Credit Management in Australia - October 2020 by AICM

Volume 28, No 1 October 2020

The Publication for Credit and Financial Professionals

IN AUSTRALIA

A bumper National Conference edition: lS upporting your team through COVID-19 using a structured approach lZ ombie companies, planning for the fiscal cliff and how to secure your debt lU sing data sets of past downturns to predict a post COVID-19 world

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Contents Volume 28, Number 1 – October 2020

Message from the President

YCPA

Webinar and State finalists

Simon Bligh

15 Clare Venema MICM

Credit Team of the Year Credit Management

Trade late payments By Simon Bligh

Falling on hard times: COVID-19 and the Big Banks’ response to financial hardship for Australian businesses

18 Kirk Cheesman MICM

20 Patrick Coghlan MICM

By Clare Venema MICM

Global financial crisis V pandemic – a Trade Credit Insurance perspective

By Kirk Cheesman MICM

Trade payment data: The true business barometer By Patrick Coghlan MICM

Preparing small businesses to survive post-JobKeeper

22 Jane Starkins

26 Michael Shields

By Jane Starkins

Artificial intelligence: Driving cash flow improvements across the credit-to-cash cycle By Michael Shields

Leadership and High Performance ‘Employee Experience’: Looking after your Credit team in the COVID-19 Environment

28 Nikki Dennis MICM

34 Jo Marshall

By Nikki Dennis MICM

Safety – Mental Health – what’s the difference? By Jo Marshall

Legislative Update Are your debtors abusing ‘Temporary’ COVID-19 measures? What can you do?

37 Paul Hunt MICM

By Paul Hunt MICM

40 Daniel Turk MICM

Security of payments – the fundamentals By Daniel Turk MICM and Mitchell Hay

The importance of Directors Duties By Giles Woodgate and Stephanie Wise

The DIN is coming in! Australia’s introduction of a Director Identification Number (DIN) regime By Edward Martin MICM and Benjamin Bronzon MICM

42 Giles Woodgate

42 Stephanie Wise

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Contents ISSN 2207-6549

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

Andrew Spring MICM

Roger Mendelson

Evan Mijo MICM

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

Christopher Yam

Con Kokkinos

63 Matthew Kucianski

CONTRIBUTING EDITORS NSW – Chris Lagana MICM Qld – Stacey Woodward MICM SA – Clare Venema MICM WA/NT – Jeremy Coote MICM Vic/Tas – Michelle Carruthers MICM

Insolvency

EDITOR/ADVERTISING

By Chris Hadley MICM, Andrew Tanna MICM and Jessica Georges

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

Bankruptcy notices and alternative acts of bankruptcy

“INSOLVENCY is not a dirty word”

By Andrew Spring MICM

Revenge of the zombie company?

50 63

By Stephen Mullette MICM and Darrin Mitchell MICM

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.

Insolvency trading relief extended to 31 December Planning for the cliff Third party payments

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

By Evan Mijo MICM

Why it is important to be a secured creditor

By Christopher Yam

Has a preference payment loophole emerged?

By Con Kokkinos and Matthew Kucianski

Cashflow management

Training Click Here

By Roger Mendelson

Masterclass JOIN US ON LINKEDIN

By Liam White

From classroom to home, how to enhance your online learning with AICM

Recent graduates

Volume 28, Number 1 – October 2020

Contents

74 WA/NT: Cecilia Lam (NCI), Troy Mulder (WA/NT Division President), Nadia Mitsopoulos (WINC Speaker), Shelbe Croucher (NCI), Nikki Aquino, Renae Wade (both Alinta Energy) and Daniel Czaplinski (NCI).

76 SA: YCP Finalists: South Australian YCP Finalists: Briana Harris (Oakbridge Lawyers), Ryan Osborn (Oracle Insolvency Services), Emma Bird (Brice Metals) and Madison Watts (NCI).

79 Qld: YCP FInalists: Maddison Graham (Stoddart Group), Julie McNamara (Qld Division Director), Lachlan McKinnon (Vincents), Skie Stringfellow (Unita) and Shanae Walker (Unity Water).

Division Reports Western Australia/NT

South Australia

Queensland

New South Wales

Victoria/Tasmania

New Members

Credit Marketplace

83 NSW: Grant Morris (Southern Steel), Kevin Driedger (NSW YCP Finalist), Christopher Holden (NSW YCP 2020), Peter Morgan (NSW Director) and Theresa Brown (NSW Vice President).

80 Vic/Tas: YCPA finalists Rebecca Roberts, Thai Nguyen and John Torounoglou.

For advertising opportunities in Credit Management In Australia Contact: Andrew Le Marchant Ph: (02) 8317 5052 | E: andrew@aicm.com.au

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

aicm

From the President

Trevor Goodwin LICM CCE National President

OVID-19 continues to be the major issue facing our daily lives and the economy. Importantly what does the future hold and how soon will we be able to return to our ‘normal lives. When can we travel internationally or even domestically? What will our work life look like post COVID-19 and how is the pandemic accelerating this new environment we are all doing our best to navigate our way around. The Australian economy is being buoyed by various support options available from the Federal government including the Job Keeper and Job Seeker allowances and the Home Builder bonus grants, but what is in store for businesses when these allowances cease and will they weather the pandemic? What other changes/ levers will government use to drive the economy yet keep us in our world leading, safe position. Also impacting our sector is the lack of clarity to our required nuanced approach when engaging with individuals experiencing hardship as a result of either unemployment or reduced incomes as a result of being stood down/furloughed. Government is recognising the specialised and necessary skills that credit professionals bring to conversations. More and more we need to have unscripted and individualised conversations with each debtor in the review their individual circumstances. We tailor suitable and respectful outcomes that allow both the lender and the debtor to move forward in unprecedented circumstances. These conversations take time to have and time to document and enact. These are questions on every person’s mind and ones we consider with a bumper edition of Credit Management in Australia through our broad and deep reach of contributors.

Bankruptcy and Insolvency The insolvency moratoriums, increased thresholds and time frames relating to Statutory Demands put in place in March 2020 as part of the government’s response to the COVID-19 pandemic were due to expire on 25 September 2020 but have been extended until the end of the year. More recently has been the government proposal to introduce a new process for incorporated businesses with liabilities of less than $1 million to

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

be able to keep trading while they develop a debt restructuring plan, ultimately voted on by creditors. The government support mechanisms seem to have worked, at least temporary in keeping business afloat and people employed; with the number of insolvency appointments well down relative to the same period last year, despite the adverse business conditions. However, the expectation is a number of businesses will unfortunately enter into insolvency administrations once the support options cease and credit professionals will need to have the appropriate skills and knowledge to deal with debtors, administrators, liquidators or receivers. PPSR will be extremely important in securing your firm’s interests. The Institute’s National Office team led by our CEO, Nick Pilavidis, has been busy in attending roundtable meetings with government officials and other professional bodies, as well as presenting numerous written submissions to various government bodies. AICM advocated strongly on behalf of our members that the temporary insolvency relief measures should not be extended, and we will continue to advocate that an exemption to preference claims should be provided to payments received during this time. Other recent AICM submissions to government authorities include our submission on Bankruptcy thresholds where we advocate for caution and further review, and the Payment Times Reporting reforms. The Institute now has a broader reach and a louder voice in shaping the legislative landscape than ever before.

National Conference pivot In my last President’s report to members I informed our intention to hold a Face to Face conference in each Division in place of the National Conference. Unfortunately, due to the continued uncertainty and impact of COVID-19 this has necessitated the cancellation of these events. This decision was not taken lightly by the Board but was made in the best interest of the Institute and our members. The reality of the pandemic is that the events were unlikely to meet both our high standards and the expectations of you and our delegates. We are however excited to be able to deliver all the benefits of our national conference in a new, engaging

From the President

aicm

digital format. This virtual conference will include pre-recorded sessions with keynote presentations and live panels with audience Q&A which can be attended at your own pace with no need to leave your office. Attendees will be able to hear from industry leaders about all things credit and how your peers are managing these uncertain times. With a trading landscape that is unfamiliar to us the risk to businesses supplying goods and services on credit has increased. Because things are changing so rapidly the education of our members and up to date market intelligence is now becoming even more important.

Education is the backbone of your career Our education programs for our members and their colleagues are being delivered virtually/online with a variety of options, including Registered Training Organisation, Certificates III & IV and Diploma, and our Credit Toolboxes and Workshops. September saw a round of CCE exams (online and classroom). Obtaining the CCE qualification raises a credit professional’s level of respect among colleagues in business, credit management and the broader financial community. CCE encourages our members to expand their knowledge beyond their particular area of specialisation, whilst continuing to learn and grow in the marketplace and being up to date in your knowledge of credit management skills. Firms with a eye to the future are both continuing plus ramping up their investment in their teams to ensure they’re in the best position to support the business whatever position they find themselves in.

Events and division activity On the social front I am pleased to advise we have held our first face to face events since the COVID-19 lockdown. These events were our popular Women in Credit (WINC) luncheons which have been successfully held in Perth and Adelaide with excellent numbers attending. We are confident we will be able to hold a number of education and social events in the remaining 3 months of the calendar year, including WINC events in NSW and Queensland, and hopefully in Victoria in December.

All Divisions have held their Annual General Meetings and I thank all Councillors who enthusiastically volunteer their time for the Institute in their Division. With their support and that of our experienced National Office team the Institute will continue to grow into the future to ensure our relevance, position and posterity. It is that time of the year we hold our prestigious awards including Young Credit Professionals (YCP), Student of the Year, Credit Team of the Year, CCE Dux and Pinnacle Awards which are highlights on our calendar. We encourage all members to support and encourage high performing credit professionals to apply or consider one or more of these programs/ awards.

Thank you and board composition changes In recent Board movements I wish to thank Julie McNamara who has resigned. After a two year term Julie has made the decision to step down due to work pressures. Julie has been a valued Director in the YCP/WINC/Pinnacles portfolio, as well as serving as National Vice President. I congratulate Lou Caldararo, Vic/Tas Director on becoming the Board’s new Vice President. Lou is a long-standing member and a past Vic/Tas Division State President and a highly respected Credit Manager. I am also pleased to announce the reappointment of Debbie Leo as a Board-appointed Director for a further 12 months after Debbie agreed to continue her important work in the Consumer Credit portfolio. Debbie is well known, highly regarded and is passionate about credit and the Institute. It has been a year of resilience and we are all learning valuable lessons, and this will be a critical factor in our future success. The Institute continues to perform well and remains financially sound passing our recent Audit with flying colours. Our membership base remains strong and we have welcomed a number of new members in the past few months; and our relationship with our Partners is well entrenched. I look forward to the Institute continuing to grow from strength to strength. – Trevor Goodwin LICM CCE National President

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

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. 2020 saw a change of approach for the announcement of the divisional Young Credit Professional announcement with a gala virtual night where MC CEO Nick Pilavidis hosted events in each division and linked the presentations up nationally. Let’s meet our division winners who go to the national virtual awards ceremony on 29 October. To go to the Webinar please click here 8

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

2020 JUDGES NEW SOUTH WALES Dave Hunt MICM CCE - Fujifilm Kimberley Watts MICM - ComfortDelGro Corporation Australia Peter Morgan MICM CCE - Byron Thomas Recruitment Theresa Brown MICM CCE - Optus QUEENSLAND Anna Taylor MICM - Results Legal Ashleigh Mason MICM CCE - National Collection Services Leanne Farrugia MICM CCE - Ashdown-Ingram Philip Ascher - Jirsch Sutherland SOUTH AUSTRALIA Alice Carter MICM CCE - Lynch Meyer Lawyers Candice Kerwin MICM - Equifax Kaden Davies MICM CCE - Samuel Smith & Son VICTORIA/TASMANIA Amaran Navaratnam MICM CCE - mecwacare Carole McTavish MICM CCE - Australia Post Ricky Forster MICM - Study Loans

SOUTH AUSTRALIA

Young Credit Professional of the Year

STATE FINALISTS Brianna Harris MICM Role: Associate Employer: Oakbridge Lawyers Years within the credit industry: 3 years What makes you passionate about credit: how the industry will adapt and respond to the impact of COVID-19 Highest level of accreditation: Bachelor of Laws and Legal Practice Fun fact about yourself: Outside of work I play a lot of team sport, I love basketball, soccer and I play most nights

QUEENSLAND

Maddison Graham MICM Role: Credit Officer Employer: Stoddart Group Years within the credit industry: 3.7 Years What makes you passionate about credit: Working with our Team, investigating and assessing potential risk, every day is different with new challenges Highest level of accreditation: Diploma in Justice Studies, Tafe QLD

NEW SOUTH WALES

Christopher Holden MICM

VICTORIA/TASMANIA

Fun fact about yourself: Brown Belt in MMA, enjoys camping and I have a dog named Storm

Rebecca Roberts MICM

Role: Credit Officer Employer: Electrolux Years with the credit industry: 2.5 years What makes you passionate about credit: the network of incredibly supportive credit professionals who’ve given me priceless guidance Highest level of accreditation: Bachelor of Commerce Fun fact about yourself: I play prems football and coach sporadically at Parklea Soccer Football Club

Role: Senior Collections Specialist Employer: Sensis Years with the credit industry: 2 years What makes you passionate about credit: there’s so much to learn and no two days are the same Highest level of accreditation: Bachelor of Science Fun fact about yourself: I’m an adventurer who loves to travel and while the borders have been closed I’ve been baking up a storm indulging in my foodie passion.

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Team of the Year

FINALISTS sponsored by

Our Credit Team of the Year award is an opportunity for credit teams to be recognised for the great work, results, culture and learning they do on a daily basis. 2020 saw a record number of teams enter the process and from this fantastic number of submissions the judges selected the following 4 finalist teams who will represent their companies at the awards announcement gala online event on 29 October. Our judges for 2020 were Debbie Leo (AICM Director), Rhys Buzza (Reece) and Michelle Kirkby (ERM Power)

Bunnings The team were represented by their colleagues:

Sally Achlatis – Collection Officer Rebecca Deltoro – Collection Officer Frances Duff – Collection Officer Marieta Pretorius – Collection Officer Nani Seiuli – Collection Officer Glenda Westeel – Collection Officer Used their team development grant to further their development and engaged a trainer to provide a Presentation and Public speaking workshop, which the team put into practice in the judging session.

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

As part of the award and judging process each of the four national finalists are eligible to use a team development grant of $1000. The team development grant can be used by the team to enhance what makes them a great team. The use of the team development grant is a core part of their presentation to the judges. In anticipation of the awards night and to celebrate the 4 finalists and their achievements let’s look at their colleagues and the way they plan to use the development grant to further their team’s.

The team were represented by their colleagues:

Vivasvaan Bhatnagar – Assistant Operations Manager Jordanna Kunou – Origin People Lead Abhijeet Waghmode – Account Lead - Utilities and Telecommunications Georgina Nissan – Origin People Lead Deepika Kothari – Customer Advocacy Consultant Zoe Jones – Customer Advocacy Consultant Used their team development grant to further their mission of supporting and understanding vulnerable customers. The team development grant was used to engage a Peer Ambassador from Sane Australia who presented on their mental health journey and empowered the team to look after their own mental health and wellbeing.

Synergy The team were represented by their colleagues:

Agus Halim – Manager Business Services Craig Butler – Manager Collections Strategy Leonard Fong – Financial Risk Manager Angelene Neville – Credit Risk Analyst Emily Taplin – Credit Risk Analyst Sunny Tsai – Credit Risk Analyst Donated their team development grant to the Jacaranda Community Centre, a volunteer organisation providing Financial Counselling, Family support and social services for indigenous families. They also volunteered as a team at the community centre providing further opportunity to connect with their customers and support Jacaranda.

Woolworths The team were represented by their colleagues:

Melissa Guy – Business Engagement & Improvement Lead Brandon Mazur – People, Environment & Culture Lead Skye Callinan – Credit Management Team Leader Louise Wright – Credit Management Team Leader Hayley Oswin – Credit Management Team Member Trudy Price – Credit Management Team Member Brigid Nichols – Credit Management Team Member Teena Ryan – Credit Management Leader Neil Padley – Head of Finance Shared Services Harnessing the teams passion for diversity and partnering with community groups. Half of the grant was donated to the Red Cross who has hosted cultural awareness training for the team and support the work they do with the newest community members. The other half of the grant was donated to the sleep out appeal to support the Salvation Army with their safe space and street to home initiative in which many of the team took part.

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Team of the Year

recoveriescorp

Credit Management

Trade late payments By Simon Bligh*

Battered by the first stage of the COVID-economic downturn, Australian companies are increasingly failing to pay their bills on time as they struggle to trade their way out of the current financial malaise. The incidence of suppliers being paid late rose 8.4% in the three months to the end of June, the sharpest rise in a decade, and up 7.7% year on the same time in 2019. On average, one quarter of all bills were paid beyond the agreed terms in all 14 key industry sectors, pointing to the widespread and protracted pain being felt across the economy.

“Mining, manufacturing and retail trade have traditionally been the greatest laggards in paying their suppliers on time...”

Simon Bligh

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Mining, manufacturing and retail trade have traditionally been the greatest laggards in paying their suppliers on time, while transportation, services and agriculture have been the best performing. However, it is the sharp rise in late payments by some key sectors during the COVID pandemic which is the most alarming, as it uncovers the short-term strain is felt more acutely by some than others. The biggest jumps in late payments have occurred in: z fishing (up 52.4%) z forestry (up 35.5%) z mining (up 26.3%) z the public sector (up 26.1%) z wholesale industries (up 18.0%) z services (up 13.0%), and manufacturing (up 10.3%). Although the quarterly figures

Credit Management

“The results reverse a 10-year trend of companies increasingly paying their debts on time, and strongly mark a turning point in economic conditions experienced by many organisations.” do not include Victoria’s stage four restrictions that came into effect in early August, or the earlier closure of the NSW-Victoria and NSWQueensland borders from early July, they effectively summarise the impact of the first wave of COVID across Australia. The results reverse a 10-year trend of companies increasingly paying their debts on time, and strongly mark a turning point in economic conditions experienced by many organisations. The big question will be the extent to which organisations continue to hold off on paying their bills during the September quarter, prior to many of the Government’s pump-priming spending programs scaling back in September and October. Australian Treasurer Josh Frydenberg has recently revealed the ‘real’ rate of unemployment is set to hit 13 per cent1 later this year, as state borders remain closed and Victoria slowly emerges from its second lockdown2. However, there is some cause for optimism with Treasury analysis revealing 689,000 people have gained jobs or returned to work since April3. On a state-by-state basis, the illion data shows all states and territories across Australia have recorded increases in the time it takes to pay suppliers, with Tasmania hit the worst. The Apple Isle reported a 17.6% quarter-on-quarter increase, while the ➤

Table 1: Percentage rise in late payments – by sector Days late June 2019

Days late June 2020

% change

Fishing

9.44

14.38

52.4%

Forestry

6.22

8.43

35.5%

Mining

12.66

15.99

26.3%

Public sector

9.82

12.36

26.1%

Wholesale

10.70

12.62

18.0%

Services

8.67

9.80

13.0%

Communications

10.96

12.33

12.5%

Manufacturing

11.81

13.03

10.3%

AVERAGE

10.06

10.83

7.7%

Transportation

9.69

10.31

6.4%

Retail

12.87

13.63

5.9%

Finance/insurance/real estate

9.47

10.01

5.7%

Electric/gas/sanitation

11.16

11.73

5.1%

Agriculture

8.87

9.00

1.5%

Construction

10.54

10.28

-2.5%

Table 2 – Late payments versus on-time payments – by sector On time payments June 2019

On time payments June 2020

Late payments June 2020

Mining

65%

62%

38%

Manufacturing

64%

36%

Retail trade

67%

65%

35%

Wholesale trade

67%

66%

34%

Fishing

75%

68%

32%

Construction

66%

69%

31%

Communications

73%

70%

30%

Public administration

72%

70%

30%

Electric, gas, sanitation

70%

30%

AVERAGE

72%

28%

Forestry

80%

72%

28%

Financials, insurance, real estate

73%

27%

Agriculture

71%

74%

26%

Services

76%

74%

26%

Transportation

74%

76%

24%

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

JU N 20 15 JU N 20 16 JU N 20 17 JU N 20 18 JU N 20 19 JU N 20 20

year-on-year figure jumped more than 25%. In comparison, Queensland and the Northern Territory both recorded annual increases of less than 3%, reflecting the relatively low incidence of COVID-positive cases in those communities.

Late payments – June quarter 2020

JU N 20 11 JU N 20 12 JU N 20 13 JU N 20 14

“As the economic environment in Australia continues to worsen over the remainder of 2020, we are likely to see more businesses fail to pay their bills on time...”

What this means for you As the economic environment in Australia continues to worsen over the remainder of 2020, we are likely to see more businesses fail to pay their bills on time, or fail to pay them entirely. Companies will need to understand the risk in their receivables to minimise this impact. illion achieves these insights by analysing trade information from our unique Commercial Bureau, the largest database of business-tobusiness payment information in Australia and New Zealand. To read the latest Trade Late Payments report, click here.

