply goods and services on credit

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

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From the President

terms and how your companies and industries are coping. Please stay in communication with our National Office staff, plus our sponsors who are so supportive of the Institute and the credit profession.

Events and awards I also want to reassure our members that all award programs including the YCPA will continue throughout 2020 recognising credit professionals and their teams. Application time frames remain unchanged, the only exception to our normal practice is judging which will most likely be conducted by video conferencing. A key part of the YCP awards is recognising the finalists and winner in front of their peers at dinner functions. At this stage we plan to provide this via virtual recognition which may present the opportunity for an even broader audience. These plans will be finalised and communicated in May/ June. Over the remainder of this year we will hold our other awards such as Student of the Year, Credit Team of the Year, Pinnacle Awards, while also holding our CCE exams (online and Classroom) including the Dux award. We encourage all members to support and encourage high performing credit professionals to apply or consider one of these programs/awards. In the second half of the year I am hopeful we will see our major events being held; WINC luncheons, Awards nights and Pinnacles night and especially the National Conference in some format.

National Conference With regards to the National Conference in my last President’s report I advised we will hold the conference in Brisbane. That is still our plan at this stage. All registrations received now will receive a full refund if you cancel 30 days prior to the conference or if it does not proceed. The economic position we are faced with makes conference attendance even more vital, but we also fully understand the need for social distancing and will be driven by the decisions of the health authorities and the government. A range of alternatives have been prepared with our priority to deliver a conference in a safe and responsible way that facilitates as an interaction between credit professionals to ensure we deliver on the latest in learning and economic and financial developments.

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

“The economic position we are faced with makes conference attendance even more vital, but we also fully understand the need for social distancing and will be driven by the decisions of the health authorities and the government.” Our partners and sponsors The continued support of our National and Divisional Partners and you our members is so important through your membership and active participation as this will ensure the AICM maintains its relevance and viability. If you have any questions or wish to discuss any aspect of your membership or credit in general, please reach out to your divisional councillors or team in the National office.

Membership fees for 2021 held at 2020 rates We’ll be sending membership renewals for 2021 in May to allow members the option of paying in the current financial year and to ensure if you’d like to pay early that this can be actioned before the expected June workload spike. The board has made the important decision not to increase membership fees for the coming financial year reflecting the challenges faced by us all under COVID-19. In summary I remind you The Australian Institute of Credit Management (AICM) is Australia’s leading professional membership body for over 2,600 commercial and consumer credit professionals, and the only credit industry-specific Registered Training Organisation in the country. We are the voice of the credit management profession. I hope you are as honoured to be member of this fine and highly regarded Institute as I am. Now more than ever your ongoing engagement and support of your Institute is vital to both it and your roles ensuring we continue to grow and be an important vehicle for credit professionals together.

– Trevor Goodwin LICM CCE National President

LETâ&#x20AC;&#x2122;S GIVE CREDIT TO YOUNG CREDIT PROFESSIONALS

DO YOU KNOW A TALENTED YOUNG CREDIT PROFESSIONAL WHO DESERVES RECOGNITION?

APPLIC ATION S

CLOS E 31 MA Y

The Young Credit Professional of the Year Award (YCPA) program is the largest and most prestigious Youth Credit Award program in Australia and provides a great opportunity for young Credit Professionals to gain recognition both for themselves and their employer. By entering the YCPA program and discussing your career achievements and ambitions you will gain both valuable insight to the potential for your future advancement and support from young Credit Professionals like yourself and from experienced Credit Practitioners who are interested in assisting young Credit Professionals to achieve their potential.

For more information please CLICK HERE

The YCPA applications are now open! To register your interest

CLICK HERE

During times of significant disruption and uncertainty, it’s essential for organisations to maintain business process efficiency as well as communication with customers and team members. With more companies making the necessary transition to a remote workforce, it’s changing the way accounts receivable (AR) teams work. Today’s unprecedented situation has had a direct impact on businesses and their ability to manage their AR process and collect cash. As a credit and collections manager, your mission is to preserve cash flow and provide the same service level to customers. We’ve compiled five tips to help you adapt your collections strategy, continue collecting cash, take care of your customers, empower your team, and come out on top (without being impacted too severely).

REASSESS YOUR RECEIVABLES SITUATION

While some customers have seen little change to their operations, others have been heavily impacted and, as a result, are struggling to pay their invoices. Payment extensions and credit limits are sharply increasing. Fast action is imperative, but before diving in headfirst, you must take the time to analyse your business and understand what cash can be realistically collected, what customers you can talk to, who is at risk, etc.

TAKE THE PULSE OF YOUR BUSINESS Start by reviewing your situation (e.g., customer categories, aging balance, at-risk cash, etc.) to make the most informed decisions and prioritise your efforts correctly. Continue to monitor daily performance evolution and cash forecasting (i.e., cash expected to come in and predictions), as it’s crucial to keep an eye on your daily activity, particularly in uncertain periods and put effort and resources where they need to be. Lastly, adjust your collections category following analysis.

HOW? Ability to report through customer categories (e.g., by industry, profile, payer rating, etc.), dashboards and KPIs help analyse your risk and orientate your collections efforts.

ADJUST YOUR COLLECTIONS STRATEGY

Your collection strategy has been set up to manage “normal” situations with a full staff. In today’s current climate and when understaffed, your strategy may need to be adjusted to continue to bring efficiency to your collections process. Focus on “at-risk” customers and maintain contact with them.

TAILOR YOUR PROCESS TO COLLECT CASH QUICKLY Your priority needs to be on collecting all the cash that can be collected, and efforts should be focused on that objective. Suspend your usual activity and prioritise activities according to your business’s needs. Target the highest amounts to be collected, customers most at risk according to industry, payer ratings, or pastdue (e.g., 90+ days on your aged balance). You may also need to adjust your methodology (e.g., send emails or make calls instead of mailing letters) or have your available staff focus on specific tasks.

HOW? Adapt your collections process and change the threshold for triggering collection calls, refine call priority to focus on overdue promise-to-pay or follow-up calls and customise to-do lists.

FACILITATE CUSTOMER PAYMENTS

In order to help customers who are struggling with cash flow, you may have to extend payment terms. Or, if you’re having cash flow issues, you may wish to offer early payment discounts to help motivate customers to pay you in advance. Anything that can help you get your cash back in is welcome.

OFFER FLEXIBLE PAYMENT SOLUTIONS Offering your customers the ability to renegotiate payment terms and/ or spread their debt with you over a longer time period, helps create a relationship where customers are more likely to meet their payment obligations and, in turn, your business eventually secures revenue. Additionally, by providing early payment discounts to customers who are able to pay earlier, you maintain a healthy cash flow. By being customer-focused and easy to deal with, your customers will most likely want to do more business with you in the future.

HOW? AutoPay plans give customers longer payment terms and you are more likely to receive payment at each instalment due date — a winwin situation for both you and your customers.

MANAGE CUSTOMER RELATIONSHIPS

It’s important to talk with your customers as much as possible to find out how they are dealing with the current situation, if they have any particular problems or how they foresee the next couple of months. This allows you to find solutions together (e.g., payment plans, early payment discounts, etc.). Additionally, you may need to inform them of changes in your operating structure (e.g., new business hours, how best to contact you, etc.). Customers will certainly appreciate a supplier who is by their side supporting them through difficult times and will be more likely to show their loyalty when business gets back to normal.

STAY IN TOUCH WITH YOUR CUSTOMERS Based on the staff you have in place and your level of activity, you can choose to talk to certain customers in priority (e.g., industries in difficulty, highest outstanding amounts, etc.), send bulk messages to quickly reach out to a large customer base, or give customers access to a portal to access invoices, payment plans, aged balance and messages in real time.

HOW? With access to message templates, bulk messaging capabilities and a customer portal, your collections team has more time to focus on more important tasks like talking to at-risk customers.

MAKE COLLABORATION A PRIORITY Collaboration is key and with so many working from home, being on top of your internal communication has never been more important. You must ensure business continuity and provide the same level of service to customers, including making sure questions are answered in a timely manner, disputes are addressed quickly and tasks are assigned to the right team members.

ENSURE VISIBILITY & COORDINATION THROUGHOUT It’s crucial to continue collaborating with your team, share information and resolve issues, particularly around dispute or escalation calls (e.g., customers asking for installments, etc.). Teams working in silos from home with paper-based processes (e.g., Excel spreadsheets and ERP reports, printed invoices sent via postal mail, etc.) are struggling to focus on the activities that really matter — building customer relationship and getting paid faster.

HOW? Create, assign and monitor tasks directly from the CRM-like solution, collaborate with your team and co-workers as if you were in the office (minus the free coffee!). Keep stakeholders up-to-date and ensure management can oversee team performance and ensure the collections strategy is correctly adapted to the situation.

ANTICIPATE THE FUTURE When the situation gets back to “normal”, take the time to review and see what worked and what could be improved should you be faced with a similar situation in the future.

www.esker.com.au

COVID-19

The impact of the health care crisis on the health of your business COVID-19 has put to the test everyone’s ability to create clarity out of uncertainty. Navigating your business through unprecedented financial challenges is no exception, so we asked a panel of Equifax commercial credit experts to share their insights on the industry trends impacting credit management. Their findings and recommendations for protecting your business are summarised here. Refer to the AICM webinar “How is COVID-19 impacting the health of your business” for their full responses.

The Government financial relief measures and deferrals which may impact your business

MATTHEW STRASSBERG General Manager, External Relations Australia & New Zealand, Equifax Legislation delayed, consultations suspended, timetables uncertain there’s a lot to take in when it comes to the impact COVID-19 is having on regulators, government departments and parliament itself. Numerous government bills which will affect the credit management industry have been delayed and this includes passage of bills already in parliament, such as a bill for the creation of a mandatory Directors Identification Number and merging of 32 different ASIC registries. Parliament is also very unlikely to see in time for an intended 1 July start a bill obliging all ACL/AFSL holders to obtain and supply information for mandatory reference-checking. So too delayed is a long anticipated re-draft of a bill to allow for the sharing of Governmentheld facial images for identity verification purposes. Reviews and consultations by regulators have also been put in abeyance, including a consultation on

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

Matthew Strassberg how to remove the current exemption from responsible lending laws for point-of-sale staff. Like most things COVID-19, there is uncertainty about when these regulatory processes will re-start. There is, however, clarity from APRA on Prudential Standard 220 Credit Risk Management and guide, with its start date now pushed back from January 2021 to 2022. Also delayed a further 12-months is Basel III capital adequacy measures, now to start in January 2023. Unimpacted by COVID-19 is the requirement to comply with

COVID-19

the recently updated responsible lending guide 209 (RG 209), ASIC making clear the guide is still fit for purpose in these extraordinary times. Additionally, the ACCC has restated that the Consumer Data Right – Open Banking – will start in July 2020, a commitment consistent with the commonly held view that accessing transaction data and focusing on income and expenses will be critical to credit risk following the job losses of this pandemic.

Michael Criss

What commercial and consumer bureau analysis tell us about the implications for credit markets

MICHAEL CRISS Head of Commercial, Equifax The bureau data shows us it’s not all doom and gloom in Australian credit markets. When looking at consumer credit demand during Feb-March 2020, we can see ups and downs, varying by credit activity. For example, there was a significant drop in activity associated with unsecured credit and auto financing. But the decline in mortgage credit and Buy Now, Pay Later demand was less severe. Depending on the type of credit activity, there are signs the market

was still transacting at this challenging early stage of the pandemic. When retailers shut their doors, people bought online and therefore the way they paid changed, including increased use of Buy Now Pay Later. There was also a change in the proportion of mortgage enquiries from individuals with existing mortgages, indicating that some consumers are taking advantage of low-interest rates to re-finance. Commercial credit data also shows some signs of positivity. Coming out of a slowdown that began late November 2018, the start of this year saw a substantial uptick in commercial credit activity across all segments of the market. When the Australian government announced the nationwide COVID-19 shutdown, there was only a 17% decline in credit activity across the commercial bureau. This was a softer reduction in activity than was expected. As with consumer credit, the ups and downs in commercial credit activity depend on the segment. Trade credit, asset finance, accommodation and food services are all segments that have experienced a decline in enquiries. But we can see by looking at both the commercial and consumer bureau data that as consumer confidence increases and as property prices increase, people are more likely to buy a car – hence a potential upswing in asset finance enquiries. Retail was, of course, one of the segments severely impacted when shops shut down, but the move to online shopping may have provided some insulation. And while construction workers were still out and about, there has nevertheless been a decline in this sector. Manufacturing has been the industry to experience the fastest drop in enquiries. Equifax tracks consumer and credit bureau enquiries daily. For an up-todate analysis of COVID-19’s impact on the market, contact Equifax.

Jane Yuan

Actionable tips for using the PPSR to protect your business from customer insolvency

JANE YUAN Commercial Product Manager, Equifax With not all businesses likely to bounce back from this pandemic, it’s more important than ever to protect against customer insolvency. Registering on the Personal Property Securities Register (PPSR) gives you a valid and transparent security interest over the goods or services you’ve sold on payment terms, hired or leased to a customer. It can put you first in line over other creditors and even helps to protect your interests if the goods or assets are sold on or installed into or mixed with other goods. So, what should you prioritise with the PPSR? Here are my top six tips: 1. Focus on registering your high-value accounts or high-risk customers You may not have the funds available currently to register your entire book on the PPSR. So instead prioritise the customers from which you have the most to lose or who, unfortunately, are in a higher risk industry. There are tools available in the market that can help you ascertain the current ➤

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COVID-19

risk in your portfolio and prioritise registrations on those accounts first. At the same time, register on your high-value customers, such as those over a specific credit limit.

business. In these chaotic times, keep in mind that there are experts in the market that specialise in the PPSR. You’re not alone – ask for help when needed.

2. Stagger your approach to registering Start small and increase your registrations over time as your cash flow starts to take off. For example, in the first month, aim to register 10% of your clients, in the second month 15% and so on. Use batch and bulk upload services to save time. 3. Register ASAP because past transactions aren’t covered Registrations only cover future sales, not past sales. Now is the time to seek expert advice about implementing the right approach to registering on the PPSR. Toni Morrow 4. Don’t let your registrations expire Review your PPS registrations to ensure they aren’t coming up to their expiry date. Do this if you have active customers or if you know your customers are going to stay current in the next six months or if your security interest is continuing or your trading terms are changing to adapt to COVID-19. Registrations cannot be extended or recovered, and are completely ineffective if allowed to expire. Creating a new registration would result in loss of priority. 5. Ensure your contact details are available to insolvency practitioners Check your Secured Party Group (SPG) contact details are accurate and current because not all insolvency practitioners will go to great lengths to find you. Use a generic email address when registering on the PPSR to avoid the problem of staff changes. 6. Ask the experts We all know that it’s complicated navigating the PPSR as well as understand its relevance to your

How trade payment data can help you understand the increased risk of COVID-19

TONI MORROW Commercial Product Manager, Equifax Trade payment data is highly predictive, and one of the most useful data sources when predicting the likelihood of failure. In the present climate, it’s an excellent tool for proactively monitoring your portfolio for hidden risk that already exists, or potential risks that might be on the horizon. Your customer’s risk profile is constantly changing, as is the market, and continuously monitoring your customers throughout the life of their trade relationship with you is vital. The best way to access and make use of trade payment data is via a Trade Payment Exchange. Your aged receivables data is combined with data contributed by other Australian businesses, aggregated and analysed to create a rich 360-degree view of your debtors and how they’re

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behaving across the market. Some will also augment your data with rich credit profile data - the Equifax Trade Payment Exchange (Debtor IQ) for example, provides a comprehensive view of each debtor with risk score, adverse summary, market trade payment data and a portfolio data wash. Trade payment data delivers the most value at the portfolio monitoring and account review stages of your credit cycle, giving you: z A holistic, actionable view of your entire portfolio: detect where the risk is and where you need to focus your time each month. z Monitoring of specific or highrisk industries: benchmark your late payment days performance against your industry, and monitor trade payments in the sectors of your choice. z The ability to partner with customers to monitor and protect cashflow: implement proactive collections strategies, and work together with struggling customers. z Knowing when you’re winning: see which customers contribute tangibly to your business pipeline, and partner with your sales and marketing teams to grow these accounts.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.

For more information on the topics discussed in this article please contact: Michael Criss Head of Commercial Equifax Ph: 02 9278 7699 Mob: 0413 289 063 Email: michael.criss@equifax.com

COVID-19

Channelling the ANZAC spirit to fight the coronavirus crisis By Andrew Spring*

Andrew Spring

Our most recent ANZAC Day got me thinking about the Australian spirit. It wasn’t hard considering the many stories of kindness that continue to flourish in the media: the supermarkets that organise pensioner-only times so our older population and those with disabilities can avoid the panic-buying hordes; the neighbours who are sharing food and other essential products with those who are struggling; and the many businesses who are providing their services for free or heavily discounted to ensure their customers don’t go without. And it goes without saying how much respect we are all showing our medical community who are definitely in the frontline of this “war”. In these self-isolating times, we’ve all had to “dig in” – to use an ANZAC analogy – and deal with the situation as best we can. While I know that things will come good again, I’m finding it incredibly difficult to see how much people and their livelihoods are being affected. Being at the coalface in the insolvency profession means I am all too well aware of how people are suffering. And while the federal and state governments are doing their bit with providing financial assistance, it shouldn’t be forgotten that this too, will eventually end. As credit professionals, I’m sure you’re as aware as I am of the potential for greater trouble

ahead once the financial support and debt-deferral initiatives finish. In fact, an inevitable “insolvency avalanche” is predicted if crucial decisions continue to be put off by organisations. While many businesses are just trying to make it through each day as best they can, if we want to flatten this upcoming insolvency curve, hard decisions need to be made now. Postponing tough decisions now will only postpone the inevitable. One way we at Jirsch Sutherland are trying to flatten the curve is to get businesses thinking now about what could happen after the debtdeferral initiatives finish. We ask businesses to imagine how they’re going to pay six months’ rent, utilities and financing costs as a lump sum before they can reopen. This isn’t a “what-if” scenario; this is the reality as our economy begins to move into a recovery environment. I can’t imagine many SMEs, especially those that were already having financial issues before COVID-19, being able to take this type of capital hit. I know it’s difficult to think ahead, especially when we’re all working together as a nation at the moment. But the situation will likely be very different in six or so months’ time. I remember what happened after the GFC. Our busiest period as insolvency specialists occurred 12 to 18 months after the initial shock as that was when the banks began ➤

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enforcing repayment requirements. This is why I keep telling businesses that having an exit strategy for when the financial incentives finish is crucial. As credit managers there is a number of actions you can take to ensure your organisation can avoid being part of the looming insolvency avalanche. And these first actions

don’t need to be overly complex. You could start by establishing answers to straightforward questions, such as: has the coronavirus affected your customer’s business and, if so, how are they coping? Are you concerned COVID-19 will create significant challenges for your or your customer’s business? If your business is affected, would you describe the

“In these self-isolating times, we’ve all had to “dig in” – to use an ANZAC analogy – and deal with the situation as best we can. While I know that things will come good again, I’m finding it incredibly difficult to see how much people and their livelihoods are being affected.”