Prompt payments by sector Agriculture Forestry Fishing Mining Construction Manufacturing Transportation Communications Electric, Gas, Sanitation Wholesale Trade Retail Trade Fin, Insurance, RE Services Public Admin Total

*Simon Bligh CEO illion T: 13 23 33

50%

60%

70%

80%

June 2019 June 2020

FOOTNOTES: 1 https://www.news.com.au/finance/economy/australian-economy/australias-unemployment-rate-state-virus-border-closures-hurting-jobs/newsstory/f1ebbd625d892bf5b1e8666bdde97466 2 https://www.news.com.au/finance/economy/australian-economy/australias-unemployment-rate-state-virus-border-closures-hurting-jobs/newsstory/f1ebbd625d892bf5b1e8666bdde97466 3 https://www.news.com.au/finance/economy/australian-economy/australias-unemployment-rate-state-virus-border-closures-hurting-jobs/newsstory/f1ebbd625d892bf5b1e8666bdde97466

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Credit Management

Falling on hard times COVID-19 and the Big Banks’ response to financial hardship for Australian businesses By Clare Venema MICM*

In July 2020, the Government announced a further repayment deferral of up to four months on eligible business loans, for customers impacted by COVID-19.1 Following this, the Commonwealth Bank has offered support to customers on a case-by-case basis depending on individual circumstances until October 2020, when repayments are due to recommence.2 In a time where overseas political turmoil has come to the forefront with respect to international trade, the need to buy local has become more topical than ever. In a time of desperation for local small businesses, it appears as though the Big Banks are vying for the COVID-19 Congeniality prize. The words “help” and “support” are used extensively on the Banks’ websites, but will that truly be the case come October 2020?

The solutions

Clare Venema MICM

The Big Banks have offered a largely similar menu of solutions to businesses for financial relief, including loan repayment deferrals, waiving merchant terminal fees, and lending.

When the gravity of COVID-19 hit Australia in March 2020, the Big Four Banks offered the following solutions: 1. Commonwealth Bank z Reducing rates on business loans by 100 basis points. This is in addition to the 25 basis point reduction announced on 3 March 2020, which came into effect on 3 April 2020. z Supporting the Reserve Bank of Australia’s new term funding facility, which incentivises lending to businesses. z Offering a range of measures to provide further assistance to customers facing financial hardship, including: — Waiving merchant terminal fees; — Waiving redraw fees; — Waiving early redraw fees on business term deposit accounts (including Farm Management Deposit accounts); — Waiving establishment fees and excess interest on Temporary Excess products; and — Deferring repayments on vehicle and equipment finance loans, and providing tailored restructuring options.3 ➤

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

“The words “help” and “support” are used extensively on the Banks’ websites, but will that truly be the case come October 2020?” 2. ANZ z Decreasing variable interest small business loan rates by 0.25% per annum, which was effective from 27 March 2020, resulting in a 0.50% per annum reduction that same month. z All impacted customers could request a six-month payment deferral on loan repayments for term loans, with interest capitalised. z Making available temporary increases in overdraft facilities for 12 months. z A reduction by 0.80% per annum to a new two and three-year fixed rate of 2.59% per annum for secured small business loans

up to 1 million dollars, which was effective on 3 April 2020.4 3. Westpac z Providing a 2% reduction on overdrafts for new and existing customers, which was effective on 6 April 2020. z Providing a 1% interest rate reduction for small business cashbased loans, which was effective on 6 April 2020. z Deferring principal and interest repayments of business term loans for up to six months. z Waving merchant terminal rental fee waivers for up to three months.

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

z Removing establishment fees for equipment finance loans until the end of June 2020. z Continuing the additional help already available to small business customers impacted by recent disasters (such as the bushfires): — Deferred payments for Business credit cards for a period of at least three months; — Fee free redraw; — Restructuring and consolidating loans; and — Termination of a term deposit without the interest rate adjustment.5 4. NAB z Deferring principal and interest repayments for up to six months on a range of business loans including floating and variable rates, and equipment finance loans. z Providing a 200 basis point

Credit Management

z z

rate cut on QuickBiz loans and overdrafts, which was effective on 30 March 2020. Providing an additional 100 basis point reduction on variable rates for small business loans, which was effective on 30 March 2020. This was on top of a 25 basis point reduction earlier that month. Providing up to 65 billion dollars of additional secured limits to preassessed customers, with 7 billion dollars being available at the time for a fast assessment process. Providing up to 9 billion dollars in additional limits for unsecured lending for existing customers via QuickBiz. Deferring business credit card repayments. Allowing customers to request the waiving of merchant terminal fees for up to 6 months.6

Other support on offer 1. The SME Guarantee Scheme Under the Coronavirus Small to Medium Enterprise Guarantee Scheme (SME), the Government is providing a guarantee of 50 per cent to SME lenders to support new short-term unsecured loans to SMEs. The Scheme will guarantee up to 40 billion dollars of new lending. This will provide businesses with funding to meet cash flow needs, by further enhancing lenders’ willingness and ability to provide credit. This will assist otherwise viable businesses across the economy who are facing significant challenges due to disrupted cash flow to meet existing obligations. The initial phase of the Scheme

remains available for new loans made by participating lenders until 30 September 2020. The second phase of the Scheme will start on the 1 October 2020 and be available for loans made until 30 June 2021.7

businesses to fund new productions and events, to be delivered through commercial lenders and supported by terms and conditions tailored to the arts and entertainment sector.9

Food for thought 2. The Reserve Bank of Australia (RBA) The RBA announced a term funding facility for the banking system. Banks will have access to at least 90 billion dollars in funding at a fixed interest rate of 0.25 per cent. This will reinforce the benefits of a low cash rate by reducing funding costs for banks, which in turn will help reduce interest rates for borrowers. To encourage lending to businesses, the facility offers additional low-cost funding to banks if they expand their business lending, with particular incentives applying to new loans to SMEs. In addition, the RBA announced a further easing in monetary policy by reducing the cash rate to 0.25 per cent. It is also extending and complementing the interest rate cut by taking active steps to target a 0.25 per cent yield on 3-year Australian Government Securities.8 3. COVID-19 Creative Economy Support The Government’s 250 million dollar COVID-19 Creative Economy Support Package includes a 90 million dollar Show Starter Loans Scheme. These loans will be delivered as part of the Coronavirus SME Guarantee Scheme, with the Government guaranteeing 100 per cent of loan amounts. This will support concessional loans to assist creative economy

“We cannot currently predict the potential fallout for Australian businesses once the Big Banks lessen their measures of support, though we can expect it to be significant.”

We cannot currently predict the potential fallout for Australian businesses once the Big Banks lessen their measures of support, though we can expect it to be significant. However, at an individual level, we can all actively ensure the security of Australia’s economy by buying local. *Clare Venema MICM E: vene0010@outlook.com T: 0435 636 969

FOOTNOTES: 1

Commonwealth Bank, https://www. commbank.com.au/latest/coronavirus/ guiding-you-through-hardship. html?ei=HardshipGuide.

Ibid.

ANZ, https://www.anz.com.au/support/ covid-19/.

Westpac Bank, https://www.westpac.com. au/help/disaster-relief/coronavirus/.

National Australia Bank, https://www. nab.com.au/personal/customer-support/ covid19-help/business-support.

Australian government, the Treasury, “Economic response to Coronavirus: Supporting the Flow of Credit”, https:// treasury.gov.au/coronavirus/businessinvestment.

Ibid.

SOURCES: Commonwealth Bank, https://www. commbank.com.au/latest/coronavirus/ guiding-you-through-hardship. html?ei=HardshipGuide ANZ, https://www.anz.com.au/support/ covid-19/ Westpac Bank, https://www.westpac.com.au/ help/disaster-relief/coronavirus/ National Australia Bank, https://www.nab. com.au/personal/customer-support/covid19help/business-support Australian government, the Treasury, “Economic response to Coronavirus: Supporting the Flow of Credit”, https://treasury.gov.au/coronavirus/ business-investment

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

Global financial crisis V pandemic

– a Trade Credit Insurance perspective By Kirk Cheesman MICM*

There has been much debate and speculation as to what the economy is going to do into the future. ‘Economic cliffs’, ‘zombie businesses’ and ‘COVID fallout’ have been common headlines of the doomsdayers who are predicting the worst for our economy. But is this actually the case? We thought it would be interesting to look at the current economic situation and compare it to the 2008/09 Global Financial Crisis. NCI have been recording data for the past 30 years and have many insights into trends regarding insolvencies, trade credit claims, overdue payments and commercial collection activity. First of all, let’s look at companies

who have entered administration this year and compare 2008, 2019 and 2020 to date. Since March, the number of external administrations have dropped considerably against both the previous year and 2008, see figure 1. What will be interesting to see is if these numbers level out over Financial Year 2021, or if they remain lower than 2019 and 2008. We track claim activity both on a dollar value and number basis. Again, our statistics in figure 2 show that despite a jump in March, credit insurance claims have tapered off to their lowest level of incoming claims per month for a number of years and, in fact, lower than was seen in 2008 and 2009.

Figure 1: Companies entering external administration 1050 945 840 735

Number

630 525 420 315 210 105

2008

2019

r be

De ce m

er Oc

No ve m

be pt em

2020

to b

t us Se

Au g

Ju ly

ne Ju

ay M

ril Ap

M ar

Source: ASIC Insolvency Statistics | September 2020

Kirk Cheesman MICM

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Figure 2: Claims received

12M

148

10M

123

210 420 315 105 315 210

De De De ce ce ce m m m be be be r r r

No No No ve ve ve m m m be be be r r r

Oc Oc Oc to to to be be be r r r

2008

2019

2020

Source: ASIC Insolvency Statistics | September 2020

2008

2019

2020

Source: ASIC Insolvency Statistics | September 2020

2008

2019

2020

Source: ASIC Insolvency Statistics | September 2020

148 148 123 148

10M 8M 10M

123 98 123

8M 6M 8M 6M 4M 6M

98 74 98 74 49 74

4M 2M 4M 2M 0 2M

49 25 49 25 0 25

March

April

May

June

July

August

March

April

May

June

July

August

March 2008 ($)

April 2009 ($)

May($) 2020

June (#) 2008

July 2009 (#)

August 2020 (#)

2008 ($)

2009 ($)

2020 ($)

2008 (#)

2009 (#)

2020 (#)

2008 ($)

2009 ($)

2020 ($)

2008 (#)

2009 (#)

Source: 2020 (#) NCI

Figure 3: Outstanding Claims (Jan 2008 - Aug 2020) Figure 3: Outstanding Claims (Jan 2008 - Aug 2020) Figure 3: Outstanding Claims (Jan 2008 - Aug 2020)

900 900 800

Number Number Number (#) (#) (#)

A u Au Au gu gu gu st st st S e S e Se pt pt pt e m em em be be be r r r

J Ju Ju ly ly uly

J J ne une une

ay M ay M ay

12M 10M 12M

Value Value Value ($) ($) ($)

Credit Management

Figure 2: Claims received Figure 2: Claims received Figure 2: Claims received

12M

Source: NCI

900 800 700

Number Number Number

800 700 600 700 600 500 600 500 400 500 400 300 400 300 200 300 200 100 200 100 0

F F b- eb- eb0 Ju 08Ju 08 Ju 8 l l l De -0D8 e -08De -08 c c c M -0M8 -08M -08 ay ay ay 0 0 Oc 9Oc 9 Oc 09 t t t M -0M9 -09M -09 ar ar ar Au -1A0u -10Au -10 g- g- gJa 10Ja 10 Ja 10 n- n- nJu 11Ju 11 Ju 11 n n n No -1N1o -11No -11 vv v Ap -11Ap -11Ap 11 r-1 r-1 r-1 Se S2e 2Se 2 p p p Fe -1F2e -12Fe -12 b- b- b1 1 1 Ju 3Ju 3 Ju 3 l l l De -1D3 e -13De -13 c c c M -1M3 -13M -13 ay ay ay Oc -14Oc -14 Oc 14 t t t M -1M4 -14M -14 ar ar ar Au -1A5u -15Au -15 g- g- gJa 15Ja 15 Ja 15 n- n- nJu 16Ju 16 Ju 16 n n n No -1N6o -16No -16 v- v- vAp 16Ap 16Ap 16 r r r Se -1S7e -17Se -17 p- p- p1 1 Fe F7e 7Fe 17 b- b- b1 Ju 18Ju 18 Ju 8 l l l De -1D8 e -18De -18 cc- cM 1M8 18M 18 ay ay ay Oc -19Oc -19 Oc 19 t t t M -1M9 -19M -19 ar ar ar Au -2A0u -20Au -20 g- g- g20 20 20

100 0

Outstanding Claims

Source: NCI

Outstanding Claims

Source: NCI

Outstanding Claims

Source: NCI

Figure 4: Incoming collection matters Figure 4: Incoming collection matters Figure 4: Incoming collection matters

500 450 500 500 400 450 450 350 400

Number Number Number

Information in figure 3 highlights the extremes seen in the financial crisis of 2008/09. There was a large rise in outstanding claims during that period which did not ease until 2011. Since 2015, outstanding claims were on a slight increase, but our stats show that after March 2020, claims dropped by 60% when compared to August 2019. So, at this point in time, our information suggests that business conditions may not be as bad as they seem… but will the ‘mountain’ of claims grow again in 2021? We collect and monitor overdue debts in two streams: 1. The number and volume of requests to collect overdue debts; and 2. The recovery rates once a demand letter is sent to an overdue debtor Since March, the recovery rate actually improved during April, May and June although it has dipped in July when compared to 2019. Collection matters have also slightly tapered off after an initial boost in April and May, see figure 4. Our current collection “work in progress” activity is lower than previous years, again pointing to the conclusion that either businesses are not placing pressure on debtors to collect overdue monies, or, quite simply, there is not as much overdue debt to collect as people are fearing. We expect there are many challenges to come with regard to managing in a COVID world and future government reactions. However, at this moment in time, our statistics demonstrate that the market has stabilised and future modelling is simply that, modelling. No doubt there will be some ‘normalisation’ to come, but the continuation of government support and stimulus will maintain a steady approach to managing businesses and their solvency levels. Will we see the dramatic increase in claims in 2021 as we did in 2008/09? Only time will tell.

M M ar ar ar ch ch ch

105 0

A p Ap Ap ril ril ril

0 210 105

400 300 350 350 250 300 300 200 250 250 150 200 200 100 150 150 50 100 100 50 50

March

April

May

June

July

March

April

May

June

July

August August

March

April

May

June

July

August NCI Source:

2019

2020

2019

2020

Source: NCI

2019

2020

Source: NCI

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

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

Trade payment data: The true business barometer By Patrick Coghlan MICM*

If we could predict the future, 2020 wouldn’t have upheaved our lives in such a dramatic fashion. Trade payment data is the next best thing creditors have to a crystal ball: it’s insightful, on-demand and incredibly telling of a company’s propensity to pay you in full and on time.

Get the full picture of the customers you’re dealing with A business’ payment history is a powerful indicator of their cash flow, financial status and how they treat their suppliers. It pays to pay attention – literally. In the last six months, plenty of businesses have been propped up by government stimulus packages and support measures. It’s become increasingly harder to spot the businesses that are in distress, and this is where trade payment data demonstrates its true value. If your invoices aren’t getting paid and your customers aren’t trading as frequently as they used to, it’s an early warning sign your business could be the next to suffer.

Which industries are the ones to watch?

Patrick Coghlan MICM

Each month we publish our Small Business Risk Review, which is based on payment data that’s unique to CreditorWatch. We gather trade payment data from a database of more than 50,000 businesses,

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

including both SMEs and corporate entities. This research looks across individual industry sectors and assesses how payment times are changing on an annual basis. Our August figures indicate that of all sectors, payment times for financial services have deteriorated the most year-on-year, with payment times increasing by a huge 657 per cent in August this year compared to August 2019. This data is a canary in the coal mine and indicates smaller financial services firms are under pressure. Over time, this is likely to put pressure on the bigger banks. After financial services, education and training is the second-worst performing industry sector, with payment times rising by 650 per cent year-on-year. The mining industry was the only one to buck the trend with payment times improving 12.5% year-on-year.

The state of the economy Where once we talked about a twospeed economy between the mining and non-mining states, the latest payment data shows Australia now has a multi-speed economy. States such as Western Australia and Queensland are moving ahead, while economic conditions in Victoria are extremely soft. Other states such as NSW, South Australia and Tasmania are somewhere in the middle.

Credit Management

Average Days Payment Overdue – Industries Ranked from Top to Worst Payers 100 90 80 70 60 50 40 30 20 10 0 s s s s s s s il e n g ty es ns ce ng ta ing ing ad ice ice ice ice ice ice ice fe tio io sin an ini vic ur sh Tr Re rv rv rv rv rv rv rv at uc Sa ou ra ist e e er e e e e e r ct c Fi e i t h l s T a & S S S S S S S S f s e a l t r ns n e n un te te y& ar nu od lA n& or les m he ica nc tio tio Co ta as W str m Fo Ma ra ho tio pp cia Ot ra hn & W Es ea o re t u a u o c r & l l c s s W c o S & c S a n u Te le ta In ini ,F er Re Re & & Te os tio Ed e& e& re at & dm & ar ,P da fic s& tiv ial A W i t ltu g t a C o a c t r i , r u r n n n ic h m A ri st as po ed ric bl na Hi alt cie ini ns om ,G Fi Pu Ag nM m ra He ty al, l, S cc i o t T d i a c A n n A at tri io Re rm ec ss fo El fe n o I Pr g nin Mi

2019 August 2020 August

Across the board, our trade payments data indicates there’s been a slight improvement between June and July across the country, and only a day difference between July and August. But almost all industries have experienced a significant deterioration compared to the same time last year. This has implications for the financial services sector as banks are likely to bear the brunt of the inundation of insolvencies that are likely to snowball in January 2021 when safe harbour provisions come to an end.

SME data is a powerful predictor of financial distress Small businesses make up 98% of Australia’s workforce1, but are often the last to get paid. When a business stops paying their non-essential suppliers, it’s an early warning sign the debtor is in financial distress. CreditorWatch gains an exclusive look into the treatment of Australia’s SMEs. Through our innovative tools and accounting software integrations,

small businesses provide our bureau with payment data you won’t find anywhere else. This data feeds into our credit reports, so you can better assess a business’ payment behavior and compare it to others in the industry. Remember: sluggish payment activity has the potential to start an avalanche. If you’re not paying attention to trade payment data, you run the risk of being buried. At a time

when zombie businesses are rife, it’s one of the most valuable assets you can use to protect yourself.

*Patrick Coghlan MICM CEO, CreditorWatch T: 1300 50 13 12 www.creditorwatch.com.au FOOTNOTES: 1 https://www.asbfeo.gov.au/sites/default/ files/documents/ASBFEO-small-businesscounts2019.pdf

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

Preparing small businesses to survive post-JobKeeper Preparation will be the key for SMEs, who must have the funds in place to survive the COVID-19 recession. By Jane Starkins*

Jane Starkins

Given the broad concern about a potential tidal wave of insolvencies within the Australian small business sector, business owners need a clear plan to get money back into their enterprises. JobKeeper ended in September for many businesses, while for others the assistance has been extended through to March 2021. The Federal Government has also extended temporary insolvency and bankruptcy protections through until December 31. This reprieve will provide time, but time needs to be used wisely. So many businesses have been living on the edge due to COVID‑19; even with JobKeeper support, their deferred expenses have been accumulating. The businesses more likely to survive are those who use the next three months to get ready – who put in place systems and funding that allow them to pay staff without JobKeeper support, make loan repayments and take care of ATO and supplier debts. Businesses who spend

time now leaning into their future challenges will be better placed to have a future.

The business owner’s mindset Under JobKeeper 1.0, insolvencies were at a third of their normal level. The ATO is not enforcing their rights to wind up SMEs, landlords have been deferring rent and creditors are not readily able to enforce unpaid debts. The impact of this is SMEs are not drawing down debt. One possible reason is business owners are only paying for things they currently are being made to. This is a dangerous mindset. The real world, post-JobKeeper, will hit hard. Many lenders require an annual review and an underutilised facility line may have a lender questioning whether the quantum of that funding line is really needed. This could mean businesses have less access to essential working capital funding right at the time they need to start restocking and reopening.

“So many businesses have been living on the edge due to COVID-19; even with JobKeeper support, their deferred expenses have been accumulating.”

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Credit Management

The strongest businesses will be those that take action and take charge – by using this “payment holiday” as an opportunity to create new efficiencies within their business, to right-size, or enter new markets, or refine their offering to only sell goods and services that are profitable or that at least break even. Not taking these actions is simply kicking the can further down the road. There could be many reasons for this “can-kicking” – denial, being overwhelmed by the situation, or clinging to hope that more Government help will solve their crisis. Deferred debt is adding up, so it is vital for SMEs to quickly work out the cost base of operating in this ‘new normal’. In particular, if their cost base is too high, they need to act as soon as possible to reduce costs and find ways to pay their debts. Advisers can help business owners bite off this task in small chunks so it’s not one overwhelming debt. SMEs don’t need complicated analysis models. It’s about helping them work out what they’ve deferred and what they’ll need to catch up on. If it hasn’t already been done, now’s the time they should be creating a payment plan. Just as the early bird gets the worm, the early businesses may get the better (longer) payment plans.