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impact as marginal, major, critical or fatal? Like the ANZACs, many of us find ourselves fighting an “uphill battle”. The marketplace has changed and as credit professionals it is incumbent on you, as the custodians of your businesses’ cash-flow, to change as well. There are some simple things you can do, to reshape your operations during the crisis period: z Assume all your customers are impacted (positively or negatively) and re-engage your risk profiling techniques. z Revisit your trading terms and credit limits, to reflect the changes to enforcement options available during the crisis. z Triage your ledger and report high risk customers up the “chain of command”. It’s better to miss out on the margin in a high risk sale, than to create a bad debt. z Use your customer contact to feedback intel to sales teams and management about the key pressure points being felt and any changes to products or services offered. Recently I have spoken with a party supply importer, wholesaling to independent retailers. Talk about a three-pronged strike – supply chains disrupted, stock holding risk and customer distress. The business has taken steps to operationally restructure, utilising its network to provide personal protective equipment and sanitiser, using existing trade facilities to acquire the products; and then mitigated the trading risk by requiring 50 per cent deposit and the balance on COD terms. The key objective being to survive during the crisis with the best chance of preserving its business and asset value accumulated pre-crisis. The important point is that there are options – and you don’t need to stick to the plan you started with. I’m sure the ANZACs changed their strategy many times as the conditions of war changed in order

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to bring about their best chances of success. And as we’re in a time of unknowns, it makes sense to gather as much intelligence as you can and adapt your business plan accordingly. There are also some very good reasons why your customers shouldn’t delay if they’re considering insolvency or restructuring. Here are some: z The market value of many business assets has been adversely impacted. By holding on too long, the reduced value of these assets will only lesson return to creditors, once a viable restructure is no longer available. z This crisis may not be our fault, but it is our responsibility. Support for those customers who approach their creditors early, acknowledging the issues they are facing and providing a clear and thought out strategy to survive, should be prioritised. z If a business had accrued unpaid liabilities before the crisis, it’s unlikely to survive – even with government support. z Accessing the Fair Entitlements

Guarantee Scheme (FEG) for employee entitlements takes time, so acting now will offer staff a quicker solution. z Any delays in action may also exacerbate liabilities that may be supported by personal guarantees. Continued inaction by customers may be devaluing your security position via personal guarantees. And if you don’t have personal guarantees, as the pressure builds you may find customers deferring your liability to deal with those supported by personal guarantees. z The ANZACs also had more concerns than the enemy opposite them, such as malnutrition, dysentery and mental trauma. Likewise, a business in a time of crisis may have other issues indirectly affecting their performance, such as the loss of key staff, competitor re-positioning or business model redundancy. The market is likely to have changed once this crisis is over and the old normal is undoubtedly gone.

z Acting early also enables businesses to protect or limit their valued suppliers to ongoing debt exposure. Another point I’d like to mention is the issue of mental health implications for those trying to deal with the effects of COVID-19 on their business. Again, dealing with a problem early can offer clarity and play a major role in helping to reduce stress and anxiety. The ANZAC spirit is one where Australians come together to help each other and to let those suffering know that they are not alone. While these are dark times for many, I feel the ANZAC spirit has been very much on display, not only with our friends and family members but also with the businesses we deal with in our every-day lives. My wish is to see as many businesses as possible survive these trying times and would ask each of you to think now to ensure your business is doing all it can to emerge stronger after this crisis passes.

*Andrew Spring MICM Partner, Jirsch Sutherland Ph: 1300 265 753

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May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

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Leveraging credit insurance to protect your working capital in uncertain times By Kirk Cheesman*

Kirk Cheesman

COVID-19 has caused disruption to almost every business around the globe. This disruption has cast a spotlight on trade credit in Australia - non-payment and the drying up of cashflow will make or break a business. It‘s on everyone’s agenda, from the local coffee store to the Federal Government. New trends are starting to appear. We are seeing a sharp increase in inquiries from companies seeking protection of one of their largest assets, their debtor’s ledger, against default. Also, businesses are asking how they can collect overdue monies quicker thereby reducing their investment in working capital. These elements are reflected in our most recent NCI Trade Credit Risk Index which recorded a record level of incoming collection matters in a single quarter. Interestingly, credit insurance claims in the same quarter were down on the previous three quarters, possibly relating to businesses being

slower to ‘give up on’ a business as a result of COVID-19, and the Federal Governments legislation to protect the financially distressed.

Understand how to negotiate your policy When considering trade credit insurance, there are several things we suggest when negotiating the best terms for your business. These include: 1. Know who you are trading with (know your customer) 2. Review your terms of trade 3. Set Terms of Payment from the outset 4. Obtain security (e.g. Retention of Title rights) and register it on the PPSR 5. Incorporate a collections and legal costs clause 6. Monitor your customers’ risk profile – and set up alerts for changes 7. Stop supply on an overdue account once breaching terms

“New trends are starting to appear. We are seeing a sharp increase in inquiries from companies seeking protection of one of their largest assets, their debtor’s ledger, against default.”

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8. Build relationships with all stakeholders, including Insolvency Practitioners 9. Negotiate key cover on your top buyers from the outset 10. Negotiate Discretionary Limits in line with your spread of risk If you keep these points in mind, it will help to ensure that your business is in the best position to make a credit insurance claim if, or when, needed under your policy. If you don’t have a credit insurance policy, at least you will be in a better position to take action to recover a debt should you need to.

Key elements insurers consider when quoting a credit insurance policy There are many factors that impact the cost of trade credit insurance.

Elements that need to be considered include: z The level of Insurable turnover or credit sales z The cover level required, for example 85% - 95% z The excess and retention level per claim acceptable to you z Your bad debt history z The size of credit limit exposures z The terms of payment time periods z The industry/sector in which you trade The market has been open in saying that high-risk industries are currently closely reviewed due to COVID-19. These include transport, aviation, automotive, travel, non-food retail, hospitality etc. Over the coming months, we would expect these to come back on risk, but it will take

some time and there will need to be a higher level of certainty in the market. The future is less predictable, we’re all seeing our roles and expectations of us changing daily. Now is a crucial time for businesses to be exploring ways to mitigate their credit trading risks, monitoring their customers, and ensuring they have the most up to date information possible, so they can make risk appropriate business decisions. Credit managers need to be proactive and use this information to protect one of the largest assets within their organisation.

*Kirk Cheesman MICM Managing Director National Credit Insurance Brokers Email: kirk.cheesman@nci.com.au Ph:1300 654 500 www.nci.com.au

Let’s look at an example of trade credit insurance and how it can help Jane is a timber supplier, supplying goods to the building industry. Jane supplies $100,000 worth of timber on 30-day terms to XYZ Timber Pty Ltd. Under her policy, she has a $5,000 excess and a 90% indemnity rate and pays a premium of 0.22% on her sales. Unfortunately, XYZ Timber Pty Ltd has entered External Administration. Jane has no recoveries and is now facing a $100,000 loss. Fortunately for Jane, she has her trade credit insurance policy which was in place prior to delivering and supplying these goods. Taking into consideration that Jane has a whole of turnover policy, this means all her trade credit sales are insured providing they’re endorsed under the policy, the cost of insuring this individual sale to XYZ Timber Pty Ltd averages out to just $220. So, in this instance it’s cost Jane $220 and she can now make a claim for $100,000 under her policy. In this specific case, Jane’s return is around 35,000% more than the cost of insuring the debt. If Jane hadn’t been proactive in taking out her trade credit insurance policy, she would have had to sell an additional $1,000,000 worth of goods (assuming a generous 10% profit margin) just to recoup her loss. Although this is a simplistic example, it highlights the benefits of trade credit insurance and the benefits when the policy is broken down on an individual invoice basis. When viewed in this manner, it wouldn’t take much effort or preparation to incorporate this small premium cost into sales moving forward, thus paying for the insurance itself.

$220 Jane has a Whole of Turnover Trade Credit Insurance policy (Rate: 0.22%) and sell's timber to XYZ Timber Pty Ltd

She invoices them $100,000 for the timber, on 30-day credit terms

XYZ Timber Pty Ltd is unable to pay and enters External Administration

As Jane was insured, she can claim $100,000 under her Trade Credit Insurance policy

The cost for Jane to insure that one invoice was $220

Jane will receive her claim payment, which will give her a 35,000%+ return on her $220 investment

Jane is a happy Credit Manager

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

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Managing your cash flow in difficult times By Amer Qureshi*

Amer Qureshi

Managing through economic cycles is a regular part of owning and managing a business, but an unprecedented event such as the COVID-19 and its ensuing impact can devastate even the most prepared of businesses. COVID-19 poses unique and enormous challenges for businesses that have the potential of pushing these businesses over the edge. Some of the difficulties being experienced include: z Dramatic reduction in revenue z Supply chain threats z Organisational disruptions z Staff management z Health issues for owners and staff z Legal issues Not surprisingly, businesses are struggling with the unexpected nature and the scale of the social financial and economic impact of COVID-19. So, how do you survive this crisis from an economic point of view? How do you preserve your cash flow so that you survive this difficult time?

After all, you need to be able to survive long enough to have the capacity to bounce back when things start to improve. In the midst of a crisis, one of the first things to look at is your expenditure. You need to carefully assess your expenditure and understand where your money goes. For example, look at the following: Consider your planned expenditure for maintaining business operations. Now think about, what can be reduced or what can be eliminated altogether. Think about your significant expenses such as rent and wages, how can you reduce these expenses in the short and medium terms. In order to survive this difficult period, we really need to look at all options for reducing expenditure, so I am going to give you a few practical tips on what you can do in order to reduce your expenses. So, what are the options as far as reducing your expenditure is

“So, what are the options as far as reducing your expenditure is concerned; well there are no hard and fast rules. What you need to do is get together with your team, your advisors or simply the kitchen cabinet, who have a good understanding and knowledge of your business and brainstorm ideas.”

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concerned; well there are no hard and fast rules. What you need to do is get together with your team, your advisors or simply the kitchen cabinet, who have a good understanding and knowledge of your business and brainstorm ideas. In a situation such as this one, there are no good or bad ideas and everything should be put on the table. Here are a few thoughts to get you started: 1. Review your expenses – you need to conduct a review of all of your expenses and identify those that can be scaled back immediately. 2. Remove or reduce discretionary expenditure – anything that is non-essential should be stopped immediately. 3. Look at your staffing arrangements – review arrangements with your staff, look at your casual staff and see what can be done in order to reduce your salary expenditure. 4. Shop Around – these are difficult times and you need to actively price shop for all products and services that your business utilises.

See if you can find a more costeffective solution. 5. Finance Costs – talk to your bank about the interest rate they are charging you and see whether there is a different package or any options in terms of reducing the fees and charges associated with the borrowings that you have. Sometimes consolidation of certain facilities can help to reduce fees and charges. Don’t wait for the bank to suggest such things, take the initiative yourself. 6. Speak with your landlord – talk to them about a rent holiday or a reduction in rent. As you are aware the government has mandated it for the landlords to negotiate in good faith with the tenants and come to a compromise. It’s impossible to pay rent if your business has been forced to shut its doors due to the current restrictions. The good outcome would be a rent holiday or a significant reduction with a possible extension to the lease. 7. Credit sales to your customers – if you have been giving credit to

your customers it’s very important to establish control over these accounts and ensure that they do not become overdue or bad debts. What you need to do urgently is to review your credit policies going forward. You need to decide if you are still going to offer credit or if you are going to change your policies. For example, it may be better to encourage customers to pay using credit card than offering them free credit. 8. Consider options for outsourcing non-core or support activities – if you are running a particular type of business and there are certain activities which are considered as non-core, there may be an opportunity to outsource these. For instance, for a business that requires bookkeeping services, it may be more cost-effective for you to outsource that work to a bookkeeping service or agency rather than employing your own staff to do the same work. This way you have the flexibility of increasing the amount of work that you get done or reducing ➤

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“In recent times accountants have created a lot of confusion amongst business owners with concepts such as accrual-based accounting; whereby when you incur an expense, it’s a recorded in the accounts immediately as an expense and also as a liability.” it or cancelling it altogether without any major consequences. Outsourcing can be a really effective strategy in certain situations and you need to explore whether it is suitable for your business or not.

The relationship between cash and expenses In such difficult times, it helps to peel off the layers of complexity and to get back to the basics. In recent times accountants have created a lot of confusion amongst business owners with concepts such as accrual-based accounting; whereby when you incur an expense, it’s recorded in the accounts immediately

as an expense and also as a liability. When the payment is eventually made the liability is extinguished but the expense had made it into your profit and loss statement a lot sooner. This means the cash flow of the business and the profit/loss recorded in the accounts are two different things altogether. The same concepts applies to sales as well but in reverse. So, simply put, you can be profitable without having cash in the bank. At times like this the famous saying “cash is king” really rings true. So, if cash indeed is the king what is it that we need to do to look after this very valuable asset of our business. Cash is vital for business

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continuity, after all you cannot pay bills with accounts receivable, inventory or goodwill! Cash flow forecasting is the estimation of cash receipts and cash payments of the business over a given period of time. As I wrote in my first book, The A to Z of Healthy Small Business, “Cash in must be more than cash out or you will be on your way out”. Cash flow planning is important as it allows the business to prepare for periods of low or negative cash flow. Obviously, the next few months are going to be difficult for many businesses that have seen a significant decline in their sales or in some cases have had no sales at all. Getting control over your cash position is absolutely critical in the current business environment. We as accountants like to think, it is important all of the time, but I suppose, it’s really hitting home for most businesses right now. You need to start by estimating how much cash you have coming in versus what you will have going out over the next few months. Once you

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have a simple, cash in on cash out forecast, you need to assess where you stand. It is very likely that like many other businesses at the moment there is going to be a gap between cash in and cash out. The next step is to quantify that and figure out the exact amount of gap that we are looking at. Now, we have something to work with. Once you know the extent of the shortfall, it is time to get busy finding solutions. One of the first places to look at in terms of additional funding is to find out about the various initiatives announced by the governments, federal and state. Think about your personal sources as well and see if you have funds that can be invested in the business. Are there any assets that can be liquidated? Remember also that the Reserve Bank and the governments have been making it easier for banks to lend money to businesses, so don’t hesitate to approach your bank. Speaking of the banks, you should also discuss your existing facilities and work out a plan for repayments that suits the

current situation of your business. The Banks are under strict instructions to help all businesses that have a genuine need at this time. Finding a helpful and cooperative bank manager may be rare under normal circumstances but as everyone keeps reminding us, these are unprecedented times and hence you may actually find such a person. When you’re doing your cash flow forecasting it is important to look at the what if scenarios too. What happens if your expenses end up being higher than what you were expecting or if your revenue is lower than what you estimated? What if there was some unexpected

emergency and you had to buy a piece of equipment? These are just some of the things that need to be taken into account and considered as part of your cash flow planning. This type of cash flow planning is absolutely crucial and critical for the survival of your business. Invest the time now and hopefully you will be around to tell the tales of your survival for many more years to come.

*Amer Qureshi International Author Director – Consulting Vincents Email: AQureshi@Vincents.com.au T: 61 2 6274 3400

“When you’re doing your cash flow forecasting it is important to look at the what if scenarios too. What happens if your expenses end up being higher than what you were expecting or if your revenue is lower than what you estimated? What if there was some unexpected emergency and you had to buy a piece of equipment?”

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

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“Business as Unusual” checklist By Trevor Middleton*

We have been canvassing our customers to understand what actions they are taking in the light of the rapidly evolving “new best practice”, so that we can share what others are doing well. These are the overwhelming messages coming through. Most of this is ‘motherhood and apple pie’, but it is always good to re-focus in tough times.

Make sure your PPS registrations don’t lapse PPS registrations are your key security over your goods and property. Do not let them expire. Make sure that you “review and renew” on a timely basis. Automating the PPSR renewal process could help you sleep at night, and free you up to focus on the real issues.

Perform Industry Segmentation analysis Credit scoring and past performance are no longer ideal indicators of future performance. We all know which industries are likely to be affected more than others in the near future. Do you have good, accurate Industry segmentation data that will enable this? Your credit bureau or similar organisation can likely help you assemble this information. Investigate whether you have the ability to use different collection strategies to treat selected segments differently.

Continuously review your Portfolio Risk Scores as a whole Trevor Middleton

If a customer had a marginal score

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before, they will most likely now be under significant pressure.Whole industries that previously had excellent scores are suddenly at risk. Understand who they are, talk to them, help them through if you can. Stay close to your customers. Understand what pressures they are under. Be proactive and don’t wait till the customer shows signs of stress. Work with them now. Understand as much of the government and other support initiatives that are available, so that you can point them in the right direction if at all possible. Ensure your team has a solid method for flagging these customers so that they are included in your risk analyses and cashflow reporting.

Ensure you monitor your Credit Bureau alerts The situation is changing rapidly. It can only take a day to go from rooster to feather duster. Make sure you are reading and reacting to alerts – ideally from multiple sources.

Stay close to your credit insurers and follow due process Keep your credit insurers posted as your situation changes. Ensure that you are complying with all of the appropriate steps required by the insurer so that any potential claim is still valid. Keep them up to date with new events, your progress, and risk status. Sharing your cashflow reporting predictions and your own risk profiling will give them levels of comfort in your business. Don’t forget the insurers are not

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just interested in your customers, they are worried about you as well. So consider keeping them posted on any picture management initiatives for business continuity, such as business re-financing, cost reduction measures, customer support initiatives, etc.

Review your Terms and Conditions, make sure your team understand them There will be lots of scenarios of partial payment, promise to pay, breach, even fraud. Make sure that you, your team and your customers are clear on the terms. Help them through as much as you can, but be clear on the starting point of any negotiations – Ts and Cs. Make sure you understand any clauses that specifically relate to acts of god, epidemic and cancellation.

Monitor your own customer behaviour vs. previous payment history It will be natural that some customers will slip with some payments – as a result or financial pressure, or as a result of working remotely. Monitor broken promises carefully, and act quickly. Compare historical spend behaviour as well – monitoring both sides of the DSO calculation.

Ensure you have visibility, plan for sickness and absence With staff spread out and working from home, make sure that your records are thorough and up to date, accessible to all. There is a good chance staff will become unavailable through sickness, or through other demands on their personal lives. Make sure your team are organised so that others can pick up if one of the team is temporarily unavailable. Sadly, 54% of companies have indicated that they will have to make redundancies as a result of COVID impact. Having accurate and complete records will assist with continuity.

Review your Business Continuity and similar Insurances Are there clauses in there that you can activate or claim on any significant losses? Is there any mandatory reporting that you need to adhere to in order to ensure coverage? This is a good topic to discuss or raise with your management team.

Take any downtime to re-consider improving your processes There was a two-dog pileup in the passage on my way to work this morning. My commute time doubled to 30 seconds. But seriously, use the reduced commute time wisely. Don’t do ‘normal work’ in that time. Deliberately carve off that time to reflect, and look for innovation opportunities that will improve your processes going forward – opportunities that will stop you from dropping the ball. If you are using Excel to manage all of this, you will probably feeling significant pain with the increases speed and activity, trying to manage payment arrangements and broken promises. As increasing pressure and remote working becomes the new normal, processes that previously worked well in close proximity might start to creak and groan. What can you automate to save you from dropping the ball. Use the time to investigate improved collections systems and process that will allow you to be more productive and have better visibility. Look at automation opportunities, such as automating cash allocation or PPSR renewal – so that your team can focus on the customer and on collection.

Stay close to your peers – AICM, credit networks, etc. We need to be strong and help each other get through. Take the time to stay in touch with peers.

AICM is advocating and communicating on your behalf. Credit Network is there to help you share your challenges and find out how others are dealing with similar situations.

Manage team stress – and your own Life will become a bigger juggling act than ever before. Look after the team, and yourself. Working from home has its own challenges. Stay in touch and make regular contact. Personal stress will be high. Listen for it, cater for it, and be there for your team. If I have missed anything on this list, or if you need help implementing the suggestions or anything else in relation to credit collection (such as credit collection systems, portfolio risk analysis, PPSR automation, data cleansing, or automated cash allocation), please do hesitate to contact me via Linkedin.

Consider your next “Business as Usual” Like yourselves, we are looking beyond this lockdown to try and understand what the new “business as usual” might look like. Will the bars and restaurants ever be packed on Friday and Saturday night? Will going to the office be the exceptionworking from home with Webex and replacing daily commute and business meetings? Will people fly overseas for their holidays in future? Will they travel to us from elsewhere? Whilst this can be disheartening, it is worthwhile to put that future hat on, and re-read the article again to consider “what does that mean for our business?”. Stay safe everyone.

*Trevor Middleton MICM Principal Consultant Cosyn Software E: trevor@cosynsoftware.com Ph: 1800 123 613 www.cosynsoftware.com

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

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Enforcing judgment debts during COVID-19 By Melissa Jarvin and Judith Hishon*

Melissa Jarvin

Judith Hishon

Since the announcement late last month that the Australian Federal Government has now passed temporary amendments to insolvency laws due to the challenges of COVID-19, the changes have creditors (including credit managers) feeling somewhat discouraged regarding whether they will still be able to pursue debtors to pay judgment debts during the period the temporary amendments are in operation. However, in our view, there is no need for anyone to feel discouraged as the temporary new laws ultimately shouldn’t affect creditors’ ability to get judgment debts paid as the primary impact of the changes only relates to the issue of statutory demands and bankruptcy notices. The new COVID-19 insolvency law rules1 are currently only intended to apply until 25 September 2020. Therefore, subject to any decision by the Australian Government to extend the changes, after 25 September 2020, the former rules regarding statutory demands and bankruptcy notices will be reinstated. Creditors who favour issuing statutory demands and bankruptcy notices may need to rethink their usual strategy until 25 September 2020. However, creditors should also

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consider what steps they may wish to take during the intervening period bearing in mind the period may be extended. That is, where the relevant debt meets the temporarily increased threshold amounts2 a creditor may wish to issue a statutory demand or bankruptcy notice sooner rather than later to avoid any further delays if the temporary changes are extended beyond 25 September 2020. To avoid debts accruing during the 6 month period and, in particular, if those debts are less than the temporarily increased threshold amounts, creditors can look at various underutilised enforcement options as an alternative to statutory demands or bankruptcy notices. This article is a snapshot of some of the most effective avenues available to creditors to enforce a judgment debt. Whilst this article focuses on the position in Queensland, substantially similar options exist in all other Australian states and territories.

Statement of Financial Position/Enforcement hearing The first step after a judgment is obtained is to ascertain the financial position of the debtor. This can be done by serving a Court document called a ‘Statement of Financial Position’ on the debtor.

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A Statement of Financial Position is a comprehensive document which requires the completion of numerous questions relating to the debtor’s assets and liabilities including, for instance, whether the debtor owns any real and personal property (and the particulars of any security on the property), whether the debtor is owed money from a third party, the debtor’s wage (if employed), whether the debtor has any dependants, other debts such a credit card debts owed by the debtor and the debtor’s weekly living expenses. An online version of the Statement of Financial Position form for use in the Supreme, District and Magistrates Courts throughout Queensland can be found at: https:// www.qld.gov.au/law/court/courtservices/enforce-a-court-order-anddisputes-about-money/complete-thestatement-of-financial-position-form To encourage debtors to

honestly and accurately complete the Statement of Financial Position it must be signed by the debtor on oath or affirmation (i.e. requiring a Justice of the Peace, Solicitor or other suitably qualified witness to witness the debtor’s signing of the document) and it must be accompanied by supporting documents to substantiate the figures in the document. If the Statement of Financial Position is not completed within 14 days (or not completed to creditor’s satisfaction within 14 days) then the creditor can apply for an enforcement hearing where the debtor will be examined on oath (i.e. in the witness box) about their assets and liabilities. In our experience, debtors who can access funds to make an offer to settle their debt will do so to avoid being examined in Court under oath. The information in the Statement of Financial position will provide

guidance as to which enforcement option will be most effective in getting the judgment debt satisfied (the options of which are set out below). Otherwise, this information may give a creditor a better idea of whether they are simply “throwing good money after bad” if the debtor appears to have little to no assets and large debts.

Enforcement warrant – seizure and sale of property If the debtor owns any real property or personal property, a creditor can apply for an enforcement warrant for the seizure and sale of the debtor’s property. This type of warrant authorises the Court appointed bailiff (often referred to in other states and territories as a Sheriff) to enter the debtor’s property and seize and sell the debtor’s real and/or personal property by public ➤

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auction. The auction proceeds are applied to the judgment debt and associated expenses, less any existing mortgage or charge. Once the warrant is issued by the Court, the Court appointed bailiff takes steps to sell the property and, importantly, the bailiff is in consistent contact with the debtor throughout this process (opening up a line of communication for negotiations). After the warrant is issued, a writ is then registered against real property owned by the judgment debtor. This is helpful where the debtor is selling the property and the judgment creditor does not have a caveatable interest in the property. In our experience, the possibility that the debtor may lose his or her home (or other significant asset) often creates enough leverage to get the debtor to pay the debt prior to the sale taking place.

Enforcement warrant– redirection of earnings/ garnishee order If the debtor earns a significant wage, another option is an ‘enforcement warrantredirection of earnings’, sometimes referred to as a garnishee order. This type of warrant directs the debtor’s employer to redirect part of an enforcement debtor’s earnings to the creditor. This is particularly useful where the debtor appears to have a substantial income but no substantive assets. In considering whether to grant this enforcement warrant, the Court will have regard to evidence of the debtor’s employment, living expenses

and other liabilities and if the amount the creditors seeks to have redirected will impose unreasonable hardship on the debtor.

Enforcement warrant – redirection of debt It is often the case that a debtor is owed money by a third party (which may even be the reason why the debtor hasn’t been able to pay you as a creditor). For example, a third party may owe the debtor money relating to outstanding invoices, money in a bank account, rent due to the debtor or the debtor may be expecting an insurance payout. In these circumstances, the Court may issue an ‘enforcement warrantredirection of debt’ which authorises the redirection of the debt owed by the third party to the debtor, directly to the creditor. The main requirements to obtain this type of warrant are that the debt payable by the third party to the debtor must be a specific debt and it must be “certainly payable” to the debtor.

Charging orders A judgment creditor may apply to the Supreme Court of Queensland for a charging order over certain types of property held by the debtor. That property includes the debtor’s legal or equitable interest in annuities, debentures, stocks, bonds, shares, marketable securities and interests in managed investment schemes. The charging order creates an equitable charge over the eligible property of the debtor and entitles the creditor to the same remedies

as the creditor would have had if the equitable charge had been made in the creditor’s favour by the debtor. However, the creditor cannot take steps to recover its debt from the charged property until 3 months after service of the charging order upon the debtor. This type of order prohibits the debtor from selling, transferring or otherwise dealing with the charged property and enables the Court to set aside any purported transfer or sale made in contravention of the order. However, this type of application is narrower in scope that the warrants referred to above and more costly as it can only be made in proceedings in the Supreme Court of Queensland3. It therefore should only be considered where the debt is substantial and the debtor holds a substantial amount of eligible assets.

How we can help We have experience in obtaining payment of judgment debts using the above-referred methods in all jurisdictions in Australia. If you would like further information about enforcing a judgment debt, please contact us.

*Melissa Jarvin MICM Senior Associate TurksLegal E: Melissa.Jarvin@turkslegal.com.au T: 0424 990 088 *Judith Hishon Special Counsel TurksLegal E: Judith.Hishon@turkslegal.com.au T: 0422 411 572

FOOTNOTES:

“If the debtor earns a significant wage, another option is an ‘enforcement warrantredirection of earnings’, sometimes referred to as a garnishee order. This type of warrant directs the debtor’s employer to redirect part of an enforcement debtor’s earnings to the creditor.” 28

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

1 Specifically found in Schedule 12 to the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) 2 The temporarily increased statutory minimum for both statutory demands and bankruptcy notices is $20,000 3 Charging orders in other states and territories extend to other assets including money on deposit in a financial institution including money held on trust for the debtor and funds paid into Court.

COVID-19

Quarter 1 2020 Small Business risk review:

The calm before the chaos By Patrick Coghlan*

Small businesses are the backbone of the Australian economy, so small business data paints an accurate picture of the economic highs and lows experienced by all. From bushfires to floods and the current COVID-19 pandemic, our economy has witnessed more in the last six months than it has in some years. We are in a state of flux and “normality” has taken on a different meaning for the unforeseeable future. Now more than ever, it’s important to pay attention to small business data and take notice of the warning signs to safeguard your own business’ profitability. Data-driven decisions are a “make it or break it” factor for many during economic uncertainty. CreditorWatch’s latest Small Business Risk Review for Q1 2020 collates data from 26 unique sources, including ASIC, ABR, AFSA, the Australian courts and debt collectors. It offers a real snapshot of the difficulties all businesses have faced in the first three months of the year.

Keep an eye on increasing payment defaults Small business payment default data is unique to CreditorWatch and is one of the main early signs that administration could be on the horizon.

Nationwide payment defaults

Patrick Coghlan

Q4 2019 to Q1 2020

Comparing Q1 2019 to Q1 2020

4% increase

4.5% increase

Lodging a payment default is a powerful way to encourage your slowpaying debtors to comply. So why haven’t we seen a more dramatic increase, considering plenty of businesses have found themselves in financial difficulty since the start of the year? The common call of solidarity, “we’re all in this together”, has struck a chord with Australian businesses. Creditors are sympathetic with the plight that the vast majority of businesses are going through. They’re showing leniency in chasing up debts or lending an empathetic ear, but this will only last so long. ➤

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

COVID-19

Changes in insolvency legislation provide short-term protection

SMALL BUSINESS RISK REVIEW

Nationwide external administrations

QUARTER 1 - 2020

Q1 2019 to Q1 2020

2.8% decrease

4.5% increase

With the introduction of the new insolvent trading and safe harbour laws in late March, less businesses will be declaring themselves insolvent and will continue operating for the next 4-6 months. Courts have either closed or are burdened with long wait times as they adjust to new virtual measures.

Comparing Q1 2020 data to Q4 2019

Payment Defaults

increase nationwide

Q4 2019 to Q1 2020

State-specific court actions: Q4 2019 to Q1 2020

State data followed the national trend, except for WA

37 % 4% 4% 1%

7% 7%

“When the government’s relief measures and business loans cease, it will be interesting to see the aftermath.” Industry data paints a mixed picture of court actions over the last quarter. The agriculture industry suffers with the biggest increase after a catastrophic bushfire season.

AGRICULTURE, FORESTRY & FISHING

MANUFACTURING

12 5

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

INFORMATION, MEDIA & TELECOMMUNICATIONS

Western Australia

76% decrease

Victoria

11% decrease

Payment times across industries: Comparing January 2020 to April 2020

Court Actions

46% decrease

Payment times have blown out in all industries in the last quarter, and will continue to edge beyond 90 days overdue as businesses battle to stay afloat.

increase (comparing Q1 2019 to Q1 2020)

ADMINISTRATIVE & SUPPORT SERVICES

Queensland

Payment times are as sluggish as ever

External Administrations

decrease nationwide

4% increase

When the government’s relief measures and business loans cease, it will be interesting to see the aftermath. There needs to be an expectation that more businesses will enter into administration and the economic climate will look completely different to what it once was.

5% 4%

New South Wales

Mining

From 13 to 22 days overdue

Retail

From 28 to 48 days overdue

Transport, Postal and Warehousing

From 36 to 74 days overdue

Construction

From 57 to 80 days overdue

CreditorWatch itself has seen a reduction in the number of credit searches being performed, dropping an average of 7% each week from March, hinting at a preference for cashon-demand during these uncertain times. Many of our 50,000+ customers are small businesses, and 90% of our customers are exclusive to

External External Administrations Administrations

17COVID-19

% %

decrease decrease nationwide nationwide

“The data may paint a bleak picture, but businesses can take proactive measures to protect themselves now – and when lockdown measures are lifted.”

increase increase (comparing (comparing Q1 2019 2019 to to Q1 Q1 2020) 2020) Q1

Court Court Actions Actions Industry Industry data data paints paints a a mixed mixed picture picture of of court court actions actions over over the the last last quarter. quarter. The The agriculture agriculture industry suffers with the biggest increase industry suffers with the biggest increase after after a a catastrophic catastrophic bushfire bushfire season. season.

AGRICULTURE, FORESTRY AGRICULTURE, FORESTRY & FISHING & FISHING

CreditorWatch. Our data is a real-time account of SME trading confidence, so we expect our credit enquiries to rise once businesses are beginning to purchase goods and services again. But, this isn’t as simple as waking up and resuming things as normal. Small businesses especially don’t have the luxury of cash reserves, so the support of the banks will be paramount.

67 67

% %

25 25

% %

INFORMATION, MEDIA & INFORMATION, MEDIA & TELECOMMUNICATIONS TELECOMMUNICATIONS

% %

44 44

ARTS & ARTS & RECREATION SERVICES RECREATION SERVICES

% %

63 63

% %

43 43

ADMINISTRATIVE & ADMINISTRATIVE & SUPPORT SERVICES SUPPORT SERVICES

MANUFACTURING MANUFACTURING

12 5 12 5

% %

PUBLIC ADMINISTRATION PUBLIC ADMINISTRATION & SAFETY & SAFETY

Take preventative and proactive measures The data may paint a bleak picture, but businesses can take proactive measures to protect themselves now – and when lockdown measures are lifted. z Register on the PPSR: Reducing your payment terms and securing your interests on the PPSR will help protect your business from others that are on the brink of collapse. z Manage your debtors effectively: Analyse your ATB to identify your customers’ payment history and assess how they’re paying you in relation to the rest of the market. Shift your payment terms accordingly or stick to cash-on-demand to remove the risk completely. z Keep communication lines open: If you’re a debtor, being upfront about your situation and ability to pay goes a long way. Similarly, creditors can and should reach out. Empathy and understanding shouldn’t be devalued. z Check your fine print and cleanse your data: You don’t know what the future will hold, but checking your T&Cs and finding out what you’re entitled to are positive measures to take in any economy. Cleanse your portfolio and remove incorrect data that makes it harder to make informed decisions around your ledger.

Payment Payment Times Times

Payment Payment times times increased increased by by an an average average of 40% 40% across across all all industries. industries. of

HEALTHCARE & HEALTHCARE & SOCIAL SERVICES SOCIAL SERVICES

RETAIL RETAIL

AGRICULTURE AGRICULTURE

52 52

% 27-41days 27-41days

71 71 28-48 days 28-48 days % %

48 48 29-43 days 29-43 days % %

11 8 11 34-748 days

PROFESSIONAL, SCIENTIFIC PROFESSIONAL, SCIENTIFIC & TECHNICAL SERVICES & TECHNICAL SERVICES

% %

34-74 days

106 106

TRANSPORT, POSTAL TRANSPORT, POSTAL & WAREHOUSING & WAREHOUSING

40 40 57-80 days

CONSTRUCTION CONSTRUCTION

0 0

% 36-74 days 36-74 days

% %

57-80 days

30 30 Days Days

60 60 Days Days

90 90 Days Days

www.creditorwatch.com.au www.creditorwatch.com.au 1300 50 13 12 1300 50 13 12

https: https:// ccredi redittorwatch. orwatch.ccom. om.aau/u/ffeeatures/ atures/eenterpri nterprisse/e/kkycandaml ycandamlcctftfccompl ompliiaance/ nce/

*Patrick Coghlan MICM CEO, CreditorWatch Ph: 1300 50 13 12 www.creditorwatch.com.au

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

COVID-19

An overview on the Australian recoveries and investigation industries By Steve Wallis*

Steve Wallis

Like nearly all businesses COVID‑19 has wreaked havoc with the recoveries and investigations industry in Australia. In an interview with Alan Harries, CEO of both the Institute of Mercantile Agents (IMA) and Australian Collectors & Debt Buyers Association (ACDBA), Alan provided a unique perspective across collectors, field agents & investigators. In past weeks Alan has been fielding calls from participants across all the industry sectors as to the impacts from the pandemic and says that whilst the investigation sector still appears to be receiving instructions, the same cannot be said about repossessions, process serving and contingency collections with agencies across the country in those sectors reporting downturns in their workflow and restrictions on the services they can provide to clients. Alan reports debt buyers are continuing with their portfolios of accounts to manage and although hardship management is always an essential element of their engagement with customers, in this period of growing unemployment and reduced hours for many, conversations with customers are appropriately targeted to respectfully identify any recent changed circumstances as they help in establishing affordable and

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

sustainable arrangements to assist customers. This sector will also be affected by changes in workflow as most banks and originating creditors halt or reduce debt sales until the economy returns to some normalcy. So why do some agencies appear more resilient than others? On inspection, the resilient ones all seem to have a few crucial areas in common which is helping them navigate this crisis better than others. The first is:

Client base Never before has the 80/20 rule been more relevant. Whether agencies are involved in recoveries or investigations, if the business has 80% of its clients in a specific industry sector that is profoundly affected by the virus e.g. hospitality, council rate recoveries, banking or surveillance, the chances are these businesses are feeling the pinch significantly. Agencies with a wide spread of clients and different industry sectors appear to be dealing with the crises significantly better.

Compliance and management Other standout factors are the effort and importance agencies placed on compliance and management structures before the virus. This crucial area of any business is highlighting

COVID-19

the importance of business continuity & crisis management plans. These have never been more important. Agencies who have spent the time and effort achieving compliancy standards in management and data security systems standout and have a higher chance for survival.

Technology and flexibility No matter what business you’re in, the ability for your people to work from home is now a must. Some agencies have handled the transition well with a seamless conversion for most staff to set up at home and be productive almost immediately. However, many have struggled with outdated phone systems, computer programs that don’t allow secure access for clients, staff or field operatives. Agencies that have made an effort and invested in their systems and technology are performing much better.