Find out if there’s a funding gap It’s crucial for businesses to have a clear understanding of whether they face a funding gap. There are three key questions that can help business owners find out: 1. What support will I lose, and has my business got the cash available to replace it? 2. What payments have I deferred that I have to make after JobKeeper ends? 3. Do I have pressing creditors ready to take action against me once they are able to?

These answers will help guide whether a business needs extra funding to create essential working capital – or whether the debt mountain is too great to climb. It’s essential for business owners to know this early; having no plan is a bad plan. Extending credit to a planless business is like owning a ship

without a navigation system or map. It might return safely to harbour, but only with luck on its side. Ensuring the business remains viable, and stopping debt accumulation if it’s unviable, is critical. Particularly if current funding lines are tied to the owner’s family home. At some point, the value of ➤

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

Seek new paths to finance

the family home stops growing, and with that, so does a company’s debt capacity. There can be a better way. A growing number of SMEs are using Invoice Finance – a funding line secured by business assets such as unpaid invoices. This brings forward payment of invoices so that the business has cash in hand. Many SMEs benefit from this style of funding, with its quicker approvals and flexibility, rather than risking further exposure by taking on more loan repayments or using the family home as security. It’s also a style of funding that puts cash back into a business, which is crucial if payment times are lagging. ScotPac’s March 2020 SME Growth Index, which surveyed 1200 small business leaders, found it takes SMEs 56 days on average to get paid. At any one time they have almost a third of their revenue tied up in invoices outstanding. The spread of debtor days reported in the SME Growth Index ranged from 7 days to a challenging 134 days. The pressure is really being felt by smaller businesses – those with $1-10 million revenue were waiting on average 66 days to be paid.

This type of scenario is where smart business owners use funding solutions that release immediate cash into the business while at the same time provide professional accounts receivable services, which relieve them of the burden of debt collection, giving them precious time to work both ‘in’ and ‘on’ their business. It is notable that almost one in 10 SMEs can’t state their average debtor days, with some struggling to calculate the figure because invoice payments are too variable to reliably report. This level of variation provides another real stress for business owners, who need to pay wages on a set date. Taking charge of what’s in our control, like ensuring funding is available for key payments, is one tip we give SMEs to help ease the load.

Businesses concerned about taking on debt should also be concerned about how they’ll be paying their bills. Not paying bills doesn’t mean the debt does not exist. All unpaid bills and deferred expenses are real debts that need to be paid: ‘deferred’ does not mean ‘forgiven’. Business owners are understandably reluctant to extend their borrowings. This makes it an ideal time for them to find new funding paths that harness the value of assets already existing in their business, such as sales invoices or plant and equipment. Just because a traditional banking facility may not work in the current environment, does not mean that business owners don’t have options. There are reputable asset lenders ready to lend to SMEs using business assets to secure funding. Our most recent SME Growth Index asked small business leaders why they borrowed against personal property and credit cards. The results highlight that one in five SMEs feel locked in to using personal property because it is the only asset their lender will take, and almost one in 10 are using personal credit cards for business expenses because they cannot source any other finance. Around nine out of 10 SMEs borrow against personal property – even though SME Growth Index research shows only 5.5% of respondents listed property as their preferred option to secure business lending. It’s time to protect the family

“The spread of debtor days reported in the SME Growth Index ranged from 7 days to a challenging 134 days. The pressure is really being felt by smaller businesses – those with $1-10 million revenue were waiting on average 66 days to be paid.”

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Credit Management

home by unlinking it from a business’s debt. To ask a business owner to sell their family home to pay their outstanding amounts is a step very few want to take in these tough times. For the past six years of SME Growth Index research, there has been a continual trend towards SMEs using non-banks rather than their main bank to fund their growth. In March 2020, non-bank funding across the overall SME segment reached a new high of 20.2%, against 17.8% of the whole SME cohort who will fund growth via their main relationship bank. More than ever before, business owners should partner with the provider who is right for them. Serious consideration needs to be given to finding the finance company that will help a business achieve its goals. Does the lender understand the business? Are they able to decide on funding requests quickly, even within 24 hours? What are the values of the funder and their relationship manager? If they are aligned to the SMEs’ values, it will be easier to reach a compromise when end goals do not align. Does the lender truly support the business growing? If so, access to cash can grow with the business, not with the value of the business owner’s

“More than ever before, business owners should partner with the provider who is right for them. Serious consideration needs to be given to finding the finance company that will help a business achieve its goals.” home. Does the lender trust the business to make the right decisions? If so, there may be no covenants or restrictions on when profit needs to be made and what the owners can spend. The SME Growth Index shows when it comes to selecting a funder, SMEs want speed and ease. Nine out of 10 respondents said the top factor was finding a lender who can offer them uncomplicated paperwork and the least burdensome administration. Time-poor small business owners also prioritised fastest credit approval (nominated by two out of three) and ongoing customer support and service (one out of three) rather than just a ‘set and forget’ loan. This is contrary to traditional thinking that small businesses choose lenders based on lowest overall fees, charges and interest rates, which was the most important factor for only one in four SMEs.

Fastest access to credit actually available in their account is extremely low on the business owner’s wishlist, with only 3% naming it their top priority. This suggests many SMEs are more focused on getting guaranteed credit approval to use when and if the need arises.

Keep on going COVID-19 has made 2020 an extremely tough year for so many businesses. Many need a cash injection to get back on track but feel like they’ve exhausted all avenues. Going to their customers to ask for higher credit limits with longer terms is an unfair and unsustainable ask. SMEs should be encouraged to find the right funding package that suits their business and encouraged to set themselves up with the right solutions and partners who are committed to helping them survive, and then thrive, through our ‘new normal’. Business owners are known for their resilience. Those who are thinking now about how to fund their future are the ones who will successfully navigate this storm.

*Jane Starkins General Manager, Victoria & Tasmania ScotPac E: starkinsj@scotpac.com.au T: 1300 207 166 www.scotpac.com.au Jane Starkins is General Manager Victoria for ScotPac, Australia and New Zealand’s largest non-bank SME lender. A qualified Chartered Accountant, she has Big Four bank and accounting experience and a passion for helping businesses turn things around. ScotPac and ASBFEO have created a free download Business Funding Guide which outlines all the major SME funding options and what scenarios they suit.

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Credit Management

Artificial intelligence: Driving cash flow improvements across the credit-to-cash cycle By Michael Shields*

Michael Shields

There is a lot of talk about Artificial Intelligence (AI) these days, especially in the collections arena. But what constitutes AI and is it really beneficial? What about teams that are highly functioning without using AI? The short answer is: Yes, it is beneficial, even for those teams that are performing well. Everyone that is selling and leveraging credit terms is capable of improving results. Let’s start with a simple understanding of what constitutes AI. AI is the machine’s ability to learn and adapt without human intervention to continue to improve and obtain optimal results. This is a fairly vague statement, but it contains some key elements for defining AI. First, the machine’s ability to learn indicates that the machine can monitor some key data, action or process and understand what makes it good or bad. Second, the machine can take action without a human telling it to take that action. Now, this can be a little scary for people. Trusting that a machine is automatically taking the appropriate action. Lastly, the

machine is continuously improving. This statement indicates that there isn’t one correct answer. Things change over time and so the AI engine must adapt to continue to achieve optimal results. Given that AI is a relatively new approach to solving an old problem of an ever-changing environment, people are understandably hesitant to trust the machine making decisions on its own. Of course, movies are making matters worse, by showing the worstcase scenarios of AI running amuck. The reality is that AI can monitor more data than any individual or team of individuals can, to make accurate decisions within seconds. Leveraging AI across the full credit-to-cash cycle affords greater combined benefits than simply applying it in one or even a few areas. For simplicity’s sake, let’s look at each area individually. Ask any credit manager how they view their world, they will tell you it is a combination of science and art. Loosely translated, there are so many potential data elements involved in assessing

“Leveraging AI across the full credit-to-cash cycle affords greater combined benefits than simply applying it in one or even a few areas.”

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Credit Management

“AI in the dispute and deduction processes helps to identify and assign reason codes or categories allowing for root cause reporting and allows for prevention measures to be implemented.” appropriate credit risk, one standard formula just does not provide enough information to make a sound decision. They may use a basic set of standard scores to give them a level of comfort, but they cannot possibly review all data elements for each customer to truly mitigate risk. This is where AI can assist. It automatically pulls all of the necessary data. Think how much time is wasted by team members simply pulling the data to be reviewed. So much so that some companies have looked to “outsource” the pulling of the data to low-cost countries or operating units. The issue with this approach, however, is that delays are introduced in the process by adding in more handoffs and potential failure points. AI is then able to assess the internal and external data sources within seconds to determine the level of risk and automatically assign a credit line or move the request into a workflow for additional review. This provides more information for making risk decisions, speeds up the review process and frees resources to focus on more value-added tasks. Believe it or not, AI has been used in the collections area for many years. It just wasn’t marketed as AI when it first appeared. Using a collections risk score (not to be confused with credit risk), companies have been able to rely on AI to adjust strategies and prioritise accounts for optimum results. Let’s take a step back and review the evolution of collections over time. It started with companies using invoice value and age as the determining factor of how to prioritise accounts. This created a

very cyclical return on results. One month, results look great because a large invoice was collected at the end of the month. However, the next month(s) didn’t look so great because the large invoice was collected by neglecting countless smaller invoices. These invoices add up over time and become increasingly difficult to collect as they age. The next step in evolution was the introduction of strategies, which helped standardise the collections approach, spreading the focus equally among invoices. While results significantly improved with the introduction of strategies, they tended to plateau. Teams were left searching for how to capture the incremental improvements that would continue to improve cash flow. This is where AI was introduced. Looking at internal and external data sources, such as payment history and trade credit bureaus, an AI engine is able to predict the likelihood of a customer becoming delinquent 60 days in the future. Using that predictive view of accounts, the AI engine is able to assign a more granular risk profile and automatically adjust the strategies used for each customer and the prioritisation of those accounts to prevent them from becoming delinquent. Introducing the AI engine provides companies with the incremental improvements that have been eluding them with previous processes. AI in the dispute and deduction processes helps to identify and assign reason codes or categories allowing for root cause reporting and allows for prevention measures to be implemented. Additionally, the AI

engine can automatically approve the disputes and deductions, based on predefined criteria, or automatically route them for resolution through advanced workflows. This accelerates the resolution cycle time and increases overall cash flow improvement. Generally, deductions are identified during the cash application process. Leveraging AI during cash application increases the first pass hit rate of auto-applying payments to invoices. The AI engine is able to recognise remittance layouts to read and digitise the instructions for applying payments. Additionally, the AI engine improves hit rates over time as it learns from the exception processing of cash appliers. By monitoring how a user resolves an exception, the AI engine learns where the information used was located on the remittance and thereby learns how to apply future payments from that customer. By reducing the backlog of unapplied payments, all upstream processes (credit lines relieved timely, collection queues updated in real time, disputes resolved) benefit by creating more time for resources to focus on activities that drive cash flow. Implementing AI in any area will help improve results. However, implementing AI across credit-tocash will improve collections, credit risk, dispute resolution and cash application in addition to increasing increase cash flow. It will help your team uncover the incremental improvements that are sustainable over the long term.

*Michael Shields Business Line Executive, Receivables FIS Global For more tips on how credit and collection teams can leverage AI to optimise their process, please visit our website or contact: Varun Cherian T: +61 3 9982 5558 M: +61 430 558 859 E: Varun.Varghese@fisglobal.com www.fisglobal.com

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Leadership and High Performance

‘Employee Experience’:

Looking after your Credit team in the COVID-19 Environment By Nikki Dennis MICM*

Nikki Dennis MICM

The year 2020 is shaping up to be a defining moment for the future careers of credit professionals. With the onslaught of COVID‑19 and the challenging knock-on effects, how you respond as an organisation during this pandemic will predict the engagement, productivity, well-being, and commitment of your credit team well into the future. Employee experience, engagement and well-being should be taking centre stage. Yet, whilst much emphasis has typically been placed on ‘customer’ experience and engagement within organisations, sometimes the ‘employee’ experience takes a back seat. And sometimes the credit function itself slips down the priority list. Not so now. Worldwide, the current pandemic has well and truly thrown the spotlight on credit departments and professionals, as organisations scramble to free up cashflow, keep the lines of credit flowing, manage the increased risk and recover monies in a precarious economy. Many credit professionals have experienced economic challenges previously, but this crisis has already proven far worse than the

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

global financial crisis-led recession in 2009. In fact, the International Monetary Fund has predicted that the coronavirus-driven recession will be the most severe global economic downturn since the 1930s Great Depression. So, what does all of this mean for us in Australia? According to figures released by the Australian Bureau of Statistics (ABS) earlier this month Australian Gross Domestic Product (GDP) fell 7.0% in the June quarter, the largest quarterly fall on record. This follows a fall of 0.3% in the March quarter 2020. Further shockwaves were felt with employment falling 5.4%, between March and June and hours worked falling 9.8%, with April and May seeing many people having their hours reduced or being stood down*(1). As Australia faces its worst recession on record, many of today’s credit professionals are experiencing unprecedented challenges within their role. But how well are their needs being met in terms of protecting their own well-being, building resilience, keeping them connected and engaged during remote working conditions, and securing their own career into the future?

Leadership and High Performance

What does ‘good employee experience’ look like for credit professionals in the current environment? Put simply, ‘employee experience’ relates to what employees encounter within your organisation across all touch points including things like induction, workspaces, technology and tools, communication, and leadership. A good overall employee experience can lead to better engagement often measured by how involved and active they are in their role and workplace and how much they ‘like’ what they are doing. From a well-being perspective, how well they feel supported physically, emotionally, and mentally in the context of a work environment also plays a big part. Prior to COVID-19, the ‘employee experience’ was clearly defined by what took place within the organisation. Now with many working remotely, the boundaries between home and work life have become blurred. Many are juggling work

roles with being a partner, a parent, a teacher, all at a minute’s notice. So how do companies and their leaders navigate this change to take care of their credit staff? Firstly, to start to answer these questions, it is important that organisations and their executive leadership team understand how the current COVID-19 environment may be affecting the roles of credit professionals and the daily challenges they face. Only then, can we look at how we can engage a ‘positive’ employee experience framework to create better engagement for improved outcomes.

Daily challenges credit professionals may encounter in current COVID-19 environment: z Marked increase in payment times – Cashflow is the lifeblood of any business and in times of economic stress there is a requirement to free up more to help keep businesses afloat. The problem is that as many businesses

experience their own cash flow issues there is a knock-on effect of dragging out payment for as long as possible. Recent figures from CreditorWatch show a whopping 242% increase in average payment times from July 2019 to July 2020 with Rental and Hiring, Financial and Insurance Services, and Transport and Warehousing reporting increases of as much as 700%*(2). There could be several reasons for these concerning figures including creditors being more lenient in chasing outstanding accounts in the current climate, being wary of media backlash or damages to brand, the courts being closed for a while, or the insolvent trading moratorium. Whatever the reason though, this poses an added challenge for credit teams as payment times blow out and they struggle to meet outdated targets. There is an urgent need for targets to be reassessed and realistically achievable to avoid demotivation and burnout amongst your team. ➤

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Leadership and High Performance

z More challenging calls with customers – Many customers are experiencing increased vulnerability through direct or indirect effects of COVID-19, either by them or a family member contracting the virus or suffering the effects of job losses and decreased income as a result of lockdown measures. Add to this the mental pressures of remote working, isolation, stress, and financial hardship and you have some very challenging conversations that credit professionals are having to deal with. It is important therefore that credit and other specialised staff such as those in hardship and customer advocacy teams are equipped in effective debriefing strategies following a call to enable them to

process their own emotions in a safe environment. A high priority should also be placed on resilience building strategies. z SME’s facing hardship – The COVID-19 environment and subsequent lockdowns have resulted in many businesses suffering hardship or worse closing their doors. Unfortunately, as the JobKeeper wage subsidy is wound back, more businesses are likely to be affected. A Bureau of Statistics survey found that nearly a quarter of businesses currently receiving coronavirus support expect to close once the support is withdrawn. Whilst many credit professionals are well versed in helping consumers facing

hardship this emerging trend of small businesses needing specialised assistance and support is a very different conversation for them to have. Organisations need to ensure their credit teams are upskilled in knowing the right discovery questions to ask a small business owner to get the best outcomes possible for both parties. z Increased pressure from sales departments – Sales teams are experiencing their own struggles to meet targets in an environment where many customers/consumers are tightening their purse strings. This can be particularly stressful for sales staff if operating in a commission environment and creates added

SALESCRED’S ‘POSITIVE’ EMPLOYEE EXPERIENCE FRAMEWORK

Support Open Communication

Protect

Invest

Employee Experience

Inspire

Engage Vision

Technology

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Leadership and High Performance

“Regular communication can be through team meetings (run virtually if required), townhalls, social media campaigns, with employee feedback and ideas being encouraged at all times.” pressure on the credit team to accept new business and lines of credit. Organisations should place a priority on ensuring alignment between sales and credit strategies and facilitate clear communications between the different departments. This is especially important in a crisis to avoid conflict between the teams and added stresses for your staff which will adversely affect the employee experience for all. If this sales/credit alignment was not there before COVID-19 hit then it may be challenging to achieve, particularly in a remote working environment, but not impossible. There needs to be top down buy in, starting with leadership meetings conducted to facilitate understanding of companywide objectives and how

that translates to both the sales and credit teams’ targets and objectives. Then, regular communication between the teams should be encouraged to build rapport and create understanding. z Increased call volume putting a strain on existing resources – Many credit teams are struggling to handle the increase in inbound hardship related calls and the amount of outbound customer calls to follow up overdue accounts. Organisations that are on the ball need to focus on early intervention strategies as the debt becomes much less likely to be paid the older it gets. If companies don’t address resourcing issues accordingly, then credit staff face exhaustion, burn out and

disengagement. If the cost of taking on full time employees is prohibitive then outsourcing early collections can be a viable and effective alternative. z Remote working – Home/work life balance is increasingly hard to achieve – Prior to COVID-19, about 1 in 3 Australians worked from home on a regular basis (*3). In our current COVID‑19 environment, a Gartner HR survey reveals as many as 88 per cent of organisations have now encouraged or required employees to work from home due to coronavirus. It is estimated that once the current crisis is over many more people will remain working from home than previously. This is making the home/work life balance increasingly hard to achieve for many credit professionals resulting in increased stress and workload. It is imperative that organisations support individual credit staff in this new environment, offering flexibility in working times where possible and collaborating with employees to help them balance competing priorities at home. ➤

NCI, more than just trade credit insurance Leverage our information on more than 1 million businesses around Australia, and educate yours.

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

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How to create a ‘POSITIVE’ employee experience framework for Credit Professionals in today’s environment

Protect – Protect your employees well-being, mental health and build resilience within a work context. Look for signs that all is not well: — Body language People can share a lot about their emotional and mental well-being through non-verbal communication and changes in demeanour and behaviour. This is trickier to pick up on in a remote working environment but may still be noticed in video calls. Sometimes if people are stressed, they may rub their head, or temples, wring their hands, fidget, or scratch. They may appear unkempt, not take as much pride in their appearance and hygiene. — Tone of emails Often if people are stressed, they become irritated easily. This can come across in the tone of emails. There may be a lack of pleasantries and emails could be short and appear rude. Of course, this may just be down to poor email etiquette which can be addressed by some training and coaching but if you notice sudden changes in communication style this could be an indicator something is wrong. — Speed in which employees respond’ If an employee is usually timely in their response and suddenly response times are becoming

more drawn out and sporadic, then this can be a sign they are becoming overwhelmed. — Productivity fluctuations Some are to be expected and can be normal during a time like this. Be realistic in your expectations and reduce the pressure on employees. If however, there is both a drop in performance and change in behaviour then you could ask ‘How’s it going working from home? Is there anything else I can do to help ease some of the stress?’” What makes this situation particularly unique is that we are not just looking at economic impacts on employees, but also have to consider the personal, social, physical, and mental challenges that are by-products of COVID-19 and the associated lockdown measures. Remote working conditions, home schooling, media bombardment surrounding the virus and associated health risks, stressing about job loss, and increased mental stresses from isolation, including depression and anxiety, all threaten to affect your employee’s well-being. These factors are why many organisations are placing a priority on well-being and resilience training which is particularly important for credit professionals and collections staff in their challenging roles.

Open communication – Ensure transparent and open communication and connect regularly with your teams Regular communication can be through team meetings (run virtually if required), townhalls, social media

“Often if people are stressed, they become irritated easily. This can come across in the tone of emails. There may be a lack of pleasantries and emails could be short and appear rude.” 32

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

campaigns, with employee feedback and ideas being encouraged at all times. Arrange regular one-onone check ins and ask open-ended questions such as ‘How is the new remote working arrangement working for you?’ rather than closed questions with a yes/no answer – this will help you better gauge what might be going on. It can be hard in remote working environments to maintain relationships with employees so be inventive. Set team challenges, have virtual coffee mornings or Friday drinks. Send gift packs to show you care. It doesn’t have to be expensive, just something to show you are thinking of your team. Even a nice thank you or appreciation email to the team can go a long way to improving morale. Create daily or weekly videos to share with your team outlining expected goals and or achievements or share a good news story.

Support – Provide both internal and external support for employees Ensure Team Leaders are supported properly to do their job. Provide them with training, toolkits, and conversation guides to help them engage the team. Ensure credit staff are supported fully in their role by providing them with customer engagement, conflict resolution and hardship training to enable greater ownership of their role and improved confidence in handling challenging calls. Refer employees to internal Employee Assistance Programs and know the external support services that you can refer them to if required such as Lifeline and Beyond Blue. Remember, no credit professional is expected to be a counsellor to either staff or customers, there are experts for that. Just do the best you can do within your role to listen, assist, support and refer where necessary.

Leadership and High Performance

Vision – have a clear vision and

support their career development Your employees are your greatest asset so invest in them, if you don’t, then beware, a competitor may. Going hand-in-hand with quality training is a good internal coaching program. Provide regular feedback and on the job coaching and your staff will thank you for it both in terms of increased engagement, commitment, and productivity.

objectives for your team Ensure that you communicate the vision and objectives at every opportunity tying them to performance outcomes, rewards, performance reviews. Often company values and visions are shared but it is equally important to have do this at a team level. It serves as a set of rules to follow so everyone knows what is always expected of them, no surprises. It also creates a shared purpose and identity within the team.

Technology & Tools – Provide employees with the right technology and tools to do their job Outdated and ineffective systems can double the work for people and performing repetitive manual tasks can eat up valuable time and easily lead to job frustration, increased stress, and boredom. Providing credit professionals access to important credit risk and credit watch tools can enable them to make better decisions leading to improved overall results and job satisfaction. Similarly, providing them with strong reporting tools will help them report easily on the desired outcomes.

Inspire – Encourage strong leaders who are mentors to employees Ensure leaders are good listeners and respond accordingly to the needs of employees. They need to be good role models and practice what they preach. Invest in leadership training and coaching programs that include emotional intelligence and soft skills training to improve conversations with their teams.

Engage – Find out what motivates and inspires your employees Walk in their shoes, do they need flexibility in their working conditions? Maybe they are home schooling during the day and can log in after 8pm, can tasks be performed then? Conduct employee surveys and encourage regular catch ups such as daily team huddles. A good strategy is to keep huddles short, upbeat, and preferably have them at the start of the day. Don’t be too serious, have a laugh with your team. Encourage sharing but in a positive way, you want to avoid situations where everyone starts whinging and you end up down a rabbit hole of negativity. One way is to encourage

the team to share one thing that they’re grateful for, or one positive thing about a team member or a good thing that’s happened that day or week. Such meetings can set the team up for a positive and productive day and help them feel connected despite working remotely. The employee experience for credit professionals has changed considerably over the past 6 months with economic stresses sometimes widening the scope of their role and increasing their workload. Further impacts to their working life have been experienced through remote working conditions and the heightened anxiety around COVID-19 and its associated impacts to health, well-being, and the economy. For these reasons, leaders need to rethink how they can create and maintain a positive employee experience into the future. If you don’t act now to look after your valued employees, someone else will!

*Nikki Dennis MICM Managing Director SalesCred T: 0437 652 562 E: nikki@salescred.com.au

REFERENCES: *(1) A Series of unprecedented events – the June quarter, 2020 (ABS). *(2) CreditorWatch – The Economic Road Ahead – Perceptions and insights *(3) Australian Bureau of statistics data analysed in 2016

“Outdated and ineffective systems can double the work for people and performing repetitive manual tasks can eat up valuable time and easily lead to job frustration, increased stress, and boredom.”

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Leadership and High Performance

Psychological Safety - Mental Health

– what’s the difference? By Jo Marshall*

I’m asked that question a lot. We all know employers have a responsibility to provide a safe workplace. This means safe from physical harm, and also psychological harm. Many employers have taken a very physical approach. Only recently are we (in my humble opinion) beginning to see and understand that Psychological Safety is a thing. Let’s start with the term most people understand and use. For years we’ve been talking about mental health in the workplace. We respect that in terms of ‘illness’ a person can be physically or mentally unwell. It’s been encouraging, particularly over the past 10 years, to see an increasing general acceptance of mental health’s ‘real-ness’ and the freedom for employees to use sick leave and the same mechanisms they have traditionally used for physical illness.

Definition of mental health 1: the condition of being sound mentally and emotionally that

Jo Marshall

is characterized by the absence of mental illness and by adequate adjustment especially as reflected in feeling comfortable about oneself, positive feelings about others, and the ability to meet the demands of daily life. In my observation and work over the past 10 years, less common has been discussion of psychological safety. Bullying, harassment, discrimination and ‘stress claims’ have been present; a lurking risk for employers who often question the validity of the individual’s claim. I could write multiple blogs about just that topic, but let’s move forwards, not back. Employers have generally assumed that mental illness is a nonwork related issue. Employers have provided supports such as Employee Assistance programs and even health and wellness strategies. These are great initiatives. But they are only great if we are addressing the reality that our employees spend almost

“It’s been encouraging, particularly over the past 10 years, to see an increasing general acceptance of mental health’s ‘real-ness’ and the freedom for employees to use sick leave and the same mechanisms they have traditionally used for physical illness.”

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Leadership and High Performance

half their waking lives at work AND that some of the causes, or at least contributors to mental health issues lie within the workplace. We must provide safety psychologically in order to prevent harm. Here’s the base facts on psychological safety. If I am required as an employer legally to provide psychological safety, what does that mean? It means a workplace ‘free from psychological harm’. 1. No harassment or bullying – that’s pretty clear – it’s also illegal. Click here for an extensive list of resources. 2. No discrimination – Also illegal. Click here But just like in physical safety, we need to take more care than just the law. We need to assess risk, identify hazards, implement controls and look for best practice. We need to respect

“Poor psychological safety costs Australian organisations $6 billion per annum in lost productivity. This is primarily because psychological injuries typically require three times more time off work than other injuries” that the ‘safest’ organisations are also the most successful and profitable. This goes well beyond the physical realm. “Poor psychological safety costs Australian organisations $6 billion per annum in lost productivity. This is primarily because psychological injuries typically require three times more time off work than other injuries” (Source: Dr Peta Miller, Special Adviser for Safe Work Australia, Safework Australia). And by the way, workplaces with poor psychological safety take 43% more sick leave.

I digress – after all of that, just what is the definition of psychological safety? Not a single major international dictionary has one, so I’ll use this one. Psychological safety is a shared belief that the team is safe for interpersonal risk taking. It can be defined as “being able to show and employ one’s self without fear of negative consequences of self-image, status or career.” (Kahn 1990, p. 708) If you’re reading this, you’re probably as interested in how you get the best from your teams, than in minimum standards. Psychological ➤

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Leadership and High Performance

“Psychological safety allows for moderate risk-taking, speaking your mind, creativity, and sticking your neck out without fear of having it cut off — just the types of behaviour that lead to market breakthroughs.” safety creates great spaces for teams to achieve high performance. And at the same time, provides inclusion and leads to greater opportunities for Equity. “Psychological safety allows for moderate risk-taking, speaking your mind, creativity, and sticking your neck out without fear of having it cut off — just the types of behaviour that lead to market breakthroughs.” (Harvard Business Review). There’s a famous study I’d like to share. In 2012 Google decided to invest heavily in figuring out ‘what makes the perfect team’. They reviewed 50 years worth of research into the topic and then mapped thousands of teams from within Google. They did all the normal demographic data such as gender, age, ethnic background and even looked into social relationships such as whether people were ‘friends’ at work and socialised outside of work. Here’s what happened – they couldn’t find any trends that suggested any particular mix of ‘who’ is in a team drives the performance of the team. So, they started looking at behaviours and group behavioural norms. It got worse – they found that some groups that were highly successful at group norms that were wildly different from others. So, the research at that point concluded that successful teams rely heavily and shared and understood group norms. They just weren’t able to define the best ones. So it was back to the research... long story short, through a combination of further research of past studies, and their own work, the researchers came up with a

common norm. The successful groups had members that described their leaders as people who made them feel ‘safe’ to give an opinion, input, disagree and so on. In fact, they found that the one common thing all team members talked about when describing their team, was how their team made them feel. Successful teams felt safe and consistent and less successful ones didn’t. And don’t be fooled into thinking safe and consistent means low risk taking, conservative or highly organised. Some teams had strong disciplines in terms of how they interacted and ran group discussions. Others were informal and allowed conversations to vary and shift track. Behaviourally the one interesting finding that differentiated the teams that succeeded was this. Irrespective of how the meeting played out, everyone at the table spoke for approximately the same time. That tells me that psychological safety is where everyone feels safe to contribute and to do so as themselves. Harvard Business School professor Amy Edmondson defines as a ‘‘shared belief held by members of a team that the team is safe for interpersonal risk-taking.’’ Psychological safety is ‘‘a sense of confidence that the team will not embarrass, reject or punish someone for speaking up,’’

Their findings on this topic were so strong that Psychological Safety was the thing that mattered MOST in high performing teams. This was followed by Dependability, Structure and Clarity, Meaning and finally Impact. You can read more here. As we wrap up this topic, a very very simple fact remains: The most important habit in providing psychological safety is to listen – listen actively, with curiosity, with respect for difference and with freedom to disagree. At Culturise we have a powerful Hack that we Call ‘The Levels of Listening and Engagement’. It is a model that was inspired by an old friend and colleague – Tanya Lacy of Intercept Experience. By defining the levels of listening and engagement we show greater respect for others in listening and we unlock our power to respond to others, and make decisions based on future outcomes, rather than old habits. The Levels creates a team language that encourages better listening and engagement, and also deeper consideration of other people’s views. The language is easy, it’s fun and it becomes habit when practiced. If you’d like to know more about the ‘hacks’ that we use with our clients to build these habits, get in touch at curious@culturise.com.au! Thanks for reading 

*Jo Marshall Chief Culturiser Culturise E: jo.marshall@culturise.com.au T: 0408 008 344 culturise.com.au

“Psychological Safety creates great spaces for teams to achieve high performance. And at the same time, provides inclusion and leads to greater opportunities for Equity.”

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Legislative Update

Are your debtors abusing ‘Temporary’ COVID-19 measures? What can you do? By Paul Hunt MICM*

Paul Hunt MICM

On 6 September 2020 the government extended the temporary changes to the Corporations Act and Bankruptcy Act until 31 December 2020. “The extension of the temporary changes to the insolvency and bankruptcy laws will continue to provide businesses with a regulatory shield to help them get to the other side of this crisis,” Treasurer Josh Frydenberg said. Introduced in March 2020, the temporary changes increased the minimum amount to $20,000 for a creditor to issue a creditor’s statutory demand or bankruptcy notice, up from $2,000 for companies and $5,000 for individuals, and extended the time for compliance with such demand or notice to 6 months, up from 21 days. Also in March 2020 the

government introduced temporary relief for directors from any personal liability for trading while insolvent. What does this mean? For many individuals and directors of companies it has been a lifeline. The number of companies entering insolvency administration and the number of individuals entering some form of bankruptcy administration has dramatically decreased. In the quarter ending 30 June 2020, compared to last year, AFSA advises that personal insolvencies have dropped by more than 35%, and ASIC advises that corporate insolvencies are down by more than 55%. For unsecured creditors, it has however meant frustration. Debts that were incurred prior to March 2020 are caught just as much as debts incurred during COVID19. (Secured creditors may be in a different position and ought to ➤

“Introduced in March 2020, the temporary changes increased the minimum amount to $20,000 for a creditor to issue a creditor’s statutory demand or bankruptcy notice, up from $2,000 for companies and $5,000 for individuals...”

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Legislative Update

consider all of their options, including what measures the secured creditor can take to take the decision out of the hands of a recalcitrant debtor).

Have you, the debtor or the Courts delayed dealing with the debt? I have heard some advisors say there is no point pursuing debtors through the courts at the moment because the Temporary Changes have made collection virtually impossible, believing the creditor is unlikely to serve a creditors statutory demand or bankruptcy notice, and even if they do – the debtor will have 6 months to respond. For me this is not a reason to delay recovery proceedings. Certainly, some debtors have taken advantage to drag out court proceedings, knowing that some courts will accept their pleas (sometimes without any evidence) that the debtor is unable to deal with

“In some instances, Courts have criticised lawyers acting for plaintiffs for pushing for their client’s legal rights during COVID-19, citing mental health issues and the need for compassion.” the matter because of COVID-19 and needs more time. More time to get a lawyer, more time to amend their defence, more time to … delay the inevitable. In some instances, Courts have criticised lawyers acting for plaintiffs for pushing for their client’s legal rights during COVID-19, citing mental health issues and the need for compassion. Mental health during COVID-19 is a serious and prevalent issue, and mental health issues are a matter that can be brought to the attention of a court and be a legitimate reason for allowing a

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

defendant more time – but it must be based on verifiable facts such as medical reports. Indeed most credit providers have hardship policies that a debtor can access, if they meet the criteria. Genuine cases ought to be treated with compassion and allowances made. Anecdotally, some Courts have heard enough. One practitioner told me a Registrar recently said to a defendant “I don’t care if your documents are in a warehouse in Queensland and you are in lockdown in Victoria with the only key, put the

Legislative Update

key in an envelope and mail it to someone in Queensland who can go and get the documents – COVID is not an excuse for not complying with Court Orders.” In some instances, COVID-19 has probably even been the reason for defendant’s not fighting and allowing default judgment to be entered.

Options when you have Judgment When judgment is entered, there are other options to Bankruptcy Notices and Creditors Statutory Demands, including writ of execution which is enforced by the Sheriff to take possession of property of the judgment debtor and sell it to realise funds. I have however found that garnishee orders have been particularly efficient at generating a result.

Garnishee Orders What is a garnishee order? It is an order that a third party (called the garnishee) who owes money to the judgment debtor, must pay it directly to the judgment creditor. Typical garnishees are banks (a bank account is actually a debt owed by the bank to the bank’s customer) and employers (net wages or salary is a debt owed by the employer to the employee), but it can be any one that owes a debt to the judgment debtor. In one recent case in New South Wales, the client was awarded judgment in the amount of approximately $35,000. The debtor had paid previous invoices so the judgment creditor sought and was granted a garnishee order against the debtor’s bank which yielded approximately $8,000. The creditor

“In some instances, Courts have criticised lawyers acting for plaintiffs for pushing for their client’s legal rights during COVID-19, citing mental health issues and the need for compassion.” thought this was OK, better than nothing, but asked if we could issue another garnishee order. There was no reason why not, and with little expectation of a result (why would they put money back into an account when there has been a garnishee order?) we served a second garnishee order about 1 month after the first one, which yielded a further $12,000. The client was delighted and asked if we could do it a third time, about two weeks later, which resulted in the final amount owing under the judgment. In another recent matter, the client had obtained a certificate of judgment in Victoria, after an arbitration decision, against a bulk billing medical practice. We considered whether we could garnish Medicare for the bulk billing, however according to the High Court of Australia in Health Insurance Commission v Peverill [1994] HCA 8, bulk billing payments payable by the Health Insurance Commission do not have the character of a debt payable to the medical practitioner, and so can not be subject to a garnishee order. Luckily the medical practice had paid previously so the client knew which bank they banked with. In this instance however the Victorian court rejected the application for a garnishee order because it considered that merely because the judgment debtor had previously paid money from an account with a certain bank, was not evidence of the existence of

“If you are unsecured or there is not enough value in the security to cover the debt, and the debtor has not sought hardship, then consider commencing proceedings sooner rather than later.”

a present debt owing by that bank to the judgment debtor. So we registered the Victorian judgement in New South Wales and were issued a garnishee order and collected the amount due under the judgment from the bank. In any case, even if a garnishee order or execution by the Sheriff does not yield a result, once the Temporary Changes cease, those that already have a judgment are going to be best placed to issue a Bankruptcy Notice or Creditor’s Statutory Demand. Further, even if the debtor seeks a personal insolvency agreement or voluntary administration, there should be little opportunity for a Trustee or Administrator (as the case may be) to question the debt.

Summary Consider if there are genuine reasons of hardship to delay, supported by evidence. If not and you have security, consider what steps you can take. If you are unsecured or there is not enough value in the security to cover the debt, and the debtor has not sought hardship, then consider commencing proceedings sooner rather than later. Once you have a judgement, consider issuing a garnishee order if you can. If you can’t garnish the full judgment debt then consider waiting until the Temporary Measures have ceased and then issue a Bankruptcy Notice/Creditors Statutory Demand.

*Paul Hunt MICM Principal Solicitor Hunts.Law T: 1300 048 687 E: p.hunt@huntslaw.com.au

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Legislative Update

Security of payments – the fundamentals By Daniel Turk MICM and Mitchell Hay*

Contractors in the building and construction industry have access to important regimes in each state and territory designed to improve cash-flow. The security of payment regimes across the country differ to varying degrees, but all retain key similarities to assist you in securing timely payments for the goods or services you provide.

Who can use security of payment?

Daniel Turk MICM

Mitchell Hay

Anybody who carries out construction work or supplies goods or services for construction can use the security of payment regime. This includes people and businesses such as: z Builders z Tradespeople z Building material suppliers z Architects and engineers z Construction site cleaners In some jurisdictions, such as New South Wales, the regime does not apply to owner-occupier contracts. You should check the legislation in the state/territory in which you perform the work to determine the applicability of the regime to your circumstances. The legislation that applies is the state/territory in which the construction work or services were performed or where the goods

were delivered. You cannot contract out of this requirement.

The process There are five main stages of the security of payment regime: z Payment claim (invoice/statement) z Payment schedule (dispute) z Adjudication and payment z Register adjudication as judgment z Enforcement

Payment claim (invoices/ statements) An invoice or statement must contain a number of features to constitute a payment claim. These requirements vary from state to state, but the most common requirements are that they must: z Identify the construction work or goods and services provided z Indicate the amount of the progress payment claimed z State that it is a payment claim made under the Act You also need to serve your payment claims in accordance with the terms of your contract. If your contract is silent on this issue, your payment claim can be served on and from the last day of the month in which the construction work took place, however only one payment

“The security of payment regimes across the country differ to varying degrees, but all retain key similarities to assist you in securing timely payments for the goods or services you provide.”

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Legislative Update

“Customers who receive payment claims have a very limited time in which to dispute the amount claimed. In many circumstances this is as little as 10 business days.” claim can be made per month per construction contract. If you regularly supply goods on credit, it is important to note that each order (even from the same customer) may be treated by the law as a separate contract. If you are unsure of this, you should seek legal advice and have a lawyer review your contractual arrangements.

Disputed payment claim (invoices) Customers who receive payment claims have a very limited time in which to dispute the amount claimed. In many circumstances this is as little as 10 business days. If a customer does dispute the amount claimed, they must serve what is known as a payment schedule. This must detail the amount they propose to pay and the reasons why this amount is less than the amount claimed. Any reason for non-payment which is not in the payment schedule cannot be later relied upon if the dispute goes to adjudication. If a customer does not serve a payment schedule disputing the claim, the amount claimed will be presumed payable by the due date (which is set by the legislation if your contract does not state one).

giving your debtor a final chance to provide a payment schedule. The application is accompanied by the materials the applicant will rely on in the adjudication, such as: z A copy of the contract z Payment claims z Payment schedule (if any) z Submissions A debtor is only entitled to respond if a payment schedule was served within the time allocated. The timeframe for response is very short. Once all materials have been supplied to the adjudicator, they then have a strict time limit in which to determine the application. Once the determination has been made, the debtor then normally has a very short time – usually five business days – within which to pay the amount determined by the adjudicator.

Registering adjudication determinations as a judgment If payment is not forthcoming within the applicable timeframe, the adjudication determination can then be registered in court as a judgment. Normally, a form will need to be completed and accompanied by a filing fee, which will vary depending on the court and the amount claimed.

Enforcement Adjudication A creditor will proceed to lodge an adjudication application if there is a dispute or the undisputed invoice is unpaid. Adjudication occurs when an adjudication application is lodged – usually by the claiming party. Some jurisdictions require you to send a further notice to your debtor before lodging an adjudication application,

Once an adjudication determination has been registered in court as a judgment, the judgment can then be enforced in any of the usual ways. Your lawyer will be able to assist you with these as some options can be complex.