Opportunities No matter what industry or profession you are in it’s time to be focused on new and potential opportunities for

the future. Check with your marketing professionals for what you can do better to connect with your customers and to grow your base. Accountancy firms have also gone out of their way to help, some offering a large amount of free advice, ask your accountant for this advice so you’re equipped for the pandemic and beyond. While it will take some months, if not years for businesses to regroup, the time is now to assess your clients base and the potential of new opportunities in the coming months. Never be afraid to ask your client “Can we help?” We see businesses continue to outsource services to either reduce internal staff and liability in the short term or they physically are overwhelmed by requests for hardship and amendments to contracts.

whole industry, whether investigations or recoveries, is being affected in some way or form. We are already hearing clients’ attitudes changing in the way they are interacting with their customers as this economic disaster unfolds. This attitude shift may have a lasting effect on all avenues of our industry, especially in the short term and definitely into the future. Some economists have claimed that it will take 10 years for this period to work itself out. Short term we see at least six months, being quieter than average in all areas. The businesses that have invested in their systems, people, technology & are focused on the future have a higher chance of survival. One thing is for sure, every agency no matter what area you service will look a lot different than before the crisis.

The future If I hear one more person tell me, “You guys (as an industry) are going to be busy when this is all over”, I think I’ll scream! Who knows where the next six months or the next 6 days will take us? One thing is for sure the

*Steve Wallis Managing Director of SWA Recovery & Investigation Group. Email: Steve@swagroup.net.au Ph: 1300 557 864 Steve is the Chairperson of the Institute of Mercantile Agents’ Process Serving Committee

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

COVID-19

Working hard or hardly working? How the COVID-19 economic crisis is impacting Australians By Clare Venema*

Short of mentioning the “R” word for present circumstances, it is clear that the COVID-19 pandemic has been shaking up the Australian Economy in a manner reflective of the 1991 Recession. Australians born following this period are facing an economic crisis that is unprecedented for their generation. The once celebrated “sick day” has become a mandatory implementation, and young Australians, formerly posting about their vibrant social lives, are now turning to social media for collective mourning about the uncertain times that face the commonly regarded “Lucky Country”. How are Australians coping with the economic downturn? And how will they fare on the other side of the pandemic?

Budding Block-Heads

Clare Venema

For fans of popular renovation programs such as “The Block”, the mandatory lockdown has presented Australians with an opportunity to try their hand at DIY home makeovers. In some States, police have been issuing fines to those who venture outside without a valid reason. However, retail businesses such as Bunnings have continued to welcome customers despite supposedly strict rules around social isolation.1

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

The retail giant has reported record sales since lockdowns began, with staff voicing concern over the lack of social distancing practised at the buzzing locations.2 However, not all budding BlockHeads possess the skills or assistance rendered to reality television contestants, and many face the risk of lowering their house value over failed project attempts, or shoddy workmanship.

The perpetual sick day Thousands of Australians have found themselves unemployed in the economic downturn. For many, they are now in a situation they never thought they would be in, navigating the Centrelink process.3 The Federal Government estimates at least one million people could be made unemployed as the economic effect of coronavirus sets in. People have been lined up at Centrelink offices across the country to try and seek access to welfare payments, namely, the $550 fortnightly Coronavirus Supplement payment. The demand for help was so high on Monday, 23 March 2020 that it crashed Centrelink’s website.4 Younger workers are overrepresented in occupations that have been directly impacted by the early economic fallout of the

COVID-19

pandemic, with around 40 percent of younger workers in Australia working in retail or hospitality. Prior to the economic fallout, young Australians were already “doing it tough”, according to Callam Pickering, Economist at jobs site Indeed. The 1991 recession suggests that the impact of the pandemic will stick with younger Australians for the balance of the upcoming decade.5 During the last recession, the youth unemployment rate peaked above 20 per cent in 1992.6 As the current situation is relatively novel and subject to constant change, the current unemployment rate of young Australians is yet to be definitively measured.

24/7 Cocktail Hour The recent trend of panic buying alcohol suggests a propensity towards Australians anesthetising reality amid the pandemic. According to the

“Younger workers are overrepresented in occupations that have been directly impacted by the early economic fallout of the pandemic, with around 40% of younger workers in Australia working in retail or hospitality.” Commonwealth Bank of Australia’s card data, spending on alcohol surged during March 2020, jumping to 86% for alcoholic goods (i.e. at bottle shops).7 The novelty of increased alcohol consumption has a sobering effect, when considering the fact that alcohol-related injuries take up an enormous amount of resources in Australia’s already strained health system, according to West Australian Premier Mark McGowan.8 Furthermore, increased intoxication inevitably leads to an increased risk of conflict or violence with domestic co-inhabitants. While

quarantines are an effective measure of infection control, they can lead to significant social, economic and psychological consequences.9 The inability to work has immediate economic repercussions and deprives many individuals of essential livelihoods and health care benefits.10 Social distancing fosters isolation; exposes personal and collective vulnerabilities while limiting accessible and familiar support options.11 For those that are becoming habitual drinkers during the pandemic, integrating back into society without a chemical crutch may prove to be difficult. As it stands, short term ➤

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

COVID-19

alcohol consumption for young people can have a tendency to lower immunity, which is a less than desirable side-effect in these times.12

Going viral While social media has been an outlet for grief and frustration for young Australians and a means to connect during the pandemic, psychological studies suggest that general media exposure during the 24/7 news cycle can increase perceptions of threat and activate the “fight or flight response,” which can lead to subsequent physical and mental health problems.13 Several studies conducted after previous collective traumas, such as mass violence events or natural disasters, have demonstrated that both the type and amount of media exposure play important roles when understanding psychological and physical responses in the aftermath.14 For example, several hours of daily television consumption in the days after 9/11 was associated with increased post-traumatic stress and new-onset physical health problems two to three years later. High stress responses post-9/11 were associated with more cardiovascular ailments over the three years following the attacks, especially for people who were worried about future terrorism.15 Similarly, researchers have found that when people were exposed to several hours of daily media during the Ebola outbreak in 2014, they were more likely to experience increased distress and worry, as well as poorer functioning over time compared with people who consumed less media.16 As such, it is essential to go behind the headlines, as often “clickbait” headlines are crafted to spark emotion. But, it is crucial to understand the context of a news story, not just the headlines.17 Misinformation from media outlets has spread more rapidly than the virus itself. As COVID-19 turns into a full-fledged public health crisis, multiple theories regarding the origin

of the virus have taken hold of the internet.18 It is vital that Australians properly distinguish the facts from the fiction, as basic information on how to reduce transmission and exposure to the virus has been muddled by uncredited sources.19

Moving forward Amid the pandemic, Australia is still very much the Lucky Country. Though the economic crisis is shaping more into the “R” word as the days pass, Australians are known for their resilience, comradery and larrikinism even in the face of adversity. We must keep in mind, that like the 1991 Recession, this too shall pass. *Clare Venema MICM Solicitor, Oakbridge Lawyers Email: CVenema@oakbridgelawyers.com.au Ph: 61 8 7078 0377 FOOTNOTES: 1 Tom Cowie, The Age (Online), https:// www.theage.com.au/national/victoria/cani-go-to-bunnings-diy-run-gets-tick-understay-at-home-rules-20200407-p54hwf. html, 7 April 2020 2 Goya Dmytryshchak, The Sydney Morning Herald (Online), https://www.smh.com. au/national/bunnings-packed-despitecoronavirus-warnings-20200328-p54eud. html, 28 March 2020 3 Emily Sakzewski, ABC News (Online), https://www.abc.net.au/news/2020-0328/coronavirus-thousands-of-australiansunemployed-on-centrelink/12084438, 29 March 2020 4 Ibid 5 Stephanie Chalmers, ABC News (online), https://www.abc.net.au/news/2020-0416/history-suggests-youth-unemploymentwill-surge-coronavirus/12151668, 16 April 2020 6 Ibid 7 James Carmody, ABC News (online), https://www.abc.net.au/news/202003-31/alcohol-limits-introduced-duringcoronavirus-outbreak/12106182, 1 April 2020 8 Ibid. 9 N. van Gelder, A. Peterman, A Potts, M O’Donnell, K Thompson, N Shah et al, “COVID-19: Reducing the risk of infection might increase the risk of intimate partner violence”, The Lancet, https://www. thelancet.com/journals/eclinm/article/ PIIS2589-5370(20)30092-4/fulltext, 13 April 2020. 10 Ibid 11 Ibid 12 Headspace, https://headspace.org.au/ young-people/how-does-alcohol-affectmental-health, 9 August 2018.

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

13 Garfin, D. R., Silver, R. C., & Holman, E. A, “The novel coronavirus (COVID-2019) outbreak: Amplification of public health consequences by media exposure”, American Psychological Association, 25 March 2020. 14 Ibid 15 Ibid 16 Ibid 17 Michael L. Birnbaum, M.D, Psychology Today (online), https://www. psychologytoday.com/au/blog/thehealth-our-youth/202003/navigating-thecoronavirus-and-social-media, 13 March 2020 18 Areeb Mian & Shujhat Khan, “Coronavirus: the spread of misinformation”, BMC Medicine, https://bmcmedicine. biomedcentral.com/articles/10.1186/ s12916-020-01556-3, 18 March 2020. 19 Ibid SOURCES: z Tom Cowie, The Age (Online), https:// www.theage.com.au/national/victoria/cani-go-to-bunnings-diy-run-gets-tick-understay-at-home-rules-20200407-p54hwf. html, 7 April 2020 z Goya Dmytryshchak, The Sydney Morning Herald (Online), https://www.smh.com. au/national/bunnings-packed-despitecoronavirus-warnings-20200328-p54eud. html, 28 March 2020 z Emily Sakzewski, ABC News (Online), https://www.abc.net.au/news/2020-0328/coronavirus-thousands-of-australiansunemployed-on-centrelink/12084438, 29 March 2020 z Stephanie Chalmers, ABC News (online), https://www.abc.net.au/news/2020-0416/history-suggests-youth-unemploymentwill-surge-coronavirus/12151668, 16 April 2020 z James Carmody, ABC News (online), https://www.abc.net.au/news/202003-31/alcohol-limits-introduced-duringcoronavirus-outbreak/12106182, 1 April 2020 z N. van Gelder, A. Peterman, A Potts, M O’Donnell, K Thompson, N Shah et al, “COVID-19: Reducing the risk of infection might increase the risk of intimate partner violence”, The Lancet, https://www. thelancet.com/journals/eclinm/article/ PIIS2589-5370(20)30092-4/fulltext, 13 April 2020. z Headspace, https://headspace.org.au/ young-people/how-does-alcohol-affectmental-health, 9 August 2018. z Garfin, D. R., Silver, R. C., & Holman, E. A, “The novel coronavirus (COVID-2019) outbreak: Amplification of public health consequences by media exposure”, American Psychological Association, 25 March 2020. z Michael L. Birnbaum, M.D, Psychology Today (online), https://www. psychologytoday.com/au/blog/thehealth-our-youth/202003/navigating-thecoronavirus-and-social-media, 13 March 2020 z Areeb Mian & Shujhat Khan, “Coronavirus: the spread of misinformation”, BMC Medicine, https://bmcmedicine. biomedcentral.com/articles/10.1186/ s12916-020-01556-3, 18 March 2020.

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Credit Management

What a balance sheet should mean to a commercial credit professional By Robert Burns*

Robert Burns

The analysis of financial statements from a commercial credit professional’s point of view is quite different from that of a lending or large institution. Banks and other lenders who in most cases have access to detailed explanations and books and records of the company or firm. Also, bankers have an added advantage of knowledge of the day to day financial dealings of their customers through their banking operations. Most astute bankers are usually the first to identify trouble within their client’s operations. The credit professional on the other hand must rely on conclusions drawn from within their industry, their customer’s monthly trading with them and the customer’s and financial statements relying on the balance sheet and revenue statement ratios. Most published comment is regarding the interpretation of financial statements is directed to the large corporation. Usual accounting training is given on “how to read a Balance Sheet” or “Balance Sheets – what do they reveal” are all directed to these large listed corporations who have prepared audited publicly available financial statements. However careful review enables the same concepts of review of the smaller enterprise. In this article we restrict our

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

discussion to those businesses who are maintaining records and thereby regularly preparing their financial accounts. Discussions with insolvency professionals often reveal a high percentage of their appointments have no suitable books or records. Often the records are prepared sporadically inline with BAS and ATO annual accounts, regulations however, the new one touch payroll superannuation requirements may lead to better record keeping. The credit professional therefore must examine financial statements in varying degrees of completion and detail. However even the most sophisticated of these statements will be worthless if the numbers cannot be interpreted. Financial statements are not geared to the particular purpose of any one user. The same statement is prepared for the Australian Tax Office, creditors, banker, shareholders, proprietors and other interested parties. We hear discussion about several sets of books: 1. ATO – low profit. 2. Absent shareholders – low profit and low assets. 3. Creditors – reasonable profit and coverage of debts by assets. 4. Proprietors, directors – True copy. Many small business financial

Credit Management

accounts being prepared for the purpose of taxation require adjustments to account for internal transfers to diminish taxable profit. How often have you heard a comment from a proprietor stating that ‘that’s not the true profit’. Financial statements are normally prepared on the basis that an enterprise is a going concern. The credit professional must consider whether owners or directors are correct in treating the enterprise as a going concern. In a going concern we use the matching concept (matching costs with revenue by allocating amounts expended to specific accounting periods). If the going concern basis is not appropriate (there is doubt that the enterprise will continue as such) the assets must be shown on a break up basis (estimated realisable values) and liabilities which would include claims for breaking of contracts and other liabilities which

would be liable on cessation, must be shown in order of ranking against assets. Thus before examining financial statements it is vital to get a feeling for the accounts and to correctly classify balance sheet items. If a ”Funds Statement” is not available, then prepare one for yourself. As mentioned above, accounts are not prepared only for the directors or owners, they therefore do not always highlight the best or worse, and therefore a little digging is always necessary.

An example of a balance sheet that doesn’t accurately represent risk is when a company rapidly increases size though borrowing without a commensurate increase in profitability. This is usually a sign of weakness which could be being covered up. Take particular notice of the interest occuring and the need to repay short term loans. The loan length and repayment time frame needs to match the assets involved. Short term borrowings for long term loans is a recipe for insolvency. ➤

“An example of a balance sheet that doesn’t accurately represent risk is when a company rapidly increases size though borrowing without a commensurate increase in profitability. This is usually a sign of weakness which could be being covered up.”

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

FUNDS STATEMENT A funds statement for a company is very similar to a document that you would prepare for your own finances – sources of cash for a business, just as your income is your source of cash, so with a company it is profit after adding back noncash items ie depreciation and provisions. When these are added back, we have the cash generated by business during the year. A company also secures cash when it sells assets, borrows, issues shares, reduces debtors. Thus at one glance is the relationship between cash generated by the business and that borrowed. If a company has large borrowings in relation to cash generated, look closely where was the money spent – this may affect the future. The expenditure side of the funds statement will disclose information about the enterprise corporate strategy. If a company has a large amount in fixed assets go back and see how it is spending these funds. Unless a business is undergoing big expansion, its cash flow should be able to finance its normal business for stock and debtors. The funds statement helps determine the level of risk and will alert you to moves in stock and debtors. If these are not accompanied by similar moves in sales, this could be a warning sign. Once you have a feeling for the company’s handling of cash, the next step is to look at the quality of earnings.

Every company dutifully declares a profit or loss, but there is considerable flexibility in accounting standards. This means not all profits are comparable. Equity accounting This is used when companies take into their profits a share of earnings from entities in which there is held less than 50% equity and they do not have control. If there is a substantial content of equity profit, beware the funds may not be available. Contribution of capital asset sale Review the accounts for sale of an asset and surplus funds. Should you sell your residence you will have a surplus funds from the sale, but if you require to purchase another residence it will, all things being equal, cost you just as much. Capital profits can be the same. Inflation enables companies to sell assets above cost and capital profits as extraordinary items, not trading profits. Capitalising charges When a company buys a block of land and develops it, the company does not deduct the cost from the profit and loss but puts in on the balance sheet as an asset. But what about interest? Most companies treat interest as all the same and reduce trading profit – the conservative view. Others add the interest to the book value of the asset being developed, thereby “capitalising” the interest. This can make an enormous difference to a year’s profit. When

“A funds statement for a company is very similar to a document that you would prepare for your own finances – sources of cash for a business, just as your income is your source of cash, so with a company it is profit after adding back non-cash items i.e. depreciation and provisions.” 40

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

companies capitalise interest it means when the development is completed its interest burden suddenly hits the account reducing profit if high earnings are not being achieved. Tax Provision This allows you to assess how good the profit really is – if the provision is low there may be good reason. We have now looked at cash generation and quality of earnings. The quality of earnings rises if depreciation is over provided but falls if capital profits or low tax provisions are used to boost profits.

BALANCE SHEET Turning now to the balance sheet there are concepts which must be fully understood. Company’s borrowings Be on alert if there is a sharp rise in borrowings. Just how serious this can be depends first on the level of earnings and cash generation and second on the value of assets. Asset valuations on balance sheet Assets are included in a balance sheet basically at cost, but directors occasionally revalue to near market. This can lead to an amalgam of confusion, complicated further by plummeting values of real estate and probably assets in the books at above their worth. Basically, if a company is trading well, the value of fixed assets is not a vital matter. However, this will be of concern if a take over is considered. If a company gets into trouble, the value of its assts is vital. When survival becomes paramount, the directors may discover the market value of its assets and thereby profit is less than the book value leading to an insolvency event. The same applies to stocks and debtors. Many an insolvency practitioner and corporate raider has

Credit Management

discovered these items taken at book value resulted in unrevealed losses. Before considering some simple ratios, steps should be taken to correctly classify balance sheet items, that is whether an item is regarded as current or non-current. By examining the classifications of entries other pertinent facts may be revealed. Debtors or accounts receivable – these should be separated into: a) Trade Debtors b) Subsidiary or affiliates loans c) Shareholders loans An age analysis of item (a) would also be required. Has factoring of debtors occurred? If debtors items include (b) and (c) any analysis would be distorted. Work in progress Question if any gross profit, included in the valuation of work in progress. This item always gives an insolvency professional sleepless nights. Fixed Assets As mentioned earlier, what method is used for valuation – historic or directors value or current cost method? Intangibles This item should be amortised over time. While intangibles may be considered of value to directors, in a winding-up, it is normally valueless. A credit professional should be concerned with net tangible assets not total assets. Creditors or accounts payable If your client is a slow payer it is important to examine the age analysis of your client’s creditors. Short term liabilities = Current Liabilities These are liabilities that are due for payment in less than 12 months. Long term liabilities These are liabilities that are due for payment greater than 12 months.