Claims direct to head contractors Another option in some states, such

as New South Wales and Victoria, is the ability to have the head contractor on a construction site withhold payment to your customer. The process to commence this option differs between states, but once an adjudication determination is made, you are able to have the head contractor make payment directly to you for the amount you are owed. Crucially, if the head contractor does not comply, you may also be able to recover your debt from them. This gives you a vital second avenue of possible recovery.

Implications It is important to remember that adjudication determinations are not necessarily final judgments. Determinations can always be later challenged, and money paid to you can be claimed back as overpayments. However, the regime, if used properly, can secure your short-term cash flow to ensure that you are not forced into insolvency by long, drawn-out disputes, which are often ploys to delay or avoid payment. As each regime differs from state to state and your timing is crucial, it is important that you clarify the exact timeframes and processes with your lawyer as your circumstances dictate.

*Daniel Turk MICM Partner TurksLegal M: 0408 667 220 E: Daniel.Turk@turkslegal.com.au *Mitchell Hay Associate TurksLegal M: 0458 011 022 E: Mitchell.Hay@turkslegal.com.au

“If a customer does dispute the amount claimed, they must serve what is known as a payment schedule.”

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Legislative Update

The importance of Directors Duties By Giles Woodgate and Stephanie Wise*

Giles Woodgate

Stephanie Wise

The recently well-publicised tale of former HIH director Rodney Adler and his loan to Sydney businessman Stanley Phillip Kaftel is a cautionary tale of doing your due diligence when lending money and doing the right thing when incurring credit. It is also a general warning to company directors that the current economic climate is not an excuse to operate outside of their statutory and fiduciary duties. At the time of lending Kaftel $25,000, Mr Adler did not know that Kaftel was an undischarged bankrupt. In fact, his loan from Mr Adler was not Mr Kaftel’s first offence of obtaining credit over the statutory limit without first disclosing his bankruptcy. For his deceptive behaviour, Mr Kaftel has been sentenced to 18 months imprisonment. Why is the tale of Mr Kaftel important to note? As a response to the economic conditions caused by the COVID-19 pandemic, temporary amendments have been made to the Corporations Act which provide directors of companies with relief from personal liability for trading whilst insolvent. Those measures, which came into effect from 25 March 2020 and have been extended to 31 December 2020, apply in respect of debts that are incurred “in the ordinary course of business” if the incurring of the debt was necessary to facilitate the continuation of the business1. A great number of transactions would fall within that broad definition and receive the protection of the temporary measures. A few may not.

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We can look to the recent Virgin Australia collapse as an example of the importance of those measures. The Administrators of Virgin Australia, Deloitte, have reported that the company was likely to have engaged in insolvent trading during the period from approximately 22 March 2020 to 21 April 2020. Deloitte’s report disclosed that Virgin’s directors had a reasonable expectation of a bail out from their major shareholders or the Federal Government up to 13 April 2020, and any debts incurred during the period from 25 March 2020 to appointment are exempt due to the temporary measures. With estimated trading liabilities of $17m to $35m disclosed for the period from 18 March 2020 to 25 March 2020, the Virgin directors are presumably very grateful for that temporary relief. However, the shield from insolvent trading provided by the temporary amendments can only go so far. It is relevant to note that the statutory and fiduciary (common law) duties of directors and officers still remain in force and operational regardless of whether such a person is working from an office, from home or from a sickbed. Under Sections 180 to 183 of the Corporations Act, directors and officers of companies hold fundamental obligations to: — exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person, in the same shoes as the director or officer, and with the same responsibilities, would (Section 180);

Legislative Update

— exercise their powers and duties in good faith in the best interests of the company and for a proper purpose (Section 181). Good faith requires, as a minimum, characteristics of honesty and reasonableness; — not improperly use their position as a director, secretary, other officer or employee of the company to gain an advantage for themselves or someone else, or cause detriment to the company (Section 182); and, — not improperly use information obtained through their position as a director, secretary, other officer or employee of the company to gain an advantage for themselves or someone else, or cause detriment to the company (Section 183). Section 184 of the Corporations Act introduces a criminal offence with respect to the abovementioned directors’ duties, where a director is found to have been reckless or dishonest in breaching their abovementioned duties in respect of their good faith, use of information and/or use of position. Directors are provided with a statutory defence to breaches of

Section 180 (duty to act with care and diligence), known as the “business judgment rule”2. If the director can demonstrate that they made a business judgment in good faith for a proper purpose, that they did not have a material personal interest in the subject matter of the judgment, that they informed themselves about the subject matter to an extent they believe reasonably appropriate, and they rationally believe that the decision made is in the best interests of the company, the business judgment rule would come into effect and the directors duty under Section 180(1) would be deemed to have been met. This rule operates in respect of the duty to act with care and diligence under the Corporations Act as well as in respect of any equivalent fiduciary duties (including the duty of care in respect of a negligence liability). In Australia, there is also substantial case law which provides that, where a company is insolvent or nearing insolvency, the directors’ duty to act in good faith in regard to “the company” may include a duty to act in the interests of the company’s creditors. Directors and officers also owe various fiduciary duties to the

company which, if breached, may lead to personal liability of that director including civil and/or criminal penalties and liability for damages. Examples of fiduciary duties that a director may owe to their company include: — a duty to act honestly; — a duty to not improperly use inside information or position; — a duty to avoid a conflict of interest and to disclose material personal interests; — a duty to not abuse a corporate opportunity; — a duty of care and diligence; — a duty not to engage in insolvent trading; — a duty not to act in a misleading or deceptive manner; and, — a duty to keep proper accounts and records. The fiduciary duties of a director overlap with, and are complimented by, the statutory provisions of the Act. Lastly, directors of SMEs in particular, should not forget that there is limited protection against calls on director guarantees which are often given to lenders, landlords, lessors and major suppliers. The story of Mr Kaftel is a timely reminder that despite the uncertain environment in which we are all currently operating, directors need to ensure that when they are engaging in transactions on behalf of a company, they are doing so aware of their other duties and obligations. *Giles Woodgate Partner Woodgate & Co *Stephanie Wise Manager Woodgate & Co. E: reception@woodgateco.com.au

FOOTNOTES: 1

Explanatory memorandum, Coronavirus Economic Response Package Omnibus Bill 2020 and associated Bills, at [12.18]

Section 180 (2), Corporations Act 2001 (Cth)

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Legislative Update

The DIN is coming in!

Australia’s introduction of a Director Identification Number (DIN) regime By Edward Martin MICM and Benjamin Bronzon MICM*

Scrutiny of corporate governance and the role of directors is set to continue throughout 2020 and into 2021 as the aftermath of the banking royal commission and economic impact of COVID-19 plays out. Against that background, Australian directors and corporations now face a significant new administrative burden as the long-time-coming registry modernisation legislation passed without amendment on 12 June 2020. This will bring in a new Director Identification Number (DIN) regime.

Key takeaways

Edward Martin MICM

Benjamin Bronzon MICM

z A new Commonwealth Business Registry will be established as a contemporary centralised business register. z Every director would need to register for a DIN to receive a permanent, unique director identification number, adding a new layer of red tape to existing operations and potentially delaying new board appointments going forward, if proper planning is not in place. All directors and companies would have a keen interest in ensuring they comply with the new regime as criminal and civil penalties may apply for non-compliance. The DIN regime should drive more efficient and cost-effective insolvencies. z The new DIN regime will commence on a day/days to be fixed by proclamation (or within two years from the day the Act receives Assent) – which seems likely to be on the day the Minister

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

appoints a registrar to administer the new DIN requirements (possibly early 2021). z As soon as the regime becomes operation, a person who is appointed a director within the first 12 months of the new regime’s operation will have 28 days to apply for a DIN. However after this transitional period ends, a director must apply for a DIN prior to being appointed as a director or within any later period as may be allowed by registrar or the regulations. The DIN regime is intended to further the cause of combatting illegal phoenixing (which costs Australia between $2.9 billion and $5.1 billion annually1) but it would also have immediate impacts for all directors and companies. This is not a straightforward legislative change and, given that attempts to introduce this legislation failed before and the Government is currently fighting the impacts of the COVID-19 pandemic, the significance of this change should not be underestimated. Notwithstanding the above, there are some real practical hurdles that lie ahead with the potential to delay implementation particularly with the government distracted by the unprecedented challenges posed by coronavirus. Partner Edward Martin and Associate Benjamin Bronzon explore these impacts.

Overview On 4 December 2019, the Federal Government reintroduced the following five bills: Commonwealth

Legislative Update

Registers bill 2019, Treasury Laws Amendment (registries Modernisation and Other Measures) Bill 2019, Business Names Registration (Fees) Amendment (Registries Modernisation) Bill 2019, Corporations (Fees) Amendment (registries Modernisation) Bill 2019; and National Consumer Credit Protection (Fees) Amendment (registries Modernisation) Bill 2019 (Bills). The Bills were introduced to do the following: z Introduce a single business register to improve and streamline how businesses engage with the Australian Government; z Provide a legal framework for the introduction of the DIN, which is a unique identifier that a director would keep forever – this DIN requirements can be found at Schedule 2 of the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019. z Directly tackle phoenix activity and enable prosecution of culpable directors in Australia – this proposed director regime would also bring Australia in line with other countries such as India. z Align with the Government’s development of ‘a modern approach to managing Commonwealth registers to provide more user friendly and streamlined registry services’. In this regard, we expect that the DIN

will fit neatly with an update of the 30 year old technology used by Government and the amalgamation of the current 34 business registers into one platform, in order to provide for more transparency of relationships between directors and multiple companies. On 12 June 2020, both houses passed the Bills to create the Commonwealth Registers Act 2019. As touched upon above, the purpose of this legislation is to combat phoenixing (i.e. controllers of a company deliberately avoid paying liabilities by shutting down an insolvent company and transferring its assets to another company) as the current law does not require ASIC to verify the identity of directors. The regime also offers benefits for insolvency practitioners in terms of providing for a more efficient and cost-effective process with director traceability. For example, a liquidator should have better success locating a director in order to obtain the company’s books and records for the purpose of their statutory investigations.

Impacts on business as usual for directors and companies Prior to this legislation, directors could have had multiple records within ASIC systems with minor variations of name (with a middle name), address and/or other personal details. Such incorrect information has hindered regulators,

insolvency practitioners and credit providers. Under this new legislation: z Directors would need to apply for a DIN prior to their appointment, with a grace period for existing directors to continue in their current roles. z The resignation of a director will then only take effect from the date of notification and a director that fails to notify the ASIC of his or her resignation within 28 days can be held to account z The criminal and civil penalties for contravention of DIN requirements – which are broadly consistent with current penalties applicable to comparable provisions in the Corporations Act 2001 and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 respectively. By way of example, the criminal penalties for a director applying for multiple DINs or misrepresenting a DIN could be 12 months imprisonment.

DIN regime administration The new regime will be administered by a registrar – which will be an existing Commonwealth body appointed by the relevant minister. The register will have powers and functions around data standards including the collection, maintenance and disclosure of data. The explanatory memorandum sets out that a registrar will be able to create ➤

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Legislative Update

data standards in ways that increases the efficiency of registry services. The registrar will also be required to issue a director with a DIN, where the registrar is satisfied that the identity of the director. The legislation will give the registrar power to administrator DINs including recording, cancelling and re-issuing a DIN. Despite being supportive of the proposed DIN regime, the Australian Institute of Company Directors (AICD) did express some concerns in relation to some aspects of the regime such as privacy considerations such that it is presently unknown whether the new register will sufficiently cater for director privacy, cyber-security and personal safety. These concerns may be addressed by the Minister and/or registrar prior to the introduction of the new register. The registrar will also regulate the disclosure of ‘protected information’ noting that the maximum penalty for disclosing registry information without registrar authorisation is imprisonment for two years. In this regard, the legislation will also allow a person to apply to the registrar to stop ‘inappropriate disclosure’ of registry information that relates to that person. The Administrative Appeals Tribunal will have jurisdiction to merit review decisions made by the registrar under the regime.

Regulatory considerations ASIC’s regulatory functions and powers are not intended to be impacted by this new legislation as the explanatory memorandum that only the ‘registry functions’ are being transferred to the register such as the information relating to registry information (for example, information contained in DIN applications etc.) This means, present regulators interactions with Australian businesses including how information flows between regulators and businesses should be unaffected.

DIN obligations Under the DIN regime, directors will be required to apply for a DIN prior to being appointed as a director or be required to apply for a DIN within a set period of time as directed by the registrar. The legislation includes criminal and civil penalties for applying for multiply DINs or misrepresenting a DIN. As we understand, the legislation will mean that a director will keep this DIN identifier. So even he or she ceases to be a director, the same identifier will not be re-issued to any other person.

Other practical considerations The practicalities of the operation of the DIN regime could have real implications for common corporate governance matters, such as the appointment of a new director on an urgent basis. Companies will need to be very familiar with the potential challenges that the DIN regime might pose. Further, the transition period for existing directors to obtain a DIN may not be sufficient to allow for the significant communication and education effort that will be required to inform such existing and even potential directors across companies of all types and sectors of their obligations.

administered by the Australian Taxation Office and 34 ASIC business registers on a contemporary technology platform with data relevant to an estimated 4 million companies will be a major project with significant challenges and could be a logistical nightmare. ASIC Commissioner John Price described ASIC’s current systems as ‘expensive to maintain, hard to improve, and increasingly vulnerable to outages and service disruptions’ in his keynote address at the Australian Institute of Credit Management 2019 National Conference. While the Commissioner (and ASIC) appear supportive of the DIN proposals for various counter phoenix reasons, ASIC appears to be mindful that the implementation of the DIN will need to work in hand with modernising the business register. That is easier said than done. With the government facing unprecedented coronavirus-related challenges in 2020, the timeframe for implementing a DIN regime in the first half of 2021 might be aspirational but we do know that it will be in operation by 2022. It will be important for companies as well as directors to stay on top of these changes and to prepare processes to ensure compliance before the legislation takes effect.

So when is the DIN coming in? The Australian Financial Review reported an expectation that the DIN will implemented in the first half of 20212 and indications earlier this year were that more than $60 million has been set aside to begin developing the business register as part of the Government’s ‘new deregulation agenda’ as set out in the 2019-20 midyear economic and fiscal outlook. However, there are various practical challenges affecting ‘when’. For all the strong reasons for the government to introduce the DIN, the practical reality is that combining the Australian Business Register

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

*Edward Martin MICM Partner, Gadens E: Edward.martin@gadens.com T: +61 2 9163 3086 *Benjamin Bronzon MICM Associate, Gadens E: benjamin.bronzon@gadens.com T: +61 2 9163 3041 FOOTNOTES: 1 Explanatory Memorandum 2016-20172018-2019, Treasury laws Amendment (Registries Modernisation and Other Measures) Bill 2019 (Cth) 39 2 Australian Financial Review, Directors to get ID number ‘for life’ to thwart phoenixing, T Burton (16 June 2020) <https://www.afr.com/politics/federal/ directors-to-get-id-number-for-life-tothwart-phoenixing-20200612-p55218>

Insolvency

“INSOLVENCY is not a dirty word” – Let’s change the insolvency conversation By Andrew Spring MICM*

Andrew Spring MICM

Similar to that classic Skyhooks anthem, Ego is not a dirty word, it is time to challenge the way that we think about insolvency and our interactions with those involved or associated with it. Our world has changed so much this year, more akin to playschools Upsy Down Town, than to what we had been accustomed. And with many of us braving the likes of working from home or video conferencing for the first time, why not use this upheaval as a way to tackle some of the other result limiting stigma’s that exist – starting with insolvency. Certainly, the Government would have us believe that entering into an insolvency process is welcoming the apocalypse, but to follow that analogy, then perhaps we should consider the prophesying of R.E.M who claimed It’s The End Of The World As We Know It (And I feel fine). In reality, even the powers that be understand that an effective use of the insolvency regime is necessary in a vibrant and self-sustaining economy, evidence by the, as yet unlegislated, Insolvency Reform proposals. It is also important to remember that behind every insolvency appointment at the core of each stakeholder is people. In a very trying time, loading inappropriate

community stigma’s onto the stresses already faced by many of us is damaging and dangerous. So why the musical theme? Because music is universal. It does not judge you and it does not discriminate. Whether you like it or hate it, it does not mind. It is just there for you. Unfortunately, most things in life are not as pure, particularly in business and certainly in Insolvency. But in the spirit of opening our minds to the possibilities of changing our perspective on Insolvency, let’s strip back our insolvency process to its core. What is the insolvency process designed to achieve? Defaulting trade relationships have occurred since the beginning of trade itself. The consequence being largely determined by the community’s moral guidance – early insolvency law. For example, the Ancient Greeks, would force debt slavery on the delinquent debtor and his family until the debt was repaid by physical labour. In our own history, we utilised debtor prison as an encouragement for the defaulting party to pay what was owed. Certainly, times have changed as the morality of our community has determined that the imprisonment of debtors is no longer acceptable, nor perhaps, particularly effective ➤

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Insolvency

as a means of collection. Today, there is more emphasis placed on the circumstances surrounding the default, noting that like Shakespeare’s Antonio, who was to lose a pound of flesh to Shylock when inclement weather delayed his merchant ships, sometimes the events that caused the default are beyond a person’s control – so the method to deal with the default should be proportionate. So why is this important when considering changing the insolvency concersation? Well, our laws have changed, but have our perspectives of those individuals that find themselves in financial distress also changed? COVID has wreaked havoc on many Australian businesses, and the stigma associated with insolvency, particularly around fear and shame, could also play a destructive role in the coming months. The stigma comes from the widely held belief that insolvency is for incompetent or crooked business owners, directors and individuals: it’s a sign you have failed and that your reputation will be forever tarnished. As a creditor, there is no doubt that

“COVID has wreaked havoc on many Australian businesses, and the stigma associated with insolvency, particularly around fear and shame, could also play a destructive role in the coming months.” you have had these thoughts many times before. And like a broken watch, that is right twice a day, sometimes those opinions are vindicated. But how many opportunities for better outcomes are being missed because good people, through fear of the “label”, are delaying making the right decision to seek help. This labelling overshadows the fact that insolvency is a legal and orderly way to save or wind up a business, or free an individual from debts. The fear and shame associated with insolvency often: z deters people from talking about their situation z stops them from gathering the appropriate information to make informed decisions z delays them from both exploring

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

and actioning an early intervention procedure that can save their business or an insolvency procedure to wind it up with minimal losses. Like all stigmas, the insolvency one thrives on lack of information and misinformation. So let’s review some basic facts to try and break through some of the barriers to talking about financial distress and insolvency within our community: 1. Many businesses go into liquidation and people become bankrupt due to no fault of their own, often as a result of circumstances out of their control, and not because they are incompetent or crooks. Customer default, supply chain failures, regulatory reforms,

Insolvency

technological advancements and changing consumer behaviours are all difficult to predict and can derail a business. This year and, unfortunately, into 2021, COVID-19 will force countless business owners and individuals into liquidation or bankruptcy due to no fault of their own; they are victims of a pandemic with no rule book and no end date in sight. 2. Entering into an insolvency process doesn’t necessarily mean it’s ‘the death’ of the business. Insolvency isn’t just the process of liquidation and bankruptcy. It also includes legal and effective early intervention procedures that can save or turn a company around. This includes personal insolvency agreements, safe harbour, voluntary administration and the governments new small business restructuring process (to be legislated) which, appropriately utilised, can provide individuals and viable businesses that have had some “bad luck” with a second chance. 3. Australia’s insolvency procedures are legal processes designed to support an efficiently functioning economy, by reviving businesses that are viable and recycling the resources of those that are not. Used appropriately, the process minimizes economic loss in our society, and provides an opportunity for resources, human and tangible and intangible assets to be put to profitable use. 4. Talking to an insolvency practitioner does not make you insolvent, just like talking to your doctor does not make you sick. Insolvency practitioners are registered gatekeepers; their role is to provide transparency and business support mechanisms designed to protect the people involved in the business –owners, employees, customers and

“Entering into an insolvency process doesn’t necessarily mean it’s ‘the death’ of the business. Insolvency isn’t just the process of liquidation and bankruptcy. It also includes legal and effective early intervention procedures that can save or turn a company around.” creditors - even if that results in the closure of the business and recycling of its resources. 5. Understanding insolvency is good business practice and, as a company owner or director, it is their responsibility to act when their business is in financial distress. Refusing to consider or explore insolvency options is not a personal choice, regardless of whether it is driven by fear or shame - it’s bad business practice which only leads to further losses and personal asset exposure. As credit professionals, encouraging that conversation is also good business practice. 6. Delaying taking action on an insolvency solution affects many people: owners/directors are exposed to increased mental stress due to a feeling that they are letting everyone down, employees don’t know if they’ll be paid and whether they can support themselves and their families, creditors worry about the impact on their business’s financial position, customers are unable to meet their own obligations, and the families of all involved can be affected financially and emotionally. As a credit professional, the fast paced nature of the world you now live in which includes, e-commerce, sms reminders and direct debits mean that the personal relationship between credit professional and debtor can be lost. Perhaps though, there is an obligation to find a way

to interact and more importantly to learn the trends of each customer. Personal relationships will give you the power to identify exceptions and the platform to intervene. When a debtor begins to deviate from the normal – asking “how their business is going?” is a gentle way to say you are noticing. And if they are unable to correct the deviation, then suggesting speaking to an external adviser may be enough for that person to raise their concerns to their own management. Any agitation may topple the first “domino” towards an action point that may get you paid, save a customer or at worst minismise any loss. It also sends the message that you are not scared of corrective action, even if that means a formal restructure, which chips away at the barrier to the debtor considering their options and engaging with a plan earlier rather than later. Remembering that while you don’t want an insolvency appointment to occur, you shouldn’t be scared if it does happen for the right reasons at the right time. So in the immortal words of Van Morrison, Talk is Cheap, let’s begin the conversation and begin to unshackle our community when it comes to dealing with financial distress. Knowing that the key to better outcomes for everyone, is acknowledging and engaging with the Insolvency process early.