“Remember a balance sheet is only a snapshot of a business at a point in time and then it is out of date so question how old are the financial statements. Having classified the data in the financial statements you should have a feel for how the company is operating.” Loans should be dissected into two categories: – Loans with security should be disclosed as separate liabilities and not deducted from the value of the asset secured – what are the securities given? Related party loans from directors and the like need to be examined closely – why were they given, was it an inability to borrow outside the group, what are their terms, could these loans be considered as capital? Provision for Income Tax Provision for deferred income tax – this is a non current liability. Future income tax benefit arising from previous losses – this is an asset Future income tax benefit arising from previous losses – this also is an asset Again the credit professional should be aware of these balance sheet items and care should be taken if they are included in net figures. Contingent Liabilities These items are not shown on the balance sheet but are usually in a note attached. These contingent liabilities should be referred to by credit professionals when considering net balance sheet figures. Contingent liabilities should include discounted bills or bills receivable, court actions, guarantees Paid up capital or proprietorship shareholders loans For a company or firm to examine the capital and current account make sure any amount shown as capital has

been in fact contributed and is not an undisclosed loan. Examine the current account of a firm and determine what profit is being withdrawn also what salaries and other benefits the directors and shareholders or proprietors are receiving. These accounts are a clue to the business responsibility of the directors or proprietors Remember a balance sheet is only a snapshot of a business at a point in time and then it is out of date so question how old are the financial statements. Having classified the data in the financial statements you should have a feel for how the company is operating. If you find a company is stretched then it may help to explain borrowing problems or slowness in payment. If the converse and cash is held in hand then an opportunity is available to astute entrepreneurs.

Republished with the kind permission of our Life Member Robert Burns. *Robert Burns LICM is a Member if the Institute of Chartered Accountants, a Trustee in Bankruptcy and an Official Liquidator in addition to being a stalwart of the AICM being a past councillor and lecturer on credit. Robert was the establisher of and key contributor to the Queensland Division’s Education Fund the precursor to the AICM’s National Education Fund.

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

The facilitation argument By Paul Burgess*

Paul Burgess

Where would we be without the services of collection professionals? With the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry barely cooling, we are seeing an interesting shift in the consumer collections space. Financial Hardship assistance has been in this space for some time, and there is a plethora of written material on the subject. What is of interest is the way in which financial services to consumers is being viewed, and how these organisations are reacting to the spotlight. As I work through the consumer lease environment, I am seeing complaint after complaint hit the desk of the Australian Financial Complaints Authority (AFCA) in the way in which collections are conducted. With the requirements of disclosure to the consumer, there is an education revolution happening. Customers know good collections from bad collections.

This means there are more educated consumers that are in the market than ever before. It is then conceivable that if your collections systems and processes have gaps in them, these educated consumers could tear apart the effort and cause the organisation to lose cash. Financial Hardship assistance makes sense from the organisation’s perspective, from a bottom-line perspective, but this should not be the driver to providing this assistance. The customer is very important in the cycle, and by working with the customer and their changing life circumstances, builds a better market and can make a huge difference to someone’s life. It could be a life changing experience. By not providing the assistance to the customer as the main driver could also be a life changing experience, for the negative. Having said that, there is a need for organisations to ensure they are protecting their cash flow. To marry

“Financial Hardship assistance makes sense from the organisation’s perspective, from a bottom-line perspective, but this should not be the driver to providing this assistance. The customer is very important in the cycle, and by working with the customer and their changing life circumstances, builds a better market and can make a huge difference to someone’s life.”

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

Credit Management

the two seemingly diverse views together is not that big a stretch. That is, if you have a view of the collections function that aligns with the wellbeing and financial health of the customer. That view would not be the traditional view of collections but morphing that view into the facilitation of payment view. This is not a move away from collections but utilising the collections skillset to negotiate payments with the idea of partnering with the customer to get them to the end of their obligation. As they trip, the collections team is there to help catch them, lifting them back up to continue their journey. This may be through the supply of financial hardship assistance or understanding for life’s little blips with promises to pay or payment arrangements, however temporary. It could be with regular contact to work through any stresses or misunderstandings. The result is a

“The importance then, for an organisation, is to have good robust collections processes and systems to facilitate a change in thought process, a re-framing of focus, to understand what the customer is wanting to achieve and marry that with what the organisation is trying to achieve.” customer in financial hardship today is a good strong customer tomorrow. If they slip again, the process repeats until they are successful in getting to the end of their obligation. I can see the argument for collections skills in an after-sales service environment, where the lines between customer service and collections are blurred to the point of not being recognisable. The way to implement this into any team is to start by viewing the process as a facilitation of the agreement, where the collections team is the support

team, the truth tellers, the shoulder to cry on. The collections skillset is already far advanced in this state, where the evolution of collections in the consumer space has been morphing into this role for more than a decade. Probably longer. I say a decade because it has probably been this long since I was in the consumer space last. A lot has changed in that time. The findings of the royal commission just confirm what I have seen of these changes, what I believe to be the one and only true measure ➤

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

of an organisation’s success: public legitimacy. Public legitimacy is how the world sees the organisation, which can enhance the organisation’s ability to partner with their current customers and attract new customers. This would result in increased profits and the round is complete. Both parties benefit from the interaction. Again, this moves the collections function into the facilitation of the success of the customer to complete their obligation. It adds to their life in a positive way, removes some of the stress points, and still creates profits for the organisation. The importance then, for an organisation, is to have good robust collections processes and systems to facilitate a change in thought process, a re-framing of focus, to understand what the customer is wanting to achieve and marry that with what

the organisation is trying to achieve. Sitting on the same side of the table in the negotiation with the customer is the secret to marrying the two objectives and achieving success for both the company and the customer. Sitting across the table is a surety for disaster. Step one is to understand what the customer wants to achieve, and that can only come from good communication at an individual level. Step two is to understand where the gaps are between what the customer wants to achieve and what the organisation wants to achieve. Step three is to build the bridge between the two. I have said many times that all collection discussions are about setting up for the next six to twelve months good payment behaviour, and this starts by understanding

the person you are dealing with. Through this understanding you are listening, you are applying empathy, and you are setting up good payment behaviours for the future, you are facilitating a successful completion of the obligation. Collections skillsets are primed for utilisation in this facilitation function, with a depth of knowledge and on the ground experience, showing once again the value of the collections team to the organisation. In the consumer space, this is the profit centre mentality. This is a value adding asset. This is collections at its finest.

*Paul Burgess B.BusCom CPA CMgr FIML MCMI MICM Cdec (Qld) General Manager – Collections Alpha Group of Companies

See you at AICM’s

14-16 October 2020 | Sofitel Brisbane Central

go to www.aicm.com.au for more details 44

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

PREMIUM SPONSOR

Legal

A tale of two creditor’s petitions: Can the Court make a post-bankruptcy costs order apply retrospectively? By Ellen Ferris and Stephen Mullette*

Ellen Ferris

“A day wasted on others is not wasted on one’s self” – or is it? In one of the first decisions this year, the Federal Circuit Court of Australia reconsidered the position regarding costs orders made after the date of bankruptcy. In ACN 116 746 859 Pty Ltd (formerly Palermo Seafoods Pty Ltd ACN 116 746 859) v Menniti [2020] FCCA 24 Judge Jarrett had to decide whether a Court has the power to effectively order a trustee to accept, as a debt in the bankruptcy, a costs order against the bankrupt made after a sequestration order.

The Facts

Stephen Mullette

In an interesting turn of events, this matter involves two creditor’s petitions on foot at the same time. This should not occur as petitioning creditors are required to search for existing petitions, prior to filing their own. Nevertheless, in unusual circumstances it does sometimes happen. Here, the first creditor’s petition against the debtor, by Mr Murphy (“the Murphy petition”) was unable to proceed because the

judgment debt on which the Murphy petition was based had become the subject of an appeal. ACN 116 746 859 Pty Ltd (“Palermo”) filed an appearance (and an affidavit of debt) as a supporting creditor and applied to be substituted as the petitioning creditor in the Murphy petition. However, a substituted creditor proceeds on the basis of the existing petition, and so the Court refused Palermo’s application for the same reason that Mr Murphy was unable to proceed i.e. that the Murphy judgment debt was subject to an appeal. Palermo had at an earlier stage issued its own bankruptcy notice to the debtor. An application to set aside the Palermo bankruptcy notice was dismissed and Palermo then filed a separate creditor’s petition. Unbeknownst to Palermo at the time, the debtor had filed (but did not serve) an application to review the Registrar’s decision to dismiss the application to set aside the Palermo bankruptcy notice. Before the second (Palermo’s) creditor’s petition was heard, the appeal of the first petitioning ➤

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Legal

creditor’s debt was dismissed and both creditors’ petitions came before the Court on the same date. The first petition was heard first and a sequestration order was made. The debtor sought a stay of the sequestration order and filed an application to review the Registrar’s decision to make the sequestration order. Palermo’s creditor’s petition was adjourned until the same date as the application for review of the Registrar’s decision of the sequestration order. The day after the sequestration was made, the Court upheld the debtor’s application regarding the Palermo bankruptcy notice and set Palermo’s notice aside. This meant there was no foundation (in terms of an act of bankruptcy) for the Palermo creditor’s petition. Thinking quickly, Palermo sought to amend its petition to rely upon the same act of bankruptcy as in the first petition – the one which had already been determined and in which a sequestration order had already been made! Why did they bother? It may have been because there was the possibility of a review of the sequestration order being successful (although if so, it is unclear how the Palermo creditor’s petition could have succeeded based on the same act of bankruptcy) but otherwise appears to have been to do with Palermo’s costs. When the matter came back before the Court, the first petitioning creditor, the debtor, and the trustee had reached an agreement to dismiss the application to review the sequestration order. This meant that Palermo’s creditors petition should be dismissed. But what to do with Palermo’s costs of its petition? Palermo and the debtor reached an agreement that Palermo’s costs be taxed and paid from the debtor’s estate subject to the Court’s power to make such an order. However, the trustee in bankruptcy appeared and brought the Court’s

“In ACN 116 746 859 Pty Ltd (formerly Palermo Seafoods Pty Ltd ACN 116 746 859) v Menniti [2020] FCCA 24 Judge Jarrett had to decide whether a Court has the power to effectively order a trustee to accept, as a debt in the bankruptcy, a costs order against the bankrupt made after a sequestration order.” attention to the decision in Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56 and suggested that such an order might be inappropriate.

The decision in Foots In Foots, the High Court held that a costs order made against a debtor is provable in a debtor’s bankruptcy only if the order is made before the date of the bankruptcy. If the costs order is made after the date of bankruptcy then it is not provable. In arriving at its decision, the High Court considered section 82 of the Bankruptcy Act 1966. Section 82 sets out what debts are and are not provable in a debtor’s bankruptcy; and specifically provides that the only debts which are provable are those which arise from an obligation incurred before the date of bankruptcy. It is often thought that because

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

the proceedings were commenced before bankruptcy, that therefore the creditor’s costs incurred in respect of those proceedings should be provable in the bankruptcy. However the High Court held that since the making of a costs order is at the discretion of the Court, unless and until the Court has made an order for costs, at most there is a “possibility or a risk that an order for costs may be made” (at [36]. This is not enough to found a provable debt. Therefore in the absence of a costs order for the payment of a creditor’s costs, normally (and subject to some exceptions such as contractual entitlements to costs, etc) a claim for costs is not provable in bankruptcy.

The outcome Palermo accepted that if a costs order was made in their favour against the debtor, Foots precluded the costs order from being a provable debt in

Legal

the bankruptcy. However, Palermo sought to circumvent Foots by seeking that the costs order be made with retrospective operation to the date of bankruptcy pursuant to the broad discretion of the Court under section 79 of the Federal Circuit Court of Australia Act 1999 and section 32 of the Bankruptcy Act 1966. Palermo argued that Foots did not consider retrospective orders but left such matters to the discretion of lower courts as appropriate, and the Court could therefore make such a retrospective costs order. Judge Jarrett rejected Palermo’s argument. It did not grapple with the underlying proposition of Foots; that an obligation which arises after the date of bankruptcy is not provable in the bankruptcy and the obligation to pay costs does not arise until the making of the costs order. His Honour indicated that even if the Court could make an order of the

kind sought by Palermo, it would not be competent for Palermo to seek the order in the present circumstances. This is because such a step would be seen as enforcing a remedy (ie the claim for costs) in respect of a provable debt (ie Palermo’s underlying debt claim against the bankrupt) which is prohibited under section 58(3) without leave of the Court (no such leave having been sought or granted in the present case). Ultimately, the Court was not satisfied that it should make a retrospective costs order and therefore ordered that the bankrupt debtor pay Palermo’s costs rather than it being paid from the bankrupt estate. This essentially left Palermo with a non-provable costs order against an impecunious bankrupt debtor, all of whose assets had vested in the trustee. In order to participate in the

distribution of any assets as a creditor, it would be necessary for Palermo to enforce its costs order against the bankrupt, commence further bankruptcy proceedings and make the bankrupt bankrupt a second time, for no obvious useful benefit.

The takeaway This case highlights the importance of obtaining specialist advice before filing a creditor’s petition or risk expending funds on proceedings without merit, which will not be able to be recovered.

*Ellen Ferris Solicitor Matthews Folbigg Ph: 02 9806 7456 Email: EllenF@matthewsfolbigg.com.au *Stephen Mullette MICM Principal Matthews Follbigg Ph: 02 9806 7459 Email: stephenm@matthewsfolbigg.com.au

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Legal

Decline of bankruptcy as an enforcement tool and why there is still a place for it By Roger Mendelson*

There is no doubt that Bankruptcy as a legal enforcement tool is on the decline. This is confirmed by the AFSA figures. The December 2019 quarter produced the lowest level since 1994. Part of this decline may be due to the fact that the economy is in a reasonably sound spaces. However, there are other reasons, which include: z Many larger corporate creditors, such as banks, energy companies and telcos have either ceased carrying out bankruptcy or have high thresh-holds and also impose limits on buyers of their debt ledgers. z In an increasing number of cases, creditors are only prepared to carry the expense for larger debts. Cost is definitely a factor. Typical legal costs and disbursements would be $8,000 or $9,000 to carry out the process from issuing a Bankruptcy Notice to handling a Petition. z The bankruptcy jurisdiction is highly specialised and there are less legal firms around with the expertise to properly handle the work.

When to use

Roger Mendelson

There are circumstances where bankruptcy is still the most effective enforcement tool available to

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

creditors. The obvious case is where the debtor has sufficient interest in real estate to cover the amount of the judgment plus debt costs. In addition, there will be cases where the debtor has access to assets, such as in a family trust or the family home being in the name of his wife or partner.

Negotiating tool The reality is that there are some debtors who have a capacity to pay but understand how to “play the game”. This tactic will usually have been effective against most of the creditors he has had over the years. In our experience, issuing and serving a Bankruptcy Notice is an effective tool in probably 80% of cases. It definitely needs to be followed up (after the 21 day period after service has expired). If the debtor does not pay the judgment debt or enter into an arrangement within the 21 day period after service of the Notice, he is deemed to be insolvent and any time thereafter, a Bankruptcy Petition can be issued and served on him. This will lead to a hearing date and a high probability of a Sequestration (Bankruptcy) Order being made against him. Only approximately 10% of Bankruptcy Notices issued by us on behalf of creditors proceeds

Legal

to a Petition. Most of the files will result in payment of some sort and our advice to creditor clients is to be realistic in terms of negotiation, including entering into instalment arrangements. We will normally only recommend proceeding to a Petition in the event where the debtor has sufficient equity in real estate or there is a compelling case that he has access to sufficient assets to at least come up with a reasonable offer but refuses to do so.

Preconditions There are many path-ways to Bankruptcy. However, by far the most common one used in debt collection is that a creditor obtains a judgment, including interests and costs of at least $5,000.00. The minimum thresh-hold was increased from $2,000.00 in 2010 and is likely to increase again, at least by CPI since 2010.

Case study

Conclusion

As an example of how effective the process can be, I refer to a current file being handled by us on behalf of a finance creditor. The judgment debt, including interest and costs was over $73,000.00. Extensive negotiations had taken place over 18 months, before, during and after the legal process. There was evidence that the debtor had disposed of real estate with a view to defeating the claims of creditors. Our client was prepared to accept $15,000 in full settlement. The debtor, who had legal representation, ultimately rejected that figure and was made bankrupt. The Trustee in Bankruptcy has recovered funds from the disposal of the property and expects to payout 100% of the judgment debt together with full Bankruptcy legal costs.

The lesson is that if you are handling commercial debts or large consumer debts and are dealing with a debtor who refuses to engage in meaningful discussions, Bankruptcy should be considered. The fact that the process is used by less creditors than before makes the case to consider it more compelling. It means that there are many creditors out there who have a capacity to at least pay something meaningful but have learnt how to get away with it. For such creditors, Bankruptcy is the only process which will work.

*Roger Mendelson CEO Prushka Fast Debt Recovery Pty Ltd and is principal of Mendelsons National Debt Collection Lawyers Pty Ltd. Ph: 1800 641 617 www.prushka.com.au

“There are circumstances where bankruptcy is still the most effective enforcement tool available to creditors. The obvious case is where the debtor has sufficient interest in real estate to cover the amount of the judgment plus debt costs.”

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

aicm Training News Using your study time effectively during the COVID-19 period It goes without saying that the world is facing an unprecedented challenge as everyone grapples with the effects of the COVID-19 pandemic, but even during these trying times it is crucial to effectively manage your time in lockdown.

Use this time effectively We are all dealing with time management on top of the undeniably chaotic events that are unfolding due to the COVID-19 pandemic. However, the time available to you now is one of the most valuable resources you have as you work towards your qualification. You only have so much time in the day, and sometimes it feels like it just flies by. When it comes time to completing your studies, students often wonder where all the time went. The important thing to remember is that there are 24 hours in every day and that is the same for everyone. Because no student has more time than another, sometimes good time management can make all the difference in achieving your qualification or achieving other life goals. Although it may sometimes feel like a waste of time, there are huge time savings to be had when you plan out your day. Below are some of the many reasons why you may want to learn how to plan your everyday life and get organised to manage your work schedule with studies. z It helps to prioritise – a good study plan will help you take care of the important and urgent tasks first. z It helps with being realistic – we often do not realise how long a task really takes. A study plan shows you how long you spend on common tasks such as readings, trainer marked activities and assessment writing. z It helps you procrastinate less – with a written list of tasks you are more likely to sit down and just get it done. z It helps you be more productive – you should know exactly what you will study before you sit down at your desk. z It helps give you more freedom – when you plan, you know that you will be finished at a certain time. Students who do not plan well often find themselves working all evening without realising it.

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

z It helps reduce guilt – if you know that you have achieved your goals for the day then you can spend your free time without your studies on your mind. z It helps you track your progress – stick to your study plan and you will know that you are on course to get everything that you need to achieve completed. z It helps you plan for the long-term – good organisation removes the uncertainty from your study and helps you focus on getting the best results possible from your learning experience. Good planning is the key to getting the most from all your activities. This discipline also helps create a good study-life balance and will benefit you in many areas of your life for years to come.