*Andrew Spring MICM Partner Insolvency Intel – powered by Jirsch Sutherland

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Insolvency

Revenge of the zombie company? By Chris Hadley MICM, Andrew Tanna MICM and Jessica Georges* Revenge of the Zombies is a 1943 horror film in which zombies exact revenge on their mad scientist creator. Although there are not many mad scientists on the scene in 2020, there are many zombie companies which, if subject to liquidation, are likely to create an influx of preference claims being brought by liquidators and which will cause grief to credit managers in the coming months and years. For those unacquainted with the term, a ‘zombie company’ refers to a business which exists but which is largely artificially sustained by external and artificial sources and factors, including the recent massive Government spending (including via the JobKeeper program) and deferrals

of liabilities (including BAS, payroll tax, and rent commitments). Those zombie companies, which continue to accumulate liabilities and rely on outside assistance for survival would, but for changes brought about by COVID-19, ordinarily have failed and be placed into administration or liquidation much sooner.

By all measures the outbreak of COVID-19 has resulted in significant disruption to large parts of the economy and has impacted the credit function of many businesses. The latest ABS statistics show that Australia’s GDP fell 0.3% in the March quarter and 7% in the June quarter (which was the largest

quarterly drop since records began). Two consecutive quarters of negative growth means that Australia is officially in a recession. By now all credit managers will know that, in response to the impacts of COVID-19 on the economy, in March 2020 the Federal Government introduced “temporary” changes to rules affecting common insolvency and bankruptcy processes which have typically been used by credit managers in recovery action. The measures increased the minimum amount of debt required to be owed before a creditor could issue a Bankruptcy Notice (from $5,000 to $20,000) or a Statutory Demand (from $2,000 to $20,000) and significantly increased the time

Chris Hadley MICM

Andrew Tanna MICM

Jessica Georges

Disruption and change

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Insolvency

“For those unacquainted with the term, a ‘zombie company’ refers to a business which exists but which is largely artificially sustained by external and artificial sources and factors...” in which a debtor has to respond to a Bankruptcy Notice or a Statutory Demand from 21 days to 6 months. The measures also provided temporary relief for directors from personal liability for trading whilst insolvent. The temporary measures were scheduled to expire on 24 September 2020. However, in early September 2020, the Government announced it would be extending the measures until at least 31 December 2020. As part of the announcement of the extension of the measures the Treasurer said that the extension would lessen the threat of actions that could unnecessarily push businesses into insolvency at a time when they continue to be impacted by health restrictions and that the change would help to prevent a further wave of failures before businesses have had the opportunity to recover.

Between a rock and a hard place? In the context of a commercial leasing example, the Government introduced a code of practice which included a number of enforceable elements adopted into legislation. The Code says that parties should agree to tailored, bespoke and appropriate temporary arrangements, taking into account the particular circumstances on a case by case basis

and that the parties should negotiate appropriate temporary arrangements. Landlord creditors might find themselves in a position whereby, adopting the spirit of the Code, they negotiate with a tenant/debtor a payment arrangement with respect to arrears only to be confronted with a preference claim brought by a liquidator should the tenant/debtor enter into liquidation. Similar scenarios are likely in other sectors, where credit managers assisting customers through the “tough times” when supplying goods or services, will be at risk of having the existence of such assistance and accommodation returning as evidence to be used by a liquidator of “suspicion” of insolvency. Although it is the case that debts are not always paid on time by solvent traders and the mere failure to pay debts on time does not by itself constitute grounds for suspecting insolvency, any experienced credit manager will know, entering into a payment arrangement (particularly with whole number payments not directly attributable to particular invoices) is one of the matters which

liquidators will rely upon in support of a claim that the creditor had the requisite “suspicion”.

Does the case law assist? The Supreme Court of NSW decision of Hamilton v BHP Steel (JLA) Ltd from 1995 provides some interesting analysis which might assist credit managers navigating the postrecession landscape. Prior to 2020, the last time Australia was in recession was in the early part of the 1990’s. Following the end of the recession, a liquidator brought a preference claim against a creditor with respect to payments made in November 1993. The liquidator was ultimately unsuccessful and the claim was dismissed. Relevantly in the context of a recession, the Judge found that when considering questions of insolvency in the 1990s one should take into account common happenings in the commercial community and such practices as a matter of the Court’s own knowledge from commercial activities that come before the Court. The Judge opined on a number ➤

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Insolvency

of relevant matters including whether suspicious circumstances arise in the context of late payment of business debt in a recessionary environment (he indicated that such suspicion will not necessarily be so engendered) and the relevance of “common knowledge” in that “many debtors in a time of recession seek to delay payments to their creditors for as long as they possibly can.” It seems likely that similar considerations will be argued by creditors in the current environment in opposition to preference claims occurring during the 2020 recession.

What defensive tools are available to creditors? Unfortunately for the credit managers, none of the measures introduced by the Government have any impact whatsoever on the preference regime under Part 5.7B of the Corporations Act 2001 (Cth). A preference claim can be brought by a liquidator within 3 years from the relation-back day. Accordingly, unless there are changes to the preference payment regime, preference claims arising from zombie companies will be an inevitable consequence for credit managers in the years to come. As an example, if a zombie company was placed into a creditors voluntary liquidation in say January 2021, the liquidator could commence proceedings against the creditor for the recovery of preference payments at any period up-to January 2024. Experience unfortunately indicates that liquidators sometimes, belatedly, commence proceedings towards the end of the 3 year period of the relation-back date. It is also available to liquidators to seek an order from the Court under s 588FF(3)(b) of the Corporations Act 2001 (Cth) that the time for bringing any such proceedings be extended beyond the usual 3 year period. Preference claims are an inevitable part of the credit function. Most

credit managers are aware of the various defences available against a preference claim including the good faith defence, the security/PPSA defence, the running account, and setoff. In time, COVID-19 will be all but a distant memory to the world. However, the harsh reality for credit managers is that even when the world returns to a “new normal” in the coming years, an influx of preference claim actions will likely occur within 3 years or longer from the relevant relation-back date and such claims will need to be responded to. In an environment in which credit managers should rightly be on alert as to possibly insolvent customers, there are measures that can adopted to mitigate the risk of a liquidator being successful in a preference claim. These include: 1. ensuring that PPS Registrations are properly made within the prescribed time and in accordance with the applicable regulations and rules. This is relevant to the “security” defence. 2. regular monitoring of customer accounts and moving quickly to manage exposure (including by limiting credit limits, trade, and payment terms). This may also include obtaining legal advice to devise a more secure repayment regime with the debtor, such as the preparation of a Deed. 3. requiring personal guarantees and other alternate forms of security where possible. For example:

— personal guarantees from directors of customer companies may be of assistance to a creditor in seeking recovery against a director in the event that the creditor is forced to pay back any preferential payment to a liquidator; — obtaining bank guarantees for larger projects which a creditor may draw on in the event of default; and — lodging caveats over any real estate owned by the customer/ guarantor as a condition to continuing trade. The Commercial Recovery and Insolvency Team at Holman Webb understands that implementing strong cost effective recovery strategies is crucial, particularly in these uncertain times. Our leading recovery specialists are on stand-by should you wish to discuss ways in which this can be best achieved.

*Chris Hadley MICM Partner – Sydney Holman Webb T: +61 2 9390 8303 E: christopher.hadley@holmanwebb.com.au *Andrew Tanna MICM Special Counsel – Sydney Holman Webb T: +61 2 9390 8309 E: andrew.tanna@holmanwebb.com.au *Jessica Georges Special Counsel – Melbourne Holman Webb T: +61 3 9691 1223 E: jessica.georges@holmanwebb.com.au

“A preference claim can be brought by a liquidator within 3 years from the relation-back day. Accordingly, unless there are changes to the preference payment regime, preference claims arising from zombie companies will be an inevitable consequence for credit managers in the years to come.”

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Insolvency

Bankruptcy notices and alternative acts of bankruptcy By Stephen Mullette MICM and Darrin Mitchell MICM*

Stephen Mullette MICM

In the time of COVID-19 and when the Federal Government has enacted legislation to significantly constrain the use and benefit bankruptcy notices, what is a frustrated creditor to do? Obviously there are other means of enforcement of a judgment debt against a debtor’s property or assets; however the mere fact that a bankruptcy notice may not be as useful a tool in these COVID-19 times does not mean that bankruptcy is not an option for recalcitrant debtors. So what other paths are available to establish a proper basis for the issue of a creditor’s petition?

Background

Darrin Mitchell MICM

Since ancient times bankruptcy has led to enslavement or imprisonment. In the late eighteenth century Lord Kenyon CJ noted that “Bankruptcy is considered as a crime and the bankrupt in the old laws is called an offender…” 1 The term “bankrupt” come from the Italian “banka rotta” or “broken bench”, a reference to a moneylender’s place of business. Systems of bankruptcy have evolved over the centuries to be both punitive, and also protective – allowing not only creditor’s petitions but also for any person unable to pay their debts, to

file a debtor’s petition and become bankrupt.

Bankruptcy Notices and Creditors Petitions It should be noted of course that the purpose of bankruptcy proceedings is not debt recovery; it is to allow for the administration of the property of insolvent persons. His Honour Justice Emmett of the Federal Court put it this way: “… I take it to be undisputed that if it is apparent that the purpose of the bankruptcy notice is to put pressure on a debtor to pay a debt rather than to invoke the Court’s jurisdiction in relation to insolvency, then the filing of a bankruptcy notice is an abuse of process.” 2 Nevertheless, a creditor seeking to file a creditor’s petition against a debtor will usually take three steps: z Firstly, the creditor will commence proceedings and obtain a final judgment for a fixed sum from a Court. z Secondly, the creditor, relying on the final judgment, will request the Official Receiver to issue a Bankruptcy Notice and will arrange for it to be served on the debtor. z Finally, should the Bankruptcy Notice not be complied with by ➤

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Insolvency

the debtor, an act of bankruptcy is committed and the creditor can rely upon that act of bankruptcy to file a Creditor’s Petition seeking a sequestration order against the debtor. To comply with the provisions of a Bankruptcy Notice, the debtor has 21 days to either pay the debt, make a satisfactory arrangement with the creditor, or to satisfy a Court that the debtor has a counterclaim, setoff or cross demand equal to or exceeding the amount of the judgment debt.

Along comes a Virus On 23 March 2020 the Federal Government passed the Coronavirus Economic Response Package Omnibus Act 2020 which included changes to various pieces of legislation designed to assist Australians in coping with the COVID-19 pandemic. One of the changes introduced by the legislation was in respect of the use of Bankruptcy Notices, a document prescribed under section

“On 23 March 2020 the Federal Government passed the Coronavirus Economic Response Package Omnibus Act 2020...” 40(1)(g) of the Bankruptcy Act 1966 (Cth)(“the Act”). The COVID‑19 amendments inserted a new regulation 4.02AA in the Bankruptcy Regulations 1996 which temporarily amends the definitions of “statutory minimum” and “default period” in section 5(1) of the Act. The changes: z Extended the time for compliance with a Bankruptcy Notice from 21 days to 6 months; and z Increased the minimum debt amount from $5,000 to $20,000. The requirement for a creditor to wait six months after service of the Bankruptcy Notice for the debtor to commit an act of bankruptcy is too long for some creditors as it may significantly reduce cashflow and cause financial difficulties.

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

The amendments were initially introduced for six months only and were set to expire in September 2020. The amendments have however recently been extended by the Federal Government until 31 December 2020.

Alternative Acts of Bankruptcy Notwithstanding the COVID‑19 legislative amendments, the Government has not put a halt on the filing of Creditor’s Petitions generally, or the pursuit of sequestration orders. Those creditors, who are owed in excess of $20,000 and are not prepared to wait for six months to obtain an act of bankruptcy, may wish to look at possible alternative acts of bankruptcy. Unfortunately this will not assist

Insolvency

creditors whose debts are less than $20,000, since regulation 4.02AA prevents the filing of a Creditor’s Petition for less than this sum. Section 40 of the Act provides for a total of 21 different acts of bankruptcy which may be relied upon by a creditor to issue a Creditor’s Petition. Some of the acts of bankruptcy include: z Taking certain steps with intent to defeat or delay creditors, including leaving the country, or a dwellinghouse or usual place of business; or alternatively, beginning to ‘keep house’ (subsection 40(1) (c)). It has been held that to satisfy this subsection, it is sufficient if this was one of a number of intentions3. A court will draw an inference about the intention if it is satisfied that the debtor “must have known that the likely result of his absenting himself would be to delay creditors”4; z If a Sheriff is sent to execute a judgment at a debtor’s property, and the Sheriff does not recover goods sufficient to pay the judgment debt (subsection 40(1) (d)). It is “only necessary to show proof that execution had issued and that it had been returned unsatisfied in whole or in part. The High Court said that the truth or falsity of the return was not a relevant matter. This was because the legislature had considered that the return should be treated as correct.”5 However if the writ is materially defective, it has been held that no act of bankruptcy will have occurred, and these requirements will be interpreted strictly6; z At a meeting of any creditors, the debtor admits he/she “is in insolvent circumstances”, and if requested to file a Debtor’s Petition or take steps to appoint a controlling trustee (under Part X of the Act), fails to do so within seven days (subsection 40(1)(f)); z Notice is given by the debtor

“In some instances, Courts have criticised lawyers acting for plaintiffs for pushing for their client’s legal rights during COVID-19, citing mental health issues and the need for compassion.” to his/her creditors that he/she has suspended, or is about to suspend payment to creditors (subsection 40(1)(h)). It has been held that “… to constitute this act of bankruptcy two things are requisite: first, an intention residing in the mind of the debtor that he will, in a sense voluntarily, that is, as his own act, refuse to pay his debts as they become due, and secondly, a communication of that intention to one of his creditors”7; z An authority is signed under section 188 of the Act (a Personal Insolvency Agreement) (subsection 40(1)(i)). The signing of an authority, even if it is not effective for the purposes of the Act, will still be an act of bankruptcy8. z A debtor becomes insolvent as a result of transfers of property under a family law financial agreement (subsection 40(1) (o)). The aim of this subsection is to deter persons from using family law proceedings, including financial agreements, to frustrate creditors. A full list of the available acts of bankruptcy can be found in section 40(1) of the Act. Whilst many of these may not be applicable or convenient, there are some which may be relevant in particular circumstances. So despite the bankruptcy process changing in these trying times with the changes to the operation of a Bankruptcy Notice, a creditor may still be able to issue a Creditor’s Petition against a debtor by relying on alternative acts of bankruptcy as prescribed in the Act. It might seem counterintuitive that

the COVID-19 amendments would primarily target one act of bankruptcy only. However, given the Government’s focus on improving the flow of funds throughout the economy, it is also somewhat counterintuitive to lock up the ability of creditors to collect properly owing debts for (at least) six months. At least for those creditors with debts above $20,000, exploring alternative acts of bankruptcy might provide some opportunity to continue collecting debts and dealing with insolvent customers in an efficient manner.

*Stephen Mullette MICM Principal Matthews Folbigg E: stephenm@matthewsfolbigg.com.au T: +61 2 9806 7549 *Darrin Mitchell MICM Senior Associate Matthews Folbigg E: darrinm@matthewsfolbigg.com.au T: +61 2 9806 7428

FOOTNOTES: 1 Fowler v. Padget (1798) 7 TR 509 at 514 2 In Brunninghausen v Glavanics [1998] FCA 230 3 Barton v DCT (Cth) (1974) 131 CLR 370 4 Re Smith; Ex parte Kern Corporation Ltd. (unreported, 19 June 1985), per Pincus J; quoted in Vassis, Re B.W. Ex Parte Leo Leung [1986] FCA 19 per Burchett J at [16] 5 Helfenbaum v St George Bank Ltd [2001] FCA 1392 per Finkelstein J (with whom Wilcox and von Doussa JJ agreed), at [19]; referring to the High Court’s decision in King v Commercial Bank of Australia Ltd (1921) 29 CLR 141 6 Lewis v. Lamb [2012] FMCA 392, per Smith FM, where the judgment debt was materially overstated 7 Cropley’s Ltd v Vickery (1920) 27 CLR 321 per Knox CJ at 325 8 Re Donovan; Ex parte ANZ Banking Group Ltd [1972–73] ALR 313

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Insolvency

Insolvency trading relief extended to 31 December

– is there hope for creditors? By Liam White*

Liam White

Strategic methods for recovering overdue debts in the current climate The further extension of insolvent trading and insolvency relief laws to 31 December, 2020 has for some simply kicked the problem down the road and delayed the inevitable. On the other side, the rules are hindering businesses from being able to recover their bad debts. As the first extension was scheduled to come to an end on September 25, 2020, a large number of businesses were ready to take the necessary action to recoup unpaid debts, only to now need to go back to the drawing board to explore their options. The original temporary insolvency safe harbour rules increased the threshold for issuing Statutory Demands and Bankruptcy Notices to a minimum debt amount of $20,000, up from $2,000 and $5,000, respectively. The rules have also extended the length of time for debtors to respond to any Statutory Demand or Bankruptcy Notice to six months. In addition to this, the new safe harbour rules continue to temporarily protect directors from any personal liability for insolvent trading during this period. “The extension of these measures will lessen the threat of actions that could unnecessarily push businesses into insolvency and external administration at a time

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

when they continue to be impacted by health restrictions,” Treasurer Josh Frydenberg said in a press statement. The goal of the extension is “to help prevent a further wave of business failures before they have the opportunity to recover,” not to entirely save businesses from eventual financial collapse. Some healthy businesses – those who were able to continue to operate and earn despite the lockdown restrictions – currently face difficulties in recovering delinquent accounts, some of which were incurred long before the COVID-19 pandemic began. The question on the minds of these businesses is this: Are we left with no recourse but to wait until the moratoriums are lifted? Below we try to answer this question as there is light at the end of the tunnel and there are a number of ways in which we have been able to achieve a satisfactory outcome for both the creditor, and the debtor.

3 proven strategies available for Creditors to recoup debts at this time Note: It must be emphasised that these options are only ever considered where we have exhausted all other avenues of either a repayment plan, a settlement for a reduced sum, or are simply being ignored after numerous contact attempts have been made.

Insolvency

1. Issue a Statement of Claim A Statement of Claim is not prohibited by the temporary rules and offers one important benefit to the creditor: it is a document that is filed in court, which brings home the serious nature of the matter and kickstarts the legal process for recovery. A Statement of Claim sets out the overdue invoices which are unpaid, and outlines the details supporting the facts (e.g. agreement or terms and conditions entered between the two parties). This legal document, once filed, is served to either the individual in person, or to the registered office address for a company. Similar to a Statutory Demand, on serving a Statement of Claim the debtor is required to respond within 28 days of the service date. This will include settling the outstanding amount, applying to the court for a repayment plan, or filing a defence. All of which move the matter to a resolution without simply letting it go stale and the number of days overdue to continue racking up. If the debtor still does nothing, you can apply for a Default Judgment. This Judgment once obtained, will place a mark against the credit file of the debtor. You can then use the Judgment order to look at enforcement (i.e. forcing payment) if the debtor is still unresponsive. 2. Enforcement warrant Pre-COVID-19, a creditor might use a Statutory Demand to demand payment within 21 days of service. With the temporary relief laws, the debtor is given a longer time frame of six months to respond. The law states that the failure of a Director to respond to a Statutory Demand within the 21 day period (now 6 months) thereby commits an act of insolvency, which gives a creditor cause to file a Winding Up Application against a debtor. The threat of having your company wound up and a liquidator appointed is what makes the issuing of a Statutory Demand an effective option.