Be organised The key message is that good organisation is the key to being successful; with better organisation you will be on top of things from day one and will not have to stress when your assessment is due. I know it sounds too easy, but it really is the key to success. The best approach is one which breaks your goals up into three different types: short, medium and longterm. A great way for students to describe these would be as daily, weekly and term goals. You can record these in your study planner, with daily goals being quite detailed and term goals being more general and giving you an overall understanding of your studies. z Your daily plan can hold a day by day account of your assignments and areas of study. The best time to prepare your study plan is in the evening, when you have finished studying for the day and know what needs to be focused on the following day, so make a to-do list or list of short-term goals for the next day then. z Your weekly plan can be used to give you an overall plan for the week, a list of approaching tasks to be achieved over the next seven days. z Your monthly plan will provide you with a broader view of your studies and will assist you to plan ahead.

aicm Training News General tips to maintain your well-being during these times Some tips to consider that will set you up for success: Set boundaries: This will have to be done both with your work team and when you are at home. You will need to get structured about space and work hours. On the work side, discuss with your manager and team members what hours should be focused time and what needs to be available for meetings and impromptu calls. Remember that you might be saving time by not travelling to and from work, use this extra time to your advantage. Manage your calendar: Treat the time as a locked meeting the same way you would if you were meeting others. Manage your time in between meetings by setting aside time to get work done and remember to take your lunch break even though you might be working from home. Acknowledge your feelings: During this time feelings of anxiety and stress are common, know that it is okay to feel that way. Allow yourself time to notice and express what you are feeling. This could be through, talking with others, or channelling your emotions into your studies or other activities around the home.

Maintain your day-to-day activities: Having a healthy routine can have a positive impact on your thoughts and feelings. Go back to basics: eating healthy meals, physical exercise (e.g., walking, stretching, running, cycling), and make sure you get enough sleep. Keep things in perspective: When many things feel uncertain or out of our control, one of the most effective ways we can manage stress and anxiety is to focus on the actions that are in our control. Remember keep calm and keep studying!

Recent graduates AICM would like to congratulate its recent graduates:

Certificate III in Mercantile Agents: Amelia Symes

FNS30415 – Certificate III in Mercantile Agents

Mercantile CPA

Certificate IV in Credit Management Stefanie Patane

NSW FNS40115 – Certificate IV in Credit Management

ParaQuad NSW and BrightSky Australia

Statement of Attainments Caroline Warner

BNSMCA302 Repossess property FNSMCA402 Initiate legal recovery of debts FNSMCA303 Serve legal process

James Tan

NSW FNSCRD401 – Assess credit applications

Mercantile Credit Management

Grenke

AICM is committed to helping busy credit professionals study anywhere, all our credit course are offered as online courses, should you wish to utilise this time to progress your studies or undertake a new challenge by completing one of our qualifications.

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

DIVISION REPORT

Queensland

Members and guests enjoying our annual bowls night in February before lockdown!

President’s Report Greetings from the comfy confines of my home! I never expected I would get the full work from home experience this year. I think after a few weeks, I am getting the hang of it! The last few months have seen things change quite rapidly and after reading the last report to this one, a lot has changed. First, I hope you are all ok, during these challenging times I encourage everyone to lean on their networks and colleagues in the AICM for any help and assistance. Personally, managing a team remotely has been challenging, but through sharing with others, the task seems a lot more manageable. As councilors we are here for this very task, please don’t hesitate to reach out. Between the last magazine and today, we did manage to have a barefoot bowls event which was a great success, we played bowls and got the opportunity to meet new members and catch up with a few we hadn’t seen in months. A big thank you to our event sponsors SLF lawyers and to the council who did all the running around to make this a very enjoyable event. Due to our current circumstances, events for the foreseeable future will be virtual in nature and the AICM will be rolling out a series of webinars to help keep us informed in these ever-changing times. We have already had a few with great attendance and if you haven’t joined in on one, please do. Also be aware that the Young Credit Professional Awards will still be going ahead, and I encourage members who are eligible to step forward and get involved. If you are not eligible and 52

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

know someone who is, you can always nominate and encourage them to apply. I also wanted to take the time to announce that Natalia Mizerski has stepped down from council as she has taken on a new role. I would like to congratulate her and thank her for her contribution. Other than that, all other councilors are still working hard to provide value where possible and if you are interested in joining council, we do have spots available for people with varying interests and availability. Please don’t hesitate to speak to anyone on council for more information. Lastly, I wanted to thank all of our members who contribute to this amazing community of professionals and to our supporters, state and national sponsors. Without your support, we would not be able to drive the goals of the AICM. We look forward to working together into the foreseeable future. – Roger Masamvu MICM CCE Queensland Division President

YNN – Bowls Night/YCP Barefoot Bowls @ The Boo Friday 21st February 2020

Our first social event of the year, held at ‘The Boo’ in Newstead, did not disappoint. With over 55 members and guests kicking of their shoes and winding down before the weekend. The event was a huge success! We said hello to some new faces and welcomed back

Queensland

Virginia Lao (Rodgers Reidy), Cameron Clough and Hannah George (both Results Legal) and Alia Hamid (Rodgers Reidy).

familiar ones. We crowned Holly Rollers (Steven Staatz, John McEniery, Rebecca Ryan, and Krystal Gleeson) as the winners of the evening. A big thank you to the event sponsor SLF Lawyers. Although we aren’t able to meet right now to rally together and support potential YCP applicants, the 2020 applications are open. It is vital that we, as Credit Managers, are providing that support and encouragement to the young credit professionals in our industry. Sometimes all it takes is a bit of motivation from a mentor or peer to give that last bit of courage to give it a go. Get involved and start having these conversations with young talent around career achievements and ambitions. We are eagerly awaiting the return of our YNN Events. Along with the ever popular Trivia Night I believe there may also be a wine tasting evening on the horizon too. We look forward to seeing you all again soon.

How long have you been part of the Vincents Team and what is your role there?

Sponsor/Councillor Spotlight We caught up with Steven Staatz from Vincents Chartered Accountants. Not only is Vincents a Qld Division Partner, we are also very lucky to have Steven on Qld Council, looking after the Professional Development Portfolio. It was a great opportunity to get some insight into Steve’s thoughts and plans for his role on our council.

I have been at Vincents since 2011, so coming up on 9 years. I am a director of Vincents and a registered liquidator. I head up the Insolvency and Reconstruction division of Vincents. Vincents are well known to credit professionals as an expert accounting firm. Tell us a little more about yourselves?

30 years young, Vincents was founded in 1989 by its namesake director, Paul Vincent, from a desire to provide specialist accounting support where the numbers were important. Today, the 44 directors and 240+ staff of Vincents operate nationally from 7 office locations and service our clients Australia-wide – in fact wherever their business interests take them. We are intentionally and proudly a fully integrated professional services firm, boasting access to expertise that caters for every business need where numbers are involved. Our Insolvency & Reconstruction experts in particular work to consistently deliver the best possible results for stakeholders in cases of personal and business financial distress. Our team’s motivation and dedication to efficiently and effectively administering all forms of insolvency and reconstruction appointments, no matter the size or the issues at hand, is our guarantee of quality and market-leading service and value. How did the firm get involved and why did you choose to partner with the AICM?

Steven Staatz, Vincents Chartered Accountants.

Vincents have had a long and valued relationship with AICM and have been Qld divisional sponsors since 2016. As a registered liquidator I communicate with

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

DIVISION REPORT

Winners “Holly Rollers”: Rebecca Ryan (Results Legal), John McEniery (Rose Litigation Lawyers), Steven Staatz (Vincents Chartered Accountants) and Krystal Gleeson (Results Legal).

DIVISION REPORT

Queensland

JHK Legal team – Claudia Smith, Matthew Paul, Jemerrie Golaw and Amanda Gildea.

Stacey Woodward (Division Vice-President), Tim Pope (Jirsch Sutherland), Jess Blakemore Randstad and Melissa Jarvin (both Turks Legal).

other credit professionals on a daily basis. Vincents’ relationship with AICM is a valued one where we as experienced insolvency accounting experts continually aim to help value add and educate members in respect of the ever-changing insolvency landscape, and to increase our own knowledge of the credit industry. Vincents look forward to continuing to work with AICM into the future.

Remote working and mental health

What can you share about your journey so far as an AICM Qld Council Member?

I was honoured to be invited to be a part of the AICM Qld Council just over a year ago now. I have really enjoyed working with and getting to know my fellow council members better and to assist with organising different professional development events. You recently obtained CCE status, congrats! – can you share any feedback on the process and any advice to anyone thinking of giving it a go?

I would recommend doing the doing the classroom exam over the online exam (I did both the online exam and the classroom exam for the fun of it). Doing the classroom exam will save you doing the 3,000 word assignment (which is the real reason why I switched to doing the classroom exam in the end). Something none of your Council Members know about you?

Before joining Vincents I used to live and work in the Cayman Islands (Caribbean) and enjoyed going scuba diving every weekend. This also allowed me the opportunity to travel extensively through Central and South America and the Caribbean. 54

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

An article by Michelle Kirkby A dedicated mental health first aid officer and advocate for mental health in her work place, Michelle supports the team at work as a first responder, acting as a much appreciate front line. Michelle encourages appropriate professional help and assists with any crisis, she listens and communicates without judgement, giving support Michelle Kirkby ERM Power, 2019 Qld AICM and helpful information and Credit Manager of the Year encourage professional help. It goes without saying, things have hit a high in terms of all things crazy. The constant barrage of news about the pandemic can feel relentless. Which can take its toll on people’s mental health, particularly those living with anxiety and OCD. The effects of the horrific bush fires Australia experienced are still prevalent, affecting our people, agriculture, retail and regional tourism. And now, a global pandemic and for many, isolation. Globally the financial effects are hitting hard. Add into that the fear which is resulting in panic buying and people behaving in ways they probably didn’t think they ever would. It’s hard to feel connected when we can’t travel, are practicing social distancing and can’t physically see our family and friends. This isolation is happening whether we like it or not and we have to make sure we stay connected to people and our communities. This is especially challenging coming from a social work culture and suddenly we find ourselves in uncharted territory.

Queensland

Josephine Decuyper and Lachlan McKinnon (both Vincents Chartered Accountants), Jackson Haswell (Results Legal) and Joshua Wright (Rodgers Reidy).

At times like these it is so important to prioritise our mental health and find ways to stay connected. I have shared some useful tips. I hope you find them as useful as I have. z Limit the news and be careful what you read. z Limit the time you spend reading and watching things that don’t make you feel better (block out time in your diary/calendar). z Have breaks from social media and mute key words which might be triggering on twitter or Facebook. z Stay connected with people, either agreed check in times or some routine so you have something to look forward to. z Have a to-do list and also a “done list” and give yourself a pat on the back. z Avoid burnout The Apple Technique is good (Acknowledge: Pause: Pull back: Let Go: Explore) z Take one day at a time. z Use your usual commute time to move and have walk or do something that makes you happy. From a credit managers perspective I am aware of the additional pressure that is put on teams and we have adopted a few things to keep us connected. z Keeping to the daily pop up meetings z Friday virtual quiz z Wednesday walks (on video) z Easter Bonnet competition z Virtual Friday drinks. z Connect with a visual and not just a call where we can. z Invite people from other teams to ask for updates or just invite them for a drink or to your quiz. z 1 minute vlogs. z A brief day in the life story to share. Remember to reach out to the sources available to

you, either your workplace EAP, Beyond Blue, Black Dog Institute to name but a few. The below link to the GOV Head to Health site has some great resources available to you. https://headtohealth.gov.au/service-providers.

The Australian Institute of Credit Management welcomes our Partners for 2020. National Partners

Trusted Insights. Responsible Decisions.

Divisional Partners

Official Division Supporting Sponsors

Our National and Divisional Partners support and work with the AICM to promote the Institute’s activities, represent the Credit Industry and develop the careers of all Credit Professionals. As these organisations support your Institute and your Industry please consider them when you require assistance.

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

DIVISION REPORT

Mikaela Brown (SM Solvency Accountants) and Bridgette Barberis (Craddock Murray Neumann Lawyers).

DIVISION REPORT

South Australia Meanwhile, Nick encourages all to say safe, but looks forward to seeing them book out Kangaroo Island once Australia is thriving again and offers the following advice for those in isolation.

Keeping Sane in isolation

SA Division President Nick Cooper with his family on Kangaroo Island.

President’s Report The South Australian Division counts itself very lucky with respect to the COVID-19 pandemic, as our slow decrease of new cases has meant that restrictions on activity are not as tight as our interstate friends. Our thoughts go out to the other States. Still, the once vibrant and active Council activities in the Festival State have now slowed to a halt, however, we are making our best endeavours to continue the professional development of our members through online webinars, and I encourage all members to connect and enjoy. We are optimistic about the future of AICM events and look forward to the Young Credit Professional of the Year competition and National Conference. I have faith in the innovative and enthusiastic nature of our members, and I am sure that we can think of viable alternatives if such events are no longer on the cards should the pandemic continue later in the year. In these uncertain times, I encourage all members to stay in contact, remain hopeful, and take care of themselves and each other.

If horror movies like “The Shining” have taught us anything, its that being cooped up for long periods of time with family can often lead to disaster. For those of us working from home, it is vital to maintain some semblance of routine and self-care. Dr Jill Newby, Associate Professor of Psychology at UNSW has provided a comprehensive list of self-care methods that we can all implement in order to weather the current storm, including: z Set up routine and structure for your workday — create boundaries between ‘work time’ and ‘home time’ z Create a specific place in your home where you work (avoid your bedroom) z Stay connected with co-workers and your manager by scheduling regular virtual or phone meetings z Try a digital detox in the evenings z Try and get outside at least once a day z Focus on the silver linings.

The Australian Institute of Credit Management welcomes our Partners for 2020. National Partners

Trusted Insights. Responsible Decisions.

– Nick Cooper MICM, SA Division President Divisional Partners

Isolating in Paradise Kangaroo Island, still reeling from the summer bushfires, is a South Australian icon that is in dire need of the support of tourists to rebuild. As an avid supporter of the “Book Them Out” campaign, Nick Cooper, the SA Division President, has used his Kangaroo Island retreat as a place of sanctuary amid the COVID-19 pandemic and has been isolating and self-sustaining with his family, making use of the world-class tuna fishing. As Managing Partner of Worrells Solvency and Forensic Accountants in South Australia, Nick has been juggling running this busy practice, along with providing advice on temporary insolvency relief in light of these tough economic times. 56

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

Official Division Supporting Sponsors

New South Wales

NSW Presidents Report So much has changed since I last addressed our members, sponsors and industry colleagues. Most of you are probably flicking through the magazine and reading from your home office as you do your very best to adhere to social distaining. In doing so the days may feel long, and the weekends even longer. The buzzing office environment and phone ringing off the hook all feels like a distant memory; so, don’t forget to check in with your colleagues and friends (especially those who are home schooling their children). As a council, us here in NSW are closely following the issues unfolding around COVID-19. The health and safety of our councillors, members and broader community is of paramount importance. We are actively monitoring updates from the Federal Government, noting that those updates and advice remain the primary source of COVID-19 response information. Currently our approach remains business as usual, and through our ability to work remotely and securely if needed, our commitment to you all will not be disrupted. In an effort of ensuring that our members and sponsors are being supported by the NSW Council, we are committed to creating more value out of your membership, providing more opportunities for engagement with webinars and education, and to our dedicated sponsors. In the interests of remaining optimistic I would like to think that next time I sit down to prepare my report that I will be in a position to reel off a list of upcoming events and functions. In the time being, we hope you, and your families, are remaining safe and healthy and as we adapt to this ‘whole new world’. – Balveen Saini AICM NSW President

Georgia Barbera and Priscilla Pillay (both Bingo Industries).

NSW – National Insolvency Seminar On 12 March 2020, the AICM’s NSW members were fortunate enough be involved in the informative, insightful and educational 2020 National Insolvency Seminar. The AICM, in collaboration with ARITA, developed a national committee of credit, legal and insolvency professionals who discussed, deliberated and debated the current issues affecting industry professionals. The sessions were structured around, Insolvency risk in Australia, using the tools available to achieve better returns and utilising informal arrangements. Then there were panellists who debated the current and emerging challenges for credit professionals. All the speakers, and moderators, delivered their sessions in an intellectual and professional manner. All the speakers were engaged and fully committed themselves to the day, which resulted in it being such a success for AICM’s members and stakeholders. Those speakers were: z Insolvency Risk in Australia – Nick Pilavidis (AICM CEO).

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Insolvency presenters - Amanda Coneyworth (KPMG), Tony Pilimon (Rexel), Joe Laban (Schneider), Kathy Sozou (McGrathNicol), Hannah Griffiths (Gilchrist Connell), Fiona Reynolds (TurksLegal), Balveen Saini (NSW Division President), Andrew Spring (Jirsch Sutherland) and Nicholas Boyce (Results Legal).

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New South Wales

Andrew Spring (Jirsch Sutherland), Nicholas Boyce (Results Legal), Joe Laban (Schnieder) and Tony Pilimon (Rexel).

Danielle Funston (Maddocks), Joe Laban (Metcash) and Kathy Sozou (McGrathNicol).

Maria Pacheco and Bruce Bills (both Metcash).

Darrin Mitchell (Matthews Folbigg), Matthew Hollands (Boral), Tanya Nightingale and Brianna Murray (both Northern Beaches Council).

z How to use the tools available to you to achieve better returns – Balveen Saini (Associate at BBW Lawyers), Danielle Funston (Partner at Maddocks), Kathy Sozou (Partner at McGrath Nicol) and Joe Labam (Regional Credit & Treasury Manager at Schneider Electric). z How to get the best outcomes from informal arrangements – Fiona Reynolds (Partner at TurksLegal), Amanda Coneyworth (Director at KPMG), Hannah Griffiths (Senior Associate at Gilchrist Connell) and Tony Pilimon (National Credit Manager at Rexel Holding Australia). z Debate of the current and emerging challenges for credit professionals – Andrew Spring (Partner at Jirsch Sutherland), Nicholas Boyce (Associate at Results Legal), Tony Pilimon (National Credit Manager at Rexel Holding Australia) and Joe Labam (Regional Credit & Treasury Manager at Schneider Electric). The AICM partners with organisations to ensure that high quality seminars and events are delivered to its members and stakeholders. As such there were representatives 58

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

from the national partnership with Jirsch Sutherland, Turks Legal, illion and Equifax who were present. And, were representatives from AICM’s divisional partnerships with, AMPAC, Onguard, Results Legal, and Esker.

Meet a NSW Councillor Treacy Ellen Sheehan is currently Managing Director/Owner of Trace Personnel Pty Limited

Treacy started her journey in the Hospitality industry working in 5-star venues such as the Sydney Opera House, Town Hall, Sydney Art Gallery, National Maritime Museum and Botanic Gardens Restaurant working primarily as Sales and Marketing Manager and Events Manager within the various venues for 15+ years. She holds a passion for the people that make up the industry and what the AICM stands for which is why she has supported the Credit industry and the AICM in

New South Wales few recent VA’s including Virgin that the Administrators sought ex part relief from the courts for blanket relaxation of their personal liability as Administrators and that relief was granted for a period of many months? Was this done without prior notification to the creditors? Did you know?