An enforcement warrant can work in the same way. Bear in mind, you can only issue an Enforcement Warrant where you have already obtained a Judgment. In a nutshell, if the Enforcement Warrant is carried out by the court appointed sheriff, and the payment of the Judgment debt is not made, after the director of the business has been notified and has been given an opportunity to resolve the matter, they are again seen to have committed an act of insolvency. It is presumed that this act of insolvency can be used (in the same way as an unpaid Statutory Demand) as the basis for a Winding-Up Application against the company debtor. Section 459C of the corporations act states; (2) The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made: (b) execution or other process issued on a judgment, decree or order of an Australian court in favour of a creditor of the company was returned wholly or partly unsatisfied. 3. Garnishee order A Garnishee Order (or attachment order as it is called in Victoria) is another effective enforcement tool used to secure payment where you have an unresponsive debtor. Like an Enforcement Warrant, a Garnishee Order can only be filed where you have obtained a Judgment. Unlike a Statutory Demand, which is simply a legal demand that the debtor to pay the debt within 21 days or face possible Windup Proceedings, a Garnishee Order, is filed with the court. A Garnishee can either be served to an individual’s employer, a bank or other financial institution, or other entities who may be holding money for the debtor. When a Garnishee order is issued, the debtor is not notified. Instead, the order will be addressed directly to the

Financial Institution or Employer who are legally required to comply with the order.

Where to from here? The extension of the governmentimposed relief has presented some challenges not only to creditors, but also for us in the debt collection industry. Nevertheless, we live in a constantly evolving world and so, have looked for ways to provide effective solutions for our clients as they continue to reach out to us to ensure their invoices to customers are paid in a timely manner and to keep up their cash flow to ensure the viability of their business into the future. With the implementation and use of the strategies mentioned above, coupled with a team of highly experienced staff, who first and foremost approach each and every matter as an individual situation, and look for the best solution that applies to that case, in both our dealings with the creditor and the debtor, we have seen outstanding results.

What the future looks like for Businesses With the uncertainties brought about by COVID-19 and the government’s response to the pandemic to try to soften the financial blow, we encourage businesses (both creditors and debtors) to act now and get on the front foot rather than wait for the moratoriums to be lifted. Communication is key. Every situation is unique and will have its own solution. By getting on the front foot and exploring your options and speaking to an expert in this field, you can ensure a healthy cash flow and longevity for years to come. *Liam White Marketing/Head of Sales Slater Byrne Recoveries E: liam@slaterbyrne.com.au T: 61 2 9191 4518 www.slaterbyrne.com.au

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Insolvency

Planning for the cliff By Roger Mendelson*

There is much talk about ‘the cliff’. What will happen when COVID subsidies cease and insolvency laws revert to pre-COVID rules. The aim of this article is to review principles and tactics which credit managers can plan for and apply, to get to the other side. I.e. when some degree of normality returns. This is a challenging time to be involved in credit, due to the fact that there is no rule book and the economy is still ultimately being held hostage to the pandemic and its course is impossible to predict. An additional factor to deal with is the issue of reputation. Achieving great credit results and not causing damage to the creditor’s reputation has always been a difficult balancing act. In the current climate, it has been much more difficult because it may take only one isolated incident to create a media storm. Thus, it is essential to be ultracautious.

Major insolvency changes

Roger Mendelson

Let’s review the major insolvency changes, all of which have been extended to December 31. I feel that there is a significant chance that they may be extended beyond that date to March 31. z The minimum Statutory Demand sum has been lifted from $2,000 to $20,000. z The bankruptcy thresh-hold has increased from $5,000 to $20,000. z The time for compliance with a Bankruptcy Notice or Statutory Demand has increased from 21 days to 6 months. z Insolvency trading exposure of directors has been lifted.

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Companies The result of the liquidation changes is that Creditors’ Petitions have dropped dramatically and ATO and other government applications have completely stopped being issued. This will in part cause the insolvency cliff, because companies which would normally be wound up aren’t being wound up. In addition, there must be a large number of companies which are trading, are insolvent but are surviving on subsidies and rent relief. This must cause alarm bells to ring. Granting credit to company customers is now much riskier. Even relying on references and accounts will be of much less use because they will be historic and not fully reflect the post -March situation. A practical change in process is that personal guarantees should be required as part of standard requirement rather than as an added condition in weak credit cases. The reality is that there will be many older and once stable companies which are now potential basket cases. A question is-should Statutory Demands be put on hold until January, in the expectation that the 6 month response period will replaced by 21 days? The answer is that Demands should still be served. This puts the debtor company under pressure and increases the chance that useful negotiations will commence. Doing nothing is not an option. If the 21 day period does come back in on January 2 and you issued a Statutory Demand in November, simply withdraw the Demand and issue a fresh one on January and get the benefit of the 21 days.

Insolvency

If the debtor’s assets are sufficient for him to want to avoid bankruptcy and the judgment exceeds $20,000, my advice is to issue the notice now. This will raise the pressure on the debtor to negotiate. The only risk in this is that if the COVID rules revert back on December 30, you may be stuck with the balance of a 6 month response period. You could reissue the notice but the likely cost in legal fees and disbursements will approximately be $2,200 and this won’t be recoverable.

A challenge

Should you sue? The short answer is that there is no reason to wait. The courts in all jurisdictions are operating. In our experience, well over 90 % of legal actions for genuine debts result in default judgments. This solidifies the claim, an order for costs is obtained and interest starts to run on the judgment. If a Defence is received, the COVID rules will slow down the steps toward hearing but at least the claim is progressing. In many cases, service rules during the COVID period are easier than before.

Negotiation A risk is that older debts become riskier in terms of collectability and statutory periods are also running by. Putting debt recovery on hold during COVID will increase risk, increase bad debts and will lead to a backlog later. However, if your debtor is open to genuine negotiation, never pass that opportunity up. Setting up instalment arrangements is always a better option than suing for a lump sum, providing that the arrangement represents a genuine attempt to pay the debt off.

Bankruptcy

At a time when credit risk has increased massively, there will be a need for businesses to provide credit in order to gain new business. Gutsy suppliers can use this as an advantage in winning customers over. There is a strong case to aggressively provide credit, to gain new orders, as many competitors will do the opposite. However, it must be matched with credit decisions based on intuition and experience, rather than being a box-ticking exercise. This will also be a time to tighten your business trading terms. For example, if your business provides building materials or services, include a clause in your trading terms providing for a right to lodge a caveat or mortgage over any property owned by the customer. Use this quieter period to refine your credit tools and processes. Review your new customer form. Ensure that you collect meaningful and useful information from new customers before you advance credit or for existing customers, if they wish to lift credit limits.

As the standard path to bankruptcy is to obtain a judgment first, there is no rational reason to not at least do this. That is, get the judgment now. Don’t wait. The question then becomes – do you wait until after December 30 to issue the Bankruptcy Notice or do it now?

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

It also provides the benefit that, with properly worded settlement deeds, there is no opportunity for a later Defence, interest and default costs can be built in, guarantees may be required where they did not apply before and the life of the debt is extended.

Enforcements There is no reason why garnishee action should be put on hold, especially if the debtor has a secure job. For NSW in particular, where the process is cheap and quick, the risk of losing money by the debtor leaving or losing his job is outweighed by the high success rate on most garnishee claims. In my view, warrants of seizure were ineffective before COVID and will be less effective now because so many businesses do not hold sufficient seizable assets.

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Insolvency

Third party payments – are they an unfair preference? By Evan Mijo MICM*

The recent Victorian Court of Appeal judgment in Cant v Mad Brothers Earthmoving Pty Ltd [2020] VSCA 198 clarifies the circumstances in which a payment from a third party may constitute an unfair preference. The decision is important to any creditors with potential exposure to unfair preference claims and for insolvency practitioners seeking to pursue such claims.

Facts

Evan Mijo MICM

Eliana Constructions and Development Group Pty Ltd (In Liquidation) (Company) owed Mad Brothers Earthmoving Pty Ltd (Creditor) a debt for excavation works. The parties agreed to settle the debt for an amount of $220,000. To pay the debt, a related entity by way of a common director, Rock Development & Investments Pty Ltd (Third Party), borrowed the funds from a lender. The lender transferred the sum directly to the Creditor to pay the debt under a settlement agreement. The liquidator of the Company brought a claim against the Creditor seeking to recover the $220,000 payment as an unfair preference pursuant to section 588FA of the Corporations Act 2001 (Cth) (Act). The liquidator claimed the Third Party was indebted to the Company at the time the payment was made and therefore was a payment by the Company to the Creditor. The Company’s books indicated the

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

opposite was true, and the Third Party was a creditor, not a debtor of the Company. The liquidator’s claim was successful at trial. The decision was reversed on appeal by the Supreme Court of Victoria. The liquidator appealed to the Court of Appeal.

Court of Appeal Decision The Court of Appeal reached the following conclusions. z To be an unfair preference, the payment must be made ‘from the company’ meaning from the company’s own money or money which the company is entitled to. z It is necessary, in order for a preference to be made ‘from the company’ that the payment has the effect of diminishing the assets of the company available to creditors. z A payment by a third party which does not have the effect of diminishing the assets of the company available to creditors is not a payment received ‘from the company’ and is therefore not an unfair preference. The Court held that the payment made by the Third Party to the Creditor was not a payment ‘from the Company’ for the following reasons. z The liquidator failed to prove that the Third Party was indebted to the Company. z The payment did not have the effect of diminishing the assets of the Company available to creditors.

Insolvency

A copy of the judgment of the Victorian Court of Appeal is available here.

When is a third party payment a preference? If a payment is made by a third party to a creditor on behalf of a debtor, the key issue is whether the payment diminished the assets of the debtor company available to creditors. To illustrate this, see the diagrams below.

Take away points z The decision identifies a possible loophole in the unfair preference regime. In certain circumstances, receiving payment from a third party can protect a creditor from an attempt by a liquidator to claw back the funds. z A payment by a third party will only be an unfair preference if the payment diminished the assets of the company available to creditors. z Creditors should consider whether payment of a debt owed by a distressed company can be structured in a way to avoid falling foul of the unfair preference regime. z A settlement agreement between a creditor, debtor and third party may, with careful wording allow for payments made by a third party to

be out of reach of a liquidator. z Careful consideration should be given to any arrangements between a third party and a debtor. If the third party owes a debt to the debtor company, the payment will likely be considered to be ‘from the company’ and a creative settlement agreement will not have the desired effect.

Other practical tips It has recently been announced that the temporary COVID-19 insolvency provisions will continue until at least 31 December 2020. A significant rise in insolvencies once the temporary provisions expire can be expected which could lead to a wave of unfair preference actions brought by liquidators. In addition to getting paid by a third party, there are a number of strategies that can be employed by creditors to reduce the risk of receiving an unfair preference claim. z Take security. Preference claims can only be brought for payments made in respect of an unsecured debt. It is best practice for credit terms to provide for security in the form of a purchase money security interest (PMSI) relating to goods supplied on credit or a registered mortgage.

The above scenario would be an unfair preference because the debt owed by the third party is used to pay the debt owed to the creditor. This has the effect of diminishing the assets of the company.

z Utilise the running account. If a creditor continues to supply goods during the six month period prior the start of the liquidation, the liquidator’s claim will be limited to the “net effect” of the transactions. A potential preference claim may be completely extinguished if the value of the goods supplied exceeds the sum of the payments made during this period. z Be careful with what is put in writing when chasing debts as it could hurt a creditor’s prospects of establishing the good faith defence under section 588FG of the Act. A liquidator will use demands for payment as evidence that a creditor had reasonable grounds to suspect the company was insolvent. z Where possible, obtain payment in advance or cash on delivery. If a creditor/debtor relationship does not exist, the payment will fall outside of the unfair preference regime. z Engage a solicitor to undertake a review of your credit application and security documents. *Evan Mijo MICM Associate Results Legal T: 61 7 3234 3231 E: emijo@resultslegal.com.au

The above scenario would not be an unfair preference because debt owed by the debtor to the creditor is merely replaced by an equivalent debt owed to the third party. The asset position of the debtor is unchanged.

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Insolvency

Why it is important to be a secured creditor By Christopher Yam* COVID-19 pandemic The COVID-19 pandemic, also known as the coronavirus pandemic, is proving to be one of the toughest challenges of our generation. The International Monetary Fund “World Economic Outlook, April 2020: The Great Lockdown April 2020” states: The COVID-19 pandemic is inflicting high and rising human costs worldwide, and the necessary protection measures are severely impacting economic activity. As a result of the pandemic, the global economy is

projected to contract sharply by –3 percent in 2020, much worse than during the 2008– 09 financial crisis. The Australian government has responded to the economic impacts of the COVID-19 pandemic by providing temporary relief, inter alia, for: z corporations at risk of insolvency (extends the time for compliance with a statutory demand from 21 days to 6 months. A creditor can only issue a statutory demand if the debt or total of debts is $20,000.00 rather than $2,000.00); z individuals at risk of bankruptcy (extends the time for compliance with a bankruptcy notice from 21 days to 6 months. A creditor can only issue a bankruptcy notice if the judgment(s) or order(s) is for an amount or a total amount of at least $20,000.00 rather than $5,000.00).

to you is secured by a security interest within the meaning of the Personal Property Securities Act 2009 (Cth); or 2. you hold a mortgage, charge or lien on property of the individual as a security for a debt due to you from the individual. A secured creditor’s right to realise or otherwise deal with its/his/ her security is not affected by the Australian government’s response to the economic impacts of the COVID-19 pandemic. For example, a secured creditor who holds an equitable charge over land owned by a company/individual as security is entitled to bring proceeding for judicial sale of the land. A simple way for you to become a secured creditor of a company/ individual is by having a charging clause in your terms and conditions. Time to review your terms and conditions?

Secured creditor You are a secured creditor of a company if the debt owing by the company to you is secured by: 1. a security interest within the meaning of the Personal Property Securities Act 2009 (Cth); or 2. a charge, lien or pledge.

Christopher Yam

You are a secured creditor of an individual if: 1. the debt owing by the individual

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

*Christopher Yam Special Counsel SLF Lawyers T: +61 3 9909 3304 E: cyam@slflawyers.com.au

Disclaimer The content of this publication is intended only to provide a summary and general overview of matters of interest. You should not rely upon the content of this publication as legal advice. You should obtain legal advice regarding the facts and circumstances of your matter before acting or relying upon the content of this publication.

Insolvency

Has a preference payment loophole emerged? By Con Kokkinos and Matthew Kucianski*

Con Kokkinos

Matthew Kucianski

In early August, the Victorian Court of Appeal handed down its decision in Cant v Mad Brothers Earthmoving Pty Ltd [2020] VSCA 198. The decision casts doubt on what was a relatively settled position: that a third-party payment could indeed constitute a preference payment. In brief, the background to the matter is as follows: z Elaina Construction and Developing Group Pty Ltd (“Elaina”) owed a debt to Mad Brothers Earthmoving Pty Ltd (“Mad Brothers”). z Payment of the debt was made but not by Elaina, rather by a related entity by way common director, Rock Investments Pty Ltd (“Rock”). z Elaina was later placed into liquidation. With the payment to Mad Brothers having been made within the relevant six-month relation-back period, the liquidator sought to recover the payment as a preference. The Court of Appeal dismissed the liquidator’s application. It found that for there to be an unfair preference the payment must be received from the company or result in a diminution of the company’s assets otherwise available to the creditors. In this

matter, the payment came from Rock not Elaina, and Elaina’s assets were not diminished by the transaction – hence the court found there could be no unfair preference. In coming to the decision, the Court focused on section 588FA(1)(b) of the Corporations Act 2001 which outlines that a transaction is an unfair preference if and only if: “the transaction results in the creditor receiving from the company … more than the creditor would receive … if the transaction were set aside and the creditor were to prove for the debt in a winding up of the company”. (emphasis added). As noted above, this decision changes what was a relatively settled position about third party payments in the context of preferences. Moreover, given it is an appellate court decision in Victoria, it would be binding on lower courts in Victoria. No doubt other jurisdictions will also be interested in the decision. The decision appears to create a mechanism – or potential loophole – by which a company can genuinely or intentionally “prefer” a creditor and nonetheless potentially defeat a liquidator’s preference claim – so long as the payment comes from a source outside the company. ➤

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

Insolvency

“A preference payment or “preferences” as they are known in the industry, are payments (or transfers of assets) that give one creditor an advantage over other creditors.” Seven tips for advisors to consider when extending terms to an insolvent entity We often hear creditors concerned about payments of their fees clawed back by a liquidator as a “preference payment”. And just as often we’re asked how they can protect themselves from becoming embroiled in such a claim in the first place. Here is a brief background to the preference payment provisions and some useful tips to help you not fall in the realms of having received a preference claim. A preference payment or “preferences” as they are known in the industry, are payments (or transfers of assets) that give one creditor an advantage over other creditors. Put simply, it is where one creditor is paid more than another creditor in the lead up to a liquidation. Payments that are seen to have preferred a particular creditor within a certain period before a company is placed into liquidation, may, be recovered by a liquidator (i.e. clawed back).

For a liquidator to successfully prove a preference payment was made to a creditor, they must first establish the following points prescribed in section 588FA of the Corporations Act 2001: 1. The company, and the creditor are parties to the transaction (even if someone else is also a party). 2. The creditor that received the payment was an unsecured creditor. 3. The transaction occurred within six months before the liquidation “commenced” (i.e. six months before the relation-back day). 4. The company made the payment when it was insolvent, or the company became insolvent as a result of the payment/transaction. 5. The payment resulted in the creditor receiving more than they would have in a liquidation scenario. That is, they received more “cents per dollar” on their debt than other creditors did or will receive.

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Assuming a liquidator can establish these points, they have a fair chance of convincing a court that the monies should be repaid to the liquidator (noting that the vast majority of preference claims are in fact settled outside court). However, there are ways for businesses to protect themselves and reduce the risk of being involved in a transaction that could be pursued as a preference claim by a liquidator. The options explored below are designed to give some guidance and help advisors from being caught in the crossfire when their client becomes insolvent. Some things for advisors to consider include: 1. Get your fees pre-paid wherever possible – especially if you’re dealing with a potentially insolvent client Because to be preferential a payment must be a transaction between the company and a creditor, payments in advance may be beneficial. If you’re never a ‘creditor’ of the company, you will not be subject to the preference payment provisions. Getting prepaid (either upfront or by monthly fee instalment arrangements) for your services is a great way to ensure a preference claim will never be a consideration. 2. Get paid by a third party outside of the company Clearly to be a preference the company and the creditor must be parties to the transaction. However, while a payment from a third party may arguably not fall into that category, a transaction involving the company, the creditor and a third party can still be regarded as preferential (i.e. essentially the third party must be a volunteer). 3. Work the running account If there is a ‘continuing business relationship’ between you and the client that gives rise to a running balance account (i.e. a fluctuating

Insolvency

debt balance), then it is the net position of all the transactions over the relevant period that is important – this is known as the “net effect” of the transactions. The relevant period is six months prior to the start of the liquidation if the appointment type is a voluntary liquidation (it is a longer period for a court liquidation and is dictated by the date the winding up application was filed). Work the running account in your favour to limit or extinguish any potential preference claim. The key for a liquidator is to show whether the debt owed to you increased or decreased during the relevant period. If the balance owed to you decreased, this amount is the potential preference amount (with all other factors being considered). If the balance owing increased, there is no preference as you were actually disadvantaged by continuing to transact with the client over the relevant period. Also give consideration to the implication of the peak indebtedness rule that denotes the point (or peak) of when the debt decreased and to what value. 4. Take security where you can Secured creditors are not subject to the preference payment provisions. Where possible and appropriate, and before services are incurred: seek security and register a security interest over the company on the PPSR. Ensure your engagement terms contain a charging clause (including over the business assets if possible). Obtain personal guarantees from directors and ensure they take the form of an equitable charge over their real property.

If you are going to take security, make sure you act quickly as the granting of the security itself may be deemed a preferential act. 5. Stay on top of your debtor’s ledger It’s only a preference if there were reasonable grounds for you to suspect the impending or actual insolvency. If you have a client that’s teetering on the edge, the best thing to do is get informed about their financial issues. Minimise having insolvent clients that drag their financial issues out. And while there is no minimum amount defined to pursue a preference claim, as a rule of thumb payments to a creditor during the relevant period for less than a few thousand dollars are generally not commercial for a liquidator to pursue. Therefore, by being on top of your debtor’s ledger and proactively getting clients to address any financial issues they have, the more likely it is that you will not be caught up in a preference payment claim. 6. Doctrine of Ultimate Effect When all else fails and you find yourself on the receiving end of a preference claim from a liquidator, the legal principle known as the Doctrine of Ultimate Effect may serve to assist you in defending the liquidators claim. Where it is applied, the Doctrine creates a higher threshold for establishing an unfair preference than would otherwise result from a literal interpretation of section 588FA. The Doctrine was explained in Airservices Australia v Ferrier – that for a payment to be preferential “it must ultimately result in a decrease

in the net value of the assets to meet the competing demands of other creditors”. So, in essence, if you can show the payment resulted in an increase or preservation of the value of the company’s assets (such as through the provision of professional services that would not otherwise have been provided and directly benefited the company), you can potentially argue the payments are not preferential. It has been held however that the Doctrine will not extend to certain transactions (including where the payment is made in respect of a past debt and is not made to secure the continuing provision of goods or services). Whether the Doctrine of Ultimate Effect can be used must be assessed on a case by case basis. 7. Talk to the liquidator, negotiate, and if required seek legal advice As insolvency practitioners we are commercially-minded people. If you are the subject of a preference claim, it is best to deal with matters head-on. Talk it through – obviously if you or your clients receive a demand from a liquidator, then you should obtain appropriate legal advice before seeking to defend any such claim yourself.