Credit scoring is rife with controversy, including vulnerability to errors. The rise in automated lending decisions, the billions of pieces of data handled each day, as well as the explosion of identity theft has left major rooms for error in scoring

Credit Quote of the Month “As we move to return to normal take the time to consider which parts of normal are worth rushing back to.”

The Australian Institute of Credit Management welcomes our Partners for 2020. National Partners

Trusted Insights. Responsible Decisions.

NSW Meet a Sponsor Georgina Wu How long have you been working at Turks Legal? Divisional Partners

Almost 5 years What is your position?

Special Counsel in commercial disputes and transactions What are your passions aside from work?

CREDIT MANAGEMENT SOFTWARE

I’m passionate about baking, especially gum paste and fondant art. I love gum paste sculpting and watching various online tutorials. I make all the birthday cakes for my close friends; they often pick a theme and I would research it and create the cake.

Official Division Supporting Sponsors

An interesting fact about yourself?

I used to love eating ramen and I was always on the hunt for the best ramen in town but this all changed after I entered a ramen eating challenge where I was required to finish 1.2kg of noodles, 300 grams of meat & vegies and 2.5 liters of broth within 1 hour. Aha moment

Our National, Divisional and Professional Partners support and work with the AICM to promote the Institute’s activities, represent the Credit Industry and develop the careers of all Credit Professionals. As these organisations support your Institute and your Industry please consider them when you require assistance.

Did I hear correctly at the watercooler? Is it true in a

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particular for over 21 years, from sponsoring nationally, NSW councillor and volunteering for ad hoc events. Her business has been built on trusting and loyal relationships coupled with providing the credit/risk/debt management and associated industries with superior staffing both contract and permanent. She loves to be involved with events be it evening or day networking on a range of topical issues, larger events include the YCP, WinC, Credit Team of the Year and end of year events like the Pinnacle Awards evening 2002-2007 Membership & driving membership growth and services. Treacy became a councillor 10 years with involvement at council level and then when her business first opened, they were heavily involved in the sponsorship side of AICM. Her achievement is mentoring YCP candidates and the induction of Women in Credit nationally – with the committee particularly now that she is older, she likes to help with the Young Credit Professional Awards and WiNC. She is especially passionate about the “newbies” entering into the industry and having the curb appeal to pursue a career in credit. Her passions aside from Credit/work: My sons & stepchildren and extended family and friends, travelling – especially to Ireland and USA, fabulous food and wine (probably too much of both :-), walking and pilates.

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Western Australia/Northern Territory President’s Report Well, what a difference couple of months makes. It seems like only yesterday that we had only just heard of this new virus that had been discovered in a far off Chinese city, and at that point it was only travel and tourism that were suffering – little did we know how quickly this would turn into a global pandemic, forcing restrictions and lockdowns, disrupting lives and businesses to an extent that has not been seen since the Second World War. Whilst the lockdown and restrictions has forced us postpone our planned events, notably our Economic Update Breakfast update and the increasingly popular Insolvency Seminar, we hope that we will see restrictions lifted to a level that will allow us to still hold our WinC and YCP Events (YCP nominations are now open) later in the year, and I am hoping that these events will be bigger and better than before, even in the face of the challenges we are experiencing. On a lighter note, a copy of the 1993 March edition of ‘Credit Management in Western Australia’ landed on my desk recently, and made for some very interesting reading, not to mention the AICM alumni that held council positions then that are still involved in some form today – Steve Thomas (President), Steve Mitchinson (Australian Director), Kevin Allen (Councillor), Frank Vredenbregt

The Australian Institute of Credit Management welcomes our Partners for 2020. National Partners

Trusted Insights. Responsible Decisions.

(Councillor) and an honourable mention to the late Mike Murphy (Councillor). Whilst the hair styles and dress sense has come a long way, the issues facing credit managers then are just as relevant now – with perhaps the exception of a piece titled “100 years ago when debtors prisons were the go”! Who knows where we will be when it comes time to pen my next report, however there is hope on the horizon as some of the restrictions are slowly being lifted and there is a lot of talk of what the world will be like post COVID-19, one thing is for certain is that credit professionals will remain very busy! Stay safe, stay sensible and I look forward to seeing you all very soon. – Troy Mulder MICM CCE AICM WA Division President

COVID impacts in Consumer Credit We recently sat down with previous YCP State Finalist. member and Credit Team Leader at Alinta Energy, Tamera Parker MICM to get her insights on how the COVID-19 pandemic is impacting her Consumer Credit team, and how Alinta Energy is supporting their customers through these challenging times. How is your team finding the changed working conditions?

“Prior to this pandemic my Retail credit team had not been exposed to working from home, they swiftly adapted to this challenge by learning new ways of working with technology they hadn’t experienced before. It is fantastic to have their support and positive attitudes during a time where processes are constantly changing, and they are having to change their philosophy on collections.”

Divisional Partners Do you think the pandemic will have a short- or long-term effect on the business?

Official Division Supporting Sponsors

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

“In my opinion the pandemic is certainly going to have a long-term effect on the business, particularly from a credit perspective. With the unemployment rate on the incline, and many SME’s affected by the mandatory government closure, it will take some time before the economy returns to “normal”. On the flip side, it’s a great opportunity to think outside of the norm for credit professionals, and perhaps it will change how we look at credit management in the future.” Will you need more resources to complete your function in coming months?

Western Australia/Northern Territory DIVISION REPORT

“At some point in the future, yes we will. When the government begins to relax lockdown requirements, many consumers and SME’s will have a backlog of debt which will require a more personalised approach to understand their situation and assess their needs.”

100 Years Ago Debtor’s Prisons were the go Once upon a time in the dim distant past, Debtors who did not pay were often brought to task. Brought before Old Brownie, a fearsome Judge indeed. Who rarely gave less than 15 years – before they would be freed. Debtor’s prison in those awesome days, a place of little hope,

What measures have you (or the business) put in place to support and assist your customers through these challenging times?

“Alinta Energy has been very forthcoming in assisting our customers with the fast implementation of a COVID care response package that was provided to all frontline and back office teams. Like other energy retailers, we have put a hold on disconnections, referrals to mercantile agents, default listings and debt sales. We have additionally increased payment extension timeframes that can be offered to customers and adjusted our criteria of our Hardship program. Our automated credit treatment cycle has also been adapted to ensure our customers do not feel overwhelmed with notifications during this trying time.”

The food was sparse, the place was damp, in darkness they would grope. 15 years a long, long time for an unpaid half-a-crown, But that was normal years ago when brought before Judge Brown. Today times have change, not always for the better, To avoid paying Creditors they sing a simple letter, A Declaration of Bankruptcy – no further need to pay, Thousands of dollars owed to Creditors borrowed along the way. The Trustee calls a meeting, the Credit Managers all attend. To see what can be done, to see what they can mend. Alas, no money in the bank account, no assets does he own, The Gucci shoes, the Rolls Royce car with mobile telephone, The cars, the boat, the properties, all in the spouses name, With Buckley’s chance of recovery, it is a crying shame! In tailored suit he states his case, showing not the slightest pain “It is not my fault, ‘cause I worked well, The bankers are to blame”. Judges are weak, the laws unfair – not like in Brownies day, The simple truth, sad but true, we cannot make them pay. 100 years from now the roles have been reversed. The Debtor’s in the Witness Box and he is well rehearsed.

Past challenges The current uncertainty and unprecedented change forced upon

“Your Honour, I am under oath and I would like to say, That this the Credit Manager demanded every day, That I make payment on a bill, a paltry sum you’ll see.

us has given us pause to reflect upon

He threatened to suspend my credit, he threatened with such glee.

the past challenges our country and

Your Honour, I now rest my case, on the action he has taken,

also AICM members have faced.

With this now said, I will retire – for I am very shaken.”

We looked into the (significant) archives we possess to see what

The Judge aghast, upset for sure unable to conceive,

credit professionals have thought

A Credit Manager would do such things, unable to believe.

in the past and stumbled upon this

the Credit Managers in the dock, he is not a happy sight

gem that was published by the WA Division in the 1980’s (a heady time for us here in the West).

Found guilty of chasing payments, awesome is his plight. Of stern approach, the Judge donned silk and sentenced by decree,

Made us reflect on how times have

15 years you will serve before you will go free.

changed and continue to change.

Creditor’s prisons in this high-tech age, a place of little hope,

However, without working together

The food is cubes, the place is bright, you’re not allowed to smoke.

with our customers and clients to

15 years, a long long time for seeking payment down,

collect outstanding debts we’ll all

But this is normal years from now when brought before Judge Brown.

face a much different future ...

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Victoria/Tasmania

Toolbox attendees: Sarah Soyjaudah (VMCH), Ritu Kapoor (VMCH), Donna Smith (Reliance Recoveries, Moderator), Jessica Kang (VMCH) and Rodney Lamb (Orora Group). Vic/Tas Division Vice President Catrina Galanti celebrating Sunny Sharma winning the YCPA at the 2018 National Conference.

President’s Report The last couple of months has shifted the way we interact with one another and living the COVID-19 way has made all of us re-assess how we live in the current moment. Some of us have been fortunate to work for organisations that have not been impacted as much as our retail, travel and accommodation sectors. This is the time we all realise that our membership with the AICM is vital to our day to day business operations. Having the online tools to adapt to the current climate is giving our teams the credibility and respect in the credit world. Check out our AICM Webinar Series to upskill your knowledge and don’t forget to include your teams. As credit professionals we have been all recognised within our organisation as a valuable asset and our business is leaning on us as expert matters in credit and collection. If you haven’t already done so make sure you know which industry your customers are linked to and ascertained risk profiles accordingly. Be on the front foot and lead by example, as credit professionals this is what we have been practicing for years and now is the time to shine. If you are under 30 years of age before June 30 or know of credit professionals who are, we are still celebrating The Young Credit Professional of the Year (YCPA) program and applications close 31 May 20. If you need help in applying you can reach out to our division YCPA councillor Amaran Navaratnam or myself. We can provide you with tips on how to have a chance to become the Victorian YCPA at Nationals and stand by you all the way. In 2018 Sunny Sharma (Vic) took out the YCPA at Nationals and is proud to say; “Partaking in the YCPA program has been one of the best decisions I’ve ever made. The journey has been nothing short. If you are a 62

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

young credit professional wanting to improve your soft skill set, form key links within the industry, take your career to the next level and strive to win the highest accolade in credit at a national level (and get your name up in lights), I would strongly encourage you to apply for YCPA 2020. Give it a shot because you will get so much out of it!” One thing I have taken from COVID-19 is that the universe is telling all of us to be kind to our climate and one another; if you haven’t already, reach out to one of your contacts daily or weekly via your phone/linkedin. We all can make a difference to that one person who may need to hear our positive voice or kind words. – Sherif Hussein MICM CCE Vic/Tas State President

TOOLBOX Collect with Confidence 11 March 2020, held at the offices of Turks Legal We managed to complete the VIC Toolbox 2 before COVID-19 happened. The Toolbox was hosted by Donna Smith from Reliance Recoveries, and three lucky ladies, all from VMCH were able to learn from her wealth of experience. (VMCH is Melbourne’s leading provider of high quality disability, specialist education, aged care and retirement living services). The topics of the day included; z Making the call z Documentation z Securities z When, why and how to make a call z Best practice for all call types I think we can all agree on how important this training is especially during unprecedented time. A huge THANKS to Turks Legal for providing a fantastic learning space, and to Donna Smith for being the moderator. Keep an eye out for the next Toolbox.

Victoria/Tasmania Janice Thomason Janice has been in the credit and finance industry for a whopping 41 years, starting her Australian career at Pacific Brands and spending the last 5 years as Head of Credit and Risk at Cummins. In addition to being very successful at her role, Janice’s strength and passion has seen her be a natural born Janice Thomason – Head of Credit and Risk at Cummins leader taking a great interest South Pacific, 15 years of in mentoring, coaching AICM membership. and training young credit professionals; right now Janice manages a team of 16. Janice’s life has taken her all over the globe – born in the United Kingdom, living for a period in South Africa and grandchildren finally bringing her to Australia, where she now calls home. At work, Janice has seen huge changes over her 41-year career, and she loves technology and automation – her career motto is “do more with less, without losing the human element”. Outside of work, Janice loves sewing, quilting, embroidery, gardening, cross-fit, entertaining and travelling around Australia. Janice’s biggest goal in 2020 was, that instead of travelling overseas, she would travel to as many of Australia’s bushfire affected regions as possible with her husband Ian and two furbaby Dachshunds Hector and Bella. Janice’s advice for young professionals entering the credit industry is to be inquisitive, listen as much as possible, make mistakes and understand the fundamentals of credit in as much detail as they can.

Member in Spotlight Joe Losinno Credit Manager at Nutrien Ag Solutions

Joe has been a member of the AICM for over 16 years, and in the credit and finance industry for many more. Joe originally obtained an environmental science degree due to his love of the outdoors, which took him to London to work for 6 years, where worked at ELF Gas & Power. In 2000, Joe Losinno – Credit London’s notorious cold drove Manager at Nutrien Ag Solutions, member of the Joe back to Australia, where AICM for over 16 years. he landed in the midst of Victoria’s gas and electricity privatisation boom.

Joe’s career since then has taken him to Exide Batteries, Visy, Metcash and the last 5 years at RuralCo – which is now called Nutrien Ag Solutions. During his time at Nutrien Ag Solutions, Joe has worked with farmers in the agricultural finance field, which Joe loves as he gets to visit these farmers and work closely with generations of Australian farming families. Joe prides himself on working collaboratively and flexibly to support these farmers and getting them through difficult economic times, including recent fires and droughts. Joe loves the networking opportunities and the collaboration of knowledge that the AICM provides, and Joe’s favourite AICM event is the Victorian golf day. Since he has been a member, Joe has not missed a golf day, except where he had his shoulder reconstruction surgery. Working from home in Geelong at the moment due to COVID-19, Joe is as busy as ever working from his desk in the bedroom home office, but he misses the opportunity to get outdoors and chat to his customers. Joe’s next big challenge will be learning to home school his four children.

THANK YOU! Frank Gambera Director of McMahon Fearnley Lawyers

Frank has been an integral member of the Vic/Tas AICM Council since 1998 (22 years), 2 years after Frank joined the AICM. After last year’s high watermark winning of the Council of the Year Award, Frank has decided that it is time to step down from his Frank Gambera role on the AICM Council. We are going to miss him. For the length of his time on the council Frank has provided invaluable legal insight, calmness, a great home to have the council meetings and great friendship for all members. It must be noted that Frank also won the Pinnacle award for the Legal Representative two years in a row, 2015 and 2016! However, Frank has decided it is time to share the invaluable experience, knowledge and friendship that he has obtained from the AICM Council with the next generation of younger lawyers. Frank has offered to provide assistance to the AICM Council for the next little while. Frank, I have no doubt that we will take you up that offer! We look forward to seeing you at your offices and tapping into your vast amount of knowledge and continuing our great friendships. From all of us on council goodbye and thank you!

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Member in Spotlight

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Victoria/Tasmania Helpful tips and comments from our council team Working from home and keeping your team positive: Catrina Galanti – NCI, Michelle Carruthers – CreditorWatch and Mary Petreski – Asahi. Right now, like we are sure that most of you are doing, all of the AICM Council are working from home during this COVID-19 pandemic. We know that working from home can bring a lot of challenges, so we thought we would use this opportunity to provide you with some tips and tricks that we each have:

Mary Petreski Asahi

I have been working from home for 4 weeks now. I work from different areas of the house. Today, in the lounge room. A perfect view of the city skyline. On other days, the makeshift office upstairs, that I share with my husband. My girls aged 13 & 10 have taken the study as they both started remote learning as of the 15th of April. Working from home has its good days and its bad days. Socially, my team and I catch up daily. This is to ensure my team are OK, and are not too overwhelmed. Seeing my family at any given time of the day is a great benefit for me. Previous to the WFH arrangements, I would be in the office 12+ hours. This is a good change. On a bad day, the long hours and little to no movement due to increased workload or poor internet. Looking forward to being able to freely move about Melbourne, have dinner and drinks and to socialise.

Catrina Galanti NCI

I am currently working from my kitchen table. I live alone so I think I’m one of the lucky ones although I do tend to do laps around my apartment when I’m on a call to keep mobile. I have located all of the friendly neighbourhood animals and make sure I stop off for a pat when I have been walking before work most days when normally I’d be sitting in peak hour traffic. As it looks like this is going to continue for a few more weeks, I am going to set up a desk instead next week and boot my table to the side. We are on week 4 of WFH. To stay sane, our team has “coffee” together every morning at 8.30am on Skype and we talk about what we did the night before, what we’re all cooking for lunch and also a bit of work talk too. 64

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Friday’s we all stop working at 4 or 4.30pm and have virtual drinks with the whole office, this includes our management team, sales, service and admin. It gets a bit crazy with everyone’s kids and pets getting in on the action. I think the key thing to WFH is to maintain your usual routine. Take coffee breaks when you would normally, give your colleagues a friendly call and start your day off with a to do list. Also, to take advantage of being home and make yourself a hot lunch and eat it AWAY from your workspace. Try to get dressed in what you would normally wear to work to keep you in that frame of mind.

Michelle Carruthers CreditorWatch

As you can see, my workspace is on our dining table together with my puzzle. While it’s not’s the ideal workspace, I think that natural light is very important, and my tip is that you find a workspace with as much natural light as you possibly can. To set boundaries for work I make sure at 5.30pm my computer is off and my husband and I go for a walk before we cook dinner. Also, on my grocery list there are always fresh flowers. To stay connected, CreditorWatch have two exercise sessions per week, this is run by a different staff member each time. We have had a yoga session, a high intensity session and even exercises from the 80’s session. I’m not sure how much exercise gets done but it sure works my belly due to the laughter of each session. We also have Thirsty Thursday via zoom and lately we have had Joe’s Kitchen whereby Joe our passionate Italian CTO teaches us to cook and Matt Jackson our GM, along with our account manager, Natasha Raymond taught us how to make their favorite cocktails.

Q&A with Mary and Amaran on COVID-19

Mary Petreski Credit Manager at Asahi How is your team finding the changed working conditions

We have daily huddles with the team. The huddles are social and are more on wellbeing than work. My team is important to me and so is their mental wellbeing. Last week we all presented a photo of our childhood. The photo had conditions. You must be from age 1-10, have a great background, and a story to go with the photo. My team members had great stories, and fantastic photos. One of

Victoria/Tasmania

Do you think the pandemic will have a short or long term effect on your business

Mid to Long term. Working in the drinks industry, we have seen the effects COVID-19 has brought to small business. We are working very closely with these businesses to help them through this time. Will you need more resources to complete your function in coming months

No, not at this time. This is the time we work together with sales to KYC, understand what steps need to be taken next and work with the business and our customers for a positive outcome. Have the new limits and timeframes on enforcement impacted the credit terms or payment arrangements you enter with customers

Yes. Majority of cafés and restaurants have been impacted. We are working with these businesses to help and provide a successful result for both. Do you feel you will be exposed to a greater risk of preference claims due to the exemption to insolvent trading for directors

We are not sure what the results are as yet. Until we have clear picture, we will keep working with customers.

Amaran Navaratnam Credit Manager at MECWACARE How is your team finding the changed working conditions

As I work within the Healthcare sector we are classified as a ‘essential service’. At this moment in time, for my credit team, we are respecting social distancing where my team is spread across the wider finance department. Do you think the pandemic will have a short or long term effect on your business

Short-term, as our business is non-for profit we do receive government funding and subsidy for aged care residents living within facilities to home care nursing. Our wider organisation takes extra precautions as they are front-line staff requiring them to continue reducing any risks for our wider customer base. Will you need more resources to complete your function in coming months

At this moment, don’t foresee hiring additional team members.

Have the new limits and timeframes on enforcement impacted the credit terms or payment arrangements you enter with customers

No, our customer base receive pensions from the government so we get guaranteed income upon service rendered. Our hardship is heavily relied upon Centrelink assessments e.g means testing fees, daily care fees. If our customers have a significant debt e.g. $80k, and Centrelink complete a re-assessment they effectively pay for the customers delinquency for them. Do you feel you will be exposed to a greater risk of preference claims due to the exemption to insolvent trading for directors

No as we don’t have to deal with preference claims within our industry.

Reassess your Career Wonderful upsides can come from the current enforced work/home time … one is to apply some focus on our precious and often ignored career. Now there’s time to review what we have “out there” that tells the professional world who we are & where we’re at. Here’s 3 R’s to make a start … Rewrite your LinkedIn profile introduction (or develop one) – How well does it explain who you are now? Research some more relevant engaging descriptions of who you have become. Have others review & edit. Decide on 3 descriptors you’d have other use for you and ask are they evident in your LinkedIn profile. Review your LinkedIn page – Ask a trusted learned contact to give you feedback on it. There are many LinkedIn “fixers” who tout their wares to assist in sprucing up your page. Check out some colleagues’ pages or just some of your network to see what about some people’s pages that catches your attention. Update your career history and add any volunteering you engage in. Reconnect with your preferred Referees – For many decades now Career Research data on how people get their next job has not changed: 80% is through networking – though you may still apply for a conventional job ad on line its connection to you comes through networks. The best place to start and to launch an expansion drive on your network, is to reconnect with your Referees. How long since you’ve spoken? They may have moved? Bring yourself, your connection and your career back to top of mind with them – and ensure you make a real connection with a Zoom, Skype or WhatsApp catch-up. Ensure you ask their advice: If you are keen to grow or move your career? Who else can they introduce you to? What gaps do they see in your career offering; what trends can they share? – Lori Vanston, Executive Leadership and Career Coach/Workplace Mediator lori@vanstonconsulting.com.au, 0413123253

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

DIVISION REPORT

my team members called in to her family back in the UK to have some photos sent. We also have daily afternoon task updates. We all have specific tasks outside of BAU. We work together to brain storm better ways of working and utilise the teams core knowledge on fast tracking the tasks. Like myself, the team miss the physical interaction.

DIVISION REPORT

Victoria/Tasmania

A fantastic turnout captured through this group shot just before tee off.

Lou Caldararo (Vic/Tas Director) with Winning team: Simon Strange (SPK Glass), Joe Losinno (Nutrien Ag Solutions), Kris Stokes and Scott Ferguson (both SPK Glass).

Michelle Carruthers and Gordon Porter (both CreditorWatch).

Steve Stafford (KPR), Liam Denver (Sacre Coeur), Michael Sailland (William Adams) and David Teehan (Body Corporate Services).

Runners Up: Lou Caldararo (Vic/Tas Director), Jon Malone, Jason Fraser and David McCully (all Equifax).

Vic/Tas Annual Golf Day

year so its looks as though with the help of Joe and extra practice this team moved from 3rd to 1st position for 2020. Well done guys! Thank you to the prize sponsor Equifax. The team that came 2nd was Lou’s team, comprising John Maloney, Jason Fraser, Lou Caldararo and David McCully. Thank you to the prize sponsor Trade Bureaux Australia. The IODM team came 3rd, well done Damien, Peter, Steven and Peter. Thank you to the prize sponsor Brooke Bird. Nunzio Settinelli from MM Electrical

Friday 21st February 2020 On a fine 18 degree day on the 21st of February, 179 people made their way down to the Southern Golf Course in Keysborough for our annual Vic/Tas AICM Golf Day. Tee off was at 1pm sharp. The overall winning team comprised of Simon Strange, Joe Losinno, Kris Stokes and Scott Ferguson. Simon, Kris and Scott came 3rd last 66

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

Victoria/Tasmania DIVISION REPORT

Joyce Gin (Viva Energy). Adrian Hunter (Brooke Bird), Sam Chopra (Viva Energy), Adrian Foo (Brooke Bird) and Raj Shan (QBE).

Robbie Fellowes and Tina Ryan (both Woolworths).

The Australian Institute of Credit Management welcomes our Partners for 2020. National Partners Shaun Mathews and Stephen Mitting (both Cor Cordis). Trusted Insights. Responsible Decisions.

won the prize for “All the gear but no idea”. Thank you to the prize sponsor CreditorWatch. A great time was had by everyone, with a delicious lunch and dinner served. Almost everyone on the day left with a prize from the business card drop. It was great to see some new faces and we look to forward to seeing you all again next year. A special thank you to Lou Caldararo and Jeff Hurst for making the day run smoothly. We would also like to say a HUGE thank you to our sponsors as this event is one that everybody looks forward to every year and without their generosity and support this event would not happen. And, in no other particular order thank you to our other event sponsors and prize donors: Brooke Bird, ARMA, Finport, Early Trade, Trade Bureaux Australia, Equifax, Robert Half, Prasidium, IODM, Kemps Peterson, QBE, Mercantile CPA, Rodwells, Collect AU, Ampac, SV Partners, Cor Codis, CreditorWatch, SPK Glass & Aluminium, Scalzo Foods, Vince and Associates, Cashflow Finance, Drake International, CJG Advisory and Atradius.

Divisional Partners

CREDIT MANAGEMENT SOFTWARE

Official Division Supporting Sponsors

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

DIVISION REPORT

New members The Institute welcomes the following credit professionals who were recently admitted to membership between February and April. New South Wales

South Australia

Phillip Baldwin Nyccolle Bates Paolo Carrozza Mohan David Edy Theo Dharmaputra Natalie Doan Danielle Dyet Marie Faker Ashwini Gajendran Emily Hanna Brenda Hulme John Richard Paul Hunt Kim Izzard Matt Jackson Amandeep Kaur Michael Loughland Matthew Lunney Janelle Marshall Edward Martin Paul Mead Maria Messina Andrew Nagle Nakul Nirmal Pranavkumar Parikh Victor Phaon Michelle Planck Gary Poslinsky Eric Robinson Prathi Shah Jennifer Shaw Amy Shores Sujatha Willathgamuwa Jan Wills

Shaun Borgas Michelle Hughes Yana Sarantos Emma Stent Kelly Williams

Finance Manager Alcon Laboratories Euler Hermes Oceania Valmont Australia Euler Hermes The Information Technology Group Accounts Receivable Relationship Officer Accounts Receivable Officer Ecolab Pty Ltd BH Collection Services Principal Accounts Receivable General Manager Euler Hermes Proprietor gadens Credt Officer Gadens Senior PPSR Consultant Credit Manager Rexel Holdings Australia Risk Underwriter Lantrak NSW Pty Ltd Valmont Australia N/A Consultant Equifax Valmont IAustralia Bartier Perry Credit Controller Smiths Medical Australasia Accounts Receivable Manager

Queensland Kimberley Badke Gimmie Jade Bartkaitis Property Compliance Australia Deborah Hitch Cairns Hardware Company Michelle Jackson Fletcher Building Australia Belinda Kerr Gimmie Michal Klinkosz Collections Agent 2IC Megan Langtree SPAR Australia Ltd Gemma Maher Accounts receivable specialist Nathan McQuade NCI Pauline Wikohika Gimmie Judy Young Rockcote Enterprises PL

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

Codan Limited BRI Ferrier Mercantile CPA BRI Ferrier Adelaide Mercantile CPA

Victoria Diana Aivaliotis Steven Babos Teletha Bird Emily Choquenot Alicia Cuesta Rory Cummins Tracy Davey Melanie Donnison Jonathon Ferraro Lisa Germon Marie Gogo Ian Grant Desiree Hunt Megan Kiefer Paul Langdon Matthew Leombruni Kathryn Manca Therese Megens David Murray Niddhe Nattraj Brigid Nichols Philip O’Brien Lisa Peluso Trudy Price Brooke Quibell Sudantha Rathnayake Tania Smith Christy Terei Cedric Thiery Jessica Waldron Kalidu Wijesundara Craig Williams

Credit Controller Woolworths Woolworths Vince & Associates Vince & Associates Woolworths Limited Ampac Debt Recovery Gadens Credit Manager Credit Services Officer Vince & Associates Senior Collections Officer Vince & Associates Vince & Associates Vince & Associates GWA Group Pty Ltd Gadens Lawyers Woolworths Group Gadens Accounts Receivable Gadens Simplot Woolworths Vince & Associates Woolworths Risk & Recoveries Officer Equifax Vince & Associates Gadens Woolworths Group Ltd

Western Australia Cheryl Morgan

Self employed

See you at AICMâ&#x20AC;&#x2122;s

PREMIUM SPONSOR

14-16 October 2020 | Sofitel Brisbane Central

go to www.aicm.com.au for more details

AICM Marketplace Directory of services For information, options and pricing please contact Andrew Le Marchant on +61 2 8317 5052 or E: andrew@aicm.com.au ADVISORY AICM Divisional Partner

SV Partners Suite 7, Ground floor, 26 St Georges Terrace Perth WA 6000, GPO Box 2527, Perth WA 6001 Tel: 08 6277 0026 Fax: 07 3229 7285 Email: perth@svp.com.au SV Partners is a national specialist accounting and advisory firm, with offices in the metropolitan and regional areas of each state, across the eastern seaboard. Our expert accountants and advisors have the skills and experience to assist across a wide range of areas, including insolvency, turnaround and advisory services for accountants, financial institutions, corporations, financial and legal advisors, and their clients.

COLLECTIONS

COLLECTION SYSTEMS

DISTRIBUTION & PRINTING AICM Divisional Partner

AICM Divisional Partner

Esker Australia Pty Ltd Suite 1502, Level 15, 227 Elizabeth Street, Sydney NSW 2000 Tel: 02 8596 5126 Email: info@esker.com.au Web: www.esker.com.au Cash is the heartbeat of your business, so give your AR department the tool they deserve! Esker’s AR solution help companies reduce costs for invoice delivery, accelerate their cash collection process and automate the reconciliation of payments. Contact us to easily achieve your cash collection goals, tackle root causes of payment delays and reduce collection disputes while improving customer relationships.

AICM Divisional Partner

Lane Communications Tel: 08 8179 9900 Web: www.laneprint.com.au Lane are widely regarded as one of the largest and most technologically advanced print production and distribution companies in Australia. We are an industry leader in digital and offset print, point of sale signs, complex embellishments and print finishing, storage, kitting and mailing. With innovation at our core, our services extend beyond transactional mail and promotional print production to include SMS, bulk email communications, and electronic billing solutions. Lane are your partner in print and multichannel communications.

INFORMATION

AICM Divisional Partner CREDIT MANAGEMENT SOFTWARE

OnGuard AMPAC Debt Recovery Level 5, 35 Clarence Street Sydney NSW 2000 Tel: 1300 426 722 Email: info@4ampac.com.au Web: www.4ampac.com.au Trust AMPAC, we guarantee to give you the right advice…… AMPAC provides a complete range of debt recovery and receivables management services to big business, government and thousands of SME’s nationally, so next time you are deciding how to deal with that difficult customer, pick up the phone and call us. We are ready to help you too.

CreditorWatch

Tel: 1800 123 613 Web: www.onguard.com OnGuard’s Credit management solution will help you hit your collection targets – each and every month. By working smarter and providing better visibility, OnGuard will help you reduce your DSOs. Why not give your staff a friendly solution that will make their life so much easier. Contact us to show you how OnGuard has made life a whole lot easier for our customers.

CONSULTANCY

GPO Box 276 Sydney NSW 2001 Tel: 1300 501 312 Web: www.creditorwatch.com.au CreditorWatch is a leading commercial credit reporting bureau used by over 50,000 businesses across Australia. CreditorWatch offers a variety of products including customer monitoring/alerts, credit reporting, an indepth trade program and online credit applications to assist with customer onboarding and decisioning. Contact us today for more information or to organise a FREE TRIAL of any of products.

AICM National Partner

AICM Divisional Partner

Trusted Insights. Responsible Decisions.

Australian Recoveries and Mercantile Agents Tel: 1300 363 394 Email: info@armagroup.com.au Web: www.armagroup.com.au ARMA is a specialist provider of contingent debt recovery solutions, outsourced accounts receivables and litigation services. ARMA was started with the aim to have fewer customers and provide better service. We provide big agency expertise with a boutique service. The ARMA team has a wealth of experience in the debt collection industry across a diverse range of markets that was gathered from working at some of the largest collection agencies in Australia.

illion

Credit Solutions Unit 1/245 Fullarton Road Eastwood SA 5063 Tel: 08 8418 1450 Email: gcrowder@creditsolutions.net.au Web: www.creditsolutions.net.au Credit Solutions, a division of the Credit Clear Group. A debt collection partner you can trust. Working with some of the country’s leading providers of information management and data intelligence solutions. Since 1965 Credit Solutions has set the benchmark for providing quality collection and recovery services to South Australian businesses and government.

CREDIT MANAGEMENT IN AUSTRALIA • May 2020

Tel: 13 23 33 Web: www.illion.com.au Dun & Bradstreet has changed. We are now illion. Bringing data, analytics and insights to life is at the heart of what we do, and we will continue to break new ground in the product development and innovation space. Our commercial and consumer databases enable Australian businesses and consumers to make informed decisions, based on real time data drawn from an extensive range of sources. We remain a reliable and trusted partner to a wide range of global organisations, who use our solutions for credit reporting, risk management, sales and marketing and receivables management.

AICM MARKETPLACE

AICM Marketplace Directory of services For information, options and pricing please contact Andrew Le Marchant on +61 2 8317 5052 or E: andrew@aicm.com.au INFORMATION AICM National Partner

LEGAL

TECHNOLOGY

AICM National Partner

CreditSoft Solutions Equifax Tel: 13 83 32 Web: www.equifax.com.au Equifax is a global information solutions company, providing data and insights that help organisations and individuals make more informed decisions. As a leading provider of credit information and analysis in Australia and New Zealand, Equifax serves key markets in risk management, marketing services and HR solutions. Drawing from trusted sources to compile and process data, Equifax helps its customers see things and make connections that others can’t.

INSOLVENCY AICM Divisional Partner

Tel: 1300 720 164 Email: info@creditsoft.com.au Web: www.creditsoft.com.au

TurksLegal Tel: 02 8257 5700 Web: www.turkslegal.com.au Contact: Daniel Turk TurksLegal is a specialist commercial law firm with 33 Partners and over 160 staff across our Sydney, Melbourne and Brisbane offices. We are proud to look after the interests of trade creditor suppliers and financial institutions in: l Portfolio debt recovery using our market-leading, real-time client interface, ‘TurksFocus’ l Resolution of complex debt disputes l PPSA recovery l Defence of unfair preference claims l Supply documentation and guarantees.

We live in a world of increasing complexities; the need for true expert advice is now more evident than ever. Established for more than 25 years Vincents is an Australian firm of accounting experts and business advisers specialising in assurance and risk advisory, business advisory, corporate advisory, financial advisory, forensic services, and insolvency and reconstruction. Gain insight and take control with Vincents.

TRADE CREDIT INSURANCE National Supporting Sponsor

AICM Divisional Partner

Vincents Level 34 Santos Place, 32 Turbot Street Brisbane QLD 4000 Tel: 1300 VINCENTS (07) 3228 4000 Web: www.vincents.com.au

CreditSoft specialises in providing credit managers with innovative products that will save your business significant operating costs and allow you to manage your time and resources more efficiently. We offer contact, tracing, payment, reporting and analytic solutions that redefine the way credit departments operate. Our goal is to ensure you achieve the best possible return on your investment.

National Credit Insurance Brokers Tel: 1800 882 820 (freecall) Email: info@nci.com.au Web: www.nci.com.au

Nova Legal Level 2, 50 Kings Park Road West Perth 6005 Tel: 08 9466 3177 Web: www.novalegal.com.au Nova Legal can assist with the recovery of problem debtors (large and small). Founding director Raffaele Di Renzo acts for creditors, debtors, directors, credit managers and insolvency practitioners in relation to solvency issues and dispute resolution.

National Credit Insurance Brokers (NCI) has established itself as the premier trade credit insurance broker in Australia, New Zealand and Singapore. Trade credit insurance is a highly specialised area of insurance and, with its 30 years of experience, National Credit Insurance Brokers has developed an unmatched depth of expertise in arranging the right protection at the best price for your particular trading needs.

AICM Divisional Partner

AICM Marketplace – our new initiative

Insolvency Intel

Results Legal

Tel: 1300 265 753 Web: www.insolvencyintel.com.au Email: answers@insolvencyintel.com.au

Level 4, 183 North Quay Brisbane QLD 4000 Tel: 1300 757 534 Web: www.resultslegal.com.au

Insolvency Intel: a subscription-only provider of insolvency and turnaround services for credit managers. Backed by national firm Jirsch Sutherland, our friendly team is just a phone call or email away, providing members with practical, strategic advice about corporate and personal insolvency. Free initial consultation; networking opportunities; training and presentations; knowledge database access; regular newsletters. Register now for a free subscription.

Results Legal is a national firm with a focus on promoting and protecting the rights of trade creditors. Our clients are some of Australia’s largest trade credit companies who rely on our assistance for legal recovery, dispute resolution, preference claim defence and PPSA rights. Results Legal are the obvious first choice for companies seeking a national solution to resolve commercial disputes and pursue swift, successful and cost effective legal recovery action.

AICM MARKETPLACE

Welcome to our new marketplace. We’re proud of the AICM and we want to let all credit professionals know those businesses that support the AICM. Thank you to these companies for their continued support and please consider them first when you’re looking for assistance in your business. We’ll also include these sponsors on our website so you can be sure to find them easily. For more information contact:

Andrew Le Marchant Direct: +61 2 8317 5052 Email: andrew@aicm.com.au Tel: 1300 560 996

May 2020 • CREDIT MANAGEMENT IN AUSTRALIA

The Publication for Credit and Financial Professionals

IN AUSTRALIA

Level 3, Suite 303 1-9 Chandos Street St Leonards NSW 2065 PO Box 64 St Leonards NSW 1590 Tel: 1300 560 996 Fax: (02) 9906 5686 www.aicm.com.au

Credit Management in Australia - May 2020

Articles inside

Victoria/Tasmania

New Members

Western Australia/Northern Territory

South Australia

Training

Queensland

The facilitation argument

Decline of bankruptcy as an enforcement tool and why there is still a place for it

New South Wales

Credit Management

Legal