*Con Kokkinos Partner Worrells T: 61 3 9613 5502 E: con.kokkinos@worrells.net.au *Matthew Kucianski Partner Worrells T: 61 3 9613 5518 E: Matthew.Kucianski@worrells.net.au

“Clearly to be a preference the company and the creditor must be parties to the transaction. However, while a payment from a third party may arguably not fall into that category, a transaction involving the company, the creditor and a third party can still be regarded as preferential. ”

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

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Masterclass

Cashflow management Never more in recent history has the monitoring of cashflow been more important and of a critical focus for businesses.

ash, as opposed to other current asset management is a subject that has attracted considerable attention of late. In this article we touch on the major factors to be considered in the management of cash within a business. Cash management is an awkward topic to deal with in such a general way because its application is applied across a very broad spectrum – from a sole trader to a large multi-national corporation. It is therefore vital to use a cost-benefit framework when assessing the applicability of some of the mathematical or computer dependent cash management techniques. We also refer to some of the models that have been developed to assist in the cash management process.

1. Importance of Cash Management The necessity for effective cash management can be gauged by the penalties paid by firms that have neglected to do so. In the extreme case, the result can mean insolvency. In the lesser case, the results are reduced returns, either due to lost opportunity for investment of idle funds, or as a result of increased costs (e.g. loss of discounts, use of expensive means of financing) or a combination of factors. Interest rates impact the return on an investment, the required rate of return and the opportunity costs.

l Increasing Opportunity Costs Interest rates and the cost of money reduce the return and therefore have an opportunity cost.

Cash management is an awkward topic to deal with in such a general way because its application is applied across a very broad spectrum... 66

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

l Inflation The effects of inflation on the levels of inventories and receivables and thus on working capital requirements generally, have placed significant pressure on liquidity in most businesses. This problem is not recognised by our taxation system.

2. The need for Cash The reasons for holding cash can still be analysed along the lines suggested by Keynes almost 100 years ago. That is, cash for transaction purposes, and cash for provision of precautionary reserves. Cash balances are required for transactions that is the day to day, month to month operation of the business, primarily because it is highly unlikely that the business will be able to arrange exact synchronisation between cash inflow (from sales) and cash outflows (for purchases of inventories and payment of expenses). Cash balances of a precautionary nature are required because of the uncertainty involved in much of the business’ forward planning. Two major problems of cash management may be summarised as: (a) Ensuring the funds are available to meet those situations where cash outflows exceed cash inflows (e.g. by use of an overdraft, short-term accommodation, extending of payment, etc). As an adjunct to this, if finance would not appear to be available, it would be necessary to ensure that suitable action is taken to avoid the situation, perhaps by re-arranging receipts and payments schedules or moving to a less ambitious scale of operations. To put this another way, firms should subject planned activities to cash flow analysis to gain an idea of potential problem areas before committing themselves to action. (b) Ensuring that surplus cash made available when inflows exceed outflows is placed to the best advantage (e.g. reduction of overdraft, short-term investment, retirement of debt, financing of longterm investments, etc).

Masterclass Effective cash management involves three steps – (a) Determine the levels of cash required for transactions at different intervals over specific time horizons. (b) Determine the precautionary cash balances required. The level of a firms “safety margin” will depend on the stability and predictability of the key variables – e.g. sales and operating expenses. (c) Determine the optimum funding/investment methods to meet the requirements of (a) and (b). Before examining each of these steps in detail, it is poignant to touch on two areas which are often overlooked. Firstly, the quicker a business can convert its revenue into cash in the bank, the lower is its requirement for intermediate financing. It follows then that it is important to closely examine areas such as credit policies, cash collections and banking methods. Secondly, the longer the delay in converting liabilities or other commitments into cash payments, the lower the need for financing. The businesses accounts payable, wages and general payment procedures should be examined. In looking at the business’ policies in these areas, it is important to recognise all of the opportunity costs and ramifications involved, (viz. the effects on sales, credit worthiness, relations with bankers and so on), as well as the more easily identifiable costs and benefits.

4. Cash Flow Forecasts The development of the cash flow forecast, for any time horizon will start with projections of income and expenditure, together with estimates of other flows such as capital investments, payment of taxes, repayment of loans and so on. It is usually at this time that the first setback in cash management occurs. Despite the exhortations of generations of teachers of the management sciences, there are a great number of businesses which do not attempt to finalise operational and financial planning. Normally the planning framework could be broken down into long-term, medium-term and short-term. (This could be five (5) years and over, one-five years and under twelve months respectively). The medium and long-term plans will usually be concerned with aggregate levels, based on estimates of net income adjusted for the non-cash items, and balance-sheet items. This is referred to as the top-down approach. The planning horizon the business is usually most concerned with is the short-term one. This period may be broken down into smaller periods. One such set of subperiods could be: — Daily for the first four weeks — Weekly for the next two months

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3. The process of Cash Management

The development of the cash flow forecast, for any time horizon will start with projections of income and expenditure, together with estimates of other flows such as capital investments, payment of taxes, repayment of loans and so on. — Monthly for the next three months — Quarterly for the next six months These short-term forecasts should be based on detailed operating budgets and should follow the “bottom-up” approach – i.e. building the final picture by working up from the detail level. The questions of how detailed is the breakdown and how short is the time period can only be judged on a cost benefit basis – i.e. what are the costs (clerical, computer and administrative) of obtaining short term detail, and what are the benefits in terms of better control and more effective use of funds. From the detailed operating budgets, and estimates of non-operating cash items, a detailed cash forecast can be established. Several things emerge quickly when actually sitting down and preparing a cash budget. Firstly, cashflow timings are not the same as revenue account timings – e.g. sales may be either cash, or credit, or a combination of both. In the case of credit sales, the actual receipt of the cash will depend on the business’ credit policy. Secondly, in estimating cashflows, we are assuming that the policies in areas such as credit and accounts payable are fixed, as is the timing of say, capital investment outlays. By making assumptions about these policies the business can prepare the cash flow estimates. It should be recognised however, that these policies can be changed in order to determine the optimum solution to the cash management problem. Orgler has examined this problem, and refers to the “sequential” approach and the “simultaneous” approach. The Sequential approach takes all other policies as being given, and solves the cash budget problems by examining the effect of the surplus or deficit for each period on that period’s closing cash balance, and either borrowing or investing as the case may be. The Simultaneous approach however, recognises that short term cash flow problems may be solved ➤

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

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Masterclass by changing other variables, e.g. postponing capital outflows, or deciding not to take settlement discounts in one period etc. (Each one of these actions would have its own cost/benefits, which would need to be evaluated).

5. Precautionary Cash Balances Having established the cash flow forecast, the next step is to carry out sensitivity analysis i.e. to determine the possible variability of results from the estimates. It is likely that in estimating the underlying variables (e.g. sales, inventory purchases, and other cash flows) it has been necessary for the business to use mean values – i.e. the business has used the most likely values, given its experience with the behaviour of the variables. Having obtained some idea of the possible variability of the cash flows, the desired level of the precautionary cash balance can be determined. An important factor in establishing this level will be the attitude of individual management to the risk of running out of cash, and the alternative sources of cash available. These sources may include unused overdraft limits, a line of credit via a bill discounting facility, access to short term loans etc.

6. Optimisation of Cash Balances The earlier sections have provided the foundations for cash management. If a business were to follow these methods, then all other things being equal, the chances of insolvency due to inadequate cash management should be greatly reduced. It should be stressed that cash management cannot reduce normal business risk and no claims are made in this regard. The next problem is to determine how periodic deficits will be funded, and surpluses invested. It is not the intent to detail specific types of finance or investments, but rather to deal with some optimisation methods which have been proposed. The selection of the appropriate source of use of funds will depend on the specific costs and benefits applicable to the business at the time, taking into account relative interest rates, transaction costs, risks, credit worthiness and so on.

7. The Sequential approach – Optimisation models Briefly recalling that the Sequential approach to cash management determines the periodic surplus/deficit with the effect of this result on the business’ cash balances on a period by periodic basis. As mentioned earlier, cash balances are comprised of the result of the firm’s periodic operations, plus the required safety margin (i.e. the transaction and precautionary cash needs). Having made these decisions, the question is then how to hold this balance – e.g. all cash, all

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Having established the cash flow forecast, the next step is to carry out sensitivity analysis i.e. to determine the possible variability of results from the estimates. unused overdraft limit, all short term investments, or combinations of these and others. If the firm holds cash there are opportunity costs involved. If it holds short term investments there are transaction costs involved. If it relies on unused overdraft limits, there are costs (both actual and opportunity) involved. Several mathematical models have been proposed to provide the optimum solution to this problem. Some of these will be detailed below. Before commenting on them, we pass some general comments concerning models. A mathematical model seeks simply to incorporate the variables of a problem into a functional relationship, which will allow consistent solutions to be calculated for changing variables. In doing this, the model cuts through the often imprecise language definition of the problem, and seeks to come to grips with the Key Factors. So far so good. To obtain the precision necessary for the mathematical expression, the model must make assumptions about the behaviour and relationship of these Key Factors, and it is here that we come to the major criticism of many models. The effectiveness of a model should not be judged by the simplifying assumptions made, but by how well it predicts real life behaviour. If the model accurately and consistently predicts actual observations, then in the absence of evidence to the contrary, it is a good model. If the model does not work, then either the functional relationship itself is wrong, or the simplifying assumptions have made it too restrictive for the real world. The other criterion for the usefulness of a model is its cost effectiveness. Reasons supporting the use of models include: — Identification of costs and benefits — Formalisation of cost benefit trade-offs — Formalisation of procedure — Provision of a performance yardstick

(a) Inventory Based Models Much of the initial work on optimum cash levels made use of the economic order quantity inventory models. These models seek to provide solutions to: — The minimum and maximum levels of cash

Masterclass

The E.O.Q. model, where the inventory item is cash flowing out at a constant rate, and being replenished at specific intervals in equal amounts by sale of securities, or borrowing. Thus, cash flows are known and are constant, and the only variables are the relative interest rates and the (fixed) transaction costs. Cash Balance The following demonstrates graphically the workings C the basic model. $ of

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— The minimum and maximum levels of marketable securities — When to transfer between marketable securities and cash — The costs of a cash “stock-out” and the trade off between this cost and the cost of holding cash.

(b) Stochastic (random cash-flow) Model This model seeks to overcome the problem of limiting assumptions by developing a model based on randomly fluctuating daily cash flows. The purpose of the model is to set control or decision limits which balance the opportunity costs of holding cash with the transaction costs of converting to and from securities. The following graph outlines the working of this model. Stochastic Cash-Management Model (Miller Orr) Cash Balance

Simple Inventory Based Cash Management Model (Baumol) Cash Balance

Cash Balance

Time

C= When

c = optimum cash conversion size B = fixed cost per conversion T = total cash outflows for the time span

under consideration

I = the interest rate per period

Note: 1) As T increases, so too does C, but at a smaller rate. 2) washes out effects of estimating errors. A major problem with this model and its developments is that although there may be some firms whose cash flows are in accord with the underlying assumptions, there is limited general applicability. In an attempt to overcome the limitations of constant or known cash flows, another model was developed.

L Z B 02 cB I H L

= = = = = = =

3Z optimum cash re-order level transaction cost (fixed) L variance of daily changes in cash balances daily interest rate (opportunity cost) upper control limit lower control limit

Note 1: when the cash balance reaches L, buy L-Z securities, which will return the cash balance to Z. Note 2: when the cash balance reaches L, sell Z-L securities, which will return the cash balance to Z. Note 3: washes our effects of estimating errors. Two important assumptions of this basic model are: — Firstly, that the cash flow pattern is random, and secondly, that adjustments necessary are between cash and marketable securities. The first assumption means that significant known flows such as capital investment, dividends, ➤

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

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Masterclass tax payments and the like, should be handled outside the model, and the latter assumption has been varied in later adaptions of the model. — Miller and Orr were quite well aware of the simplifications they had introduced in their model, and to test its usefulness, they ran tests of the model in an actual cash management environment. The results are encouraging in that the model’s performance showed improvement on existing management technique.

8. Simultaneous Approach Model One of the assumptions of the sequential approach to optimising cash balances is that other factors are constant – e.g. that accounts receivable and accounts payable policy is fixed. Another assumption is that while optimisation in successive periods will be dependent on decisions made in the current period, there is no attempt to consider inter-period effects, and look at optimisation over the entire time horizon, perhaps by shifting flows between periods where this is possible. One method has been proposed to deal with decision making over a number of variables within the current period and also to deal with inter-temporal aspects of cash management. In this method, using multi-period linear programming, cash management decisions for all periods within the time-horizon are optimised, taking into account multiple solutions for each sub-period. For each sub period the estimated cash flows are calculated by the solution to the funding of any deficit would include consideration of changing current policies e.g. with respect to accounts receivable and accounts payable, or timing of capital investment, as well as the more usual model solutions involving use of overdraft or other sources of short term finance. Similar considerations would be included in respect of periodic surpluses. The advantages of this type of model are those of being able to consider multiple factors and time period effects in optimising the solutions, and also the

There is no doubt that the application of scientific method to cash management does have potential for improving efficiency and overall performance. additional information provided by the dual model in evaluating the marginal effects of the constraints. The disadvantages of this method are firstly the determination of the objective function for the linear programming model and secondly the costs of estimating the range of values for the function and finally the processing costs involved.

9. The Costs and Benefits of Models There is no doubt that the application of scientific method to cash management does have potential for improving efficiency and overall performance. However, those models which require only limited data collection or estimation suffer from the problem of having very little real life application. On the other hand, while it is possible to tailor models to the specific requirements of a firm, this is usually achieved in conjunction with high data collection and processing costs. For large firms though, with significant funds in the balance, the prospective rewards could provide incentive to develop specifically tailored models.

10. Conclusion Effective cash management is an important component in the portfolio of skills required by credit professionals. Appropriate application of cash management techniques is surely one of the most basic ingredients for survival and success for any business.

Reprint of previous article in Australian Credit Management with amendments.

Another assumption is that while optimisation in successive periods will be dependent on decisions made in the current period, there is no attempt to consider inter-period effects, and look at optimisation over the entire time horizon, perhaps by shifting flows between periods where this is possible. 70

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

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aicm Training News From classroom to home, how to enhance your online learning with AICM Online courses offer a great opportunity for learners

Plan your schedule

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Planning is a great way to help you reinvigorate your

Collaborative learning is an important way to help

motivation to study online. The best way to do this is to

learners gain experience in interaction and develop

utilise an effective calendar system and create a study

important skills in critical thinking, self-reflection, and

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construction of knowledge which helps busy credit professionals. In a collaborative learning environment, knowledge

At the beginning of each week make a to-do list of everything you need to accomplish for the days ahead. Allocate time to each task and try to stick to this

and understanding of the subject are shared and

schedule. Not only will this implement self-discipline in

transmitted among learners as they work toward

your work, it will also allow you to prioritise your tasks

common learning goals or a solution to a problem.

in order of importance, an excellent skill to have when

Learners gain interactive experiences as they

studying online.

participate in discussions, search for information, and exchange opinions. A high-quality collaborative learning environment provides learners with opportunities to engage in

Incorporating a consistent calendar into your learning habits is a great way to reduce anxiety within your studies, whilst improving your time management and organisational skills.

interactive and collaborative activities and to get better learning outcomes including the development of

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No one enjoys cramming a whole lot of work in

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one night, however it is a route most students take.

top tips and great features to assist you in a smooth

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you have studied, will not only improve your memory,

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

aicm Training News but it will also boost your understanding of the key

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credit concepts. A great way to maintain this is to

It may not seem like a priority, but it is important to

revisit a subject or unit once a week.

acknowledge your achievements when studying online. This promotes enjoyment and motivation in your learning

Ask for help when you need it

ability. Looking after your mental health and wellbeing,

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begins with being proud of your accomplishments.

know who else might be having the same problem. Ongoing feedback from your AICM trainer can be

Create a work-life balance

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October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

DIVISION REPORT

Western Australia/Northern Territory

Cecilia Lam (NCI), Troy Mulder (WA/NT Division President), Nadia Mitsopoulos (WINC Speaker), Shelbe Croucher (NCI), Nikki Aquino, Renae Wade (both Alinta Energy) and Daniel Czaplinski (NCI).

Debbie Bernardo, Julia Brazier, Amanda Clarke and Nimisha Lad (all Westrac).

Melissa Sharpe (Turner Engineering), Candice Sharp (Lumen Christi College), Deana Barrett, Kelly Dunlop, Linsey and Rebecca Cant (all Wesfarmers Kleenheat).

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Presidents Report Another sense of déjà vu as I write the report for the October publication. Western Australia seems to be cut off from the rest of the country with our good fortune in terms of preventing any outbreaks or community spread, however we continue to sympathise with our east coast counterparts who are still experiencing lockdown measures and the continued impacts of community transmission. For us fortunate Western Australians we continue to return to normal and were able to hold our first event for the year with the ‘sold out’ sign going up at our recent WinC Luncheon in September, wonderfully hosted by the Doubletree by Hilton in Northbridge wherein our guests were both entertained and enthralled by our speakers and Keynote presenter, Nadia Mitsopoulos – a rundown of that event can be found later in this division report. A huge note of thanks to the National Office and Hayley Warner for planning and providing assistance on the day. A great success with over $800 raised on the day for Beyond Blue, my thanks to all who attended. I’d like to also extend my thanks to those Councillors and members who attended our AGM either in person or via video conference, I am pleased to report that all Council nominations and term extensions were ratified and have since been voted on in our subsequent Council meetings. Sadly, the planned one-day

Western Australia/Northern Territory

– Troy Mulder MICM CCE WA/NT Divisional President

Trusted Insights. Responsible Decisions.

Women in Credit - WinC The annual WINC event was held at the Doubletree By Hilton on September 11th and was a sell-out function. It was a good opportunity for all attendees to catch-up and network again after months of not being able to attend these sorts of events. A big thank you to Equifax, our Premium Sponsor, as well as NCI and Results Legal as Supporting Sponsors, for making this event possible. At these WINC events the AICM raises money for a nominated charity and this year that charity is Beyond Blue. Beyond Blue provides support programs to address issues related to depression, suicide, anxiety disorders and other related mental illnesses. Beyond Blue Ambassador, Emma Missen, gave an inspiring talk (via video link from Tasmania) on her journey of dealing with anxiety and depression along with how Beyond Blue assists her in coping with these illnesses. For someone so

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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.

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young it was inspirational to hear how she is dealing with the illnesses and making progress on a daily basis. Our keynote speaker was Nadia Mitsopoulos, co-host of the Breakfast program on ABC Radio Perth and board member of Lifeline WA. Nadia’s career spans nearly 30 years in journalism, having worked for GWN as well as Ten Network, Associated Press in London and as Political Reporter for Nine News. Nadia talked about her early days as a journalist in regional WA and Perth and the obstacles that she had to overcome to progress her career. Nadia told of confronting situations she had to deal Natalie Walker, Shafreen Choudhury (both Keystart Loans), Cheri Bowater (Summit with as a journalist and how some of Fertilisers), Sarah Whitby and Jenna Woodall (both Keystart Loans). those experiences drove her and set her on a path towards political journalism. It National Conference Live Event will no longer be held was interesting and inspiring to hear how Nadia overcame here in Perth this month, however we look forward to the challenges she faced; both professional and personal. participating in and promoting the Virtual Conference It was a wonderful evening and the COVID restrictions going ahead across the country later in the month, I am allowed for a more engaging setting which in turn made sure that this will deliver enormous value and wealth the whole event a great success. of fantastic content and knowledge, even in the virtual – Rowan McClarty MICM CCE format. That being said, we will be looking forward to WA Division Director a return to the normal conference format next year if circumstances permit. And with the end of a tumultuous year fast The Australian Institute of Credit approaching, we will be looking to hold our annual Management welcomes our Partners for 2020. EOY sundowner in some form into late November/early December, so watch this space for more details coming National Partners soon.

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South Australia

Kris Watts, Madeleine Dean and Lisa Miller (all Beyond Bank).

Janette Bretag and Jane Stewart (both Samuel Smith).

Natasha Cocks (Atradius) and Natasha Bissett (NCI).

Vivienne Pearson and Rachel Knight (both Group Management Services).

Presidents report

of the overwhelming amount of content which is being brought to us by experienced speakers in the credit sphere. I know that our National Office has been working tirelessly to organise the Conference to ensure that we still have the engagement and networking (albeit in a different way) that we all love about this event. Thank you to our South Australian Council who were recently reelected at our AGM – James Neate, Gemma McGrice, Clare Venema, Neil Fennell, Gail Crowder, our National President, Trevor Goodwin and our minute taker, Lindsay Chuck. The South Australian credit industry is lucky to have your experience and support. As I look forward, I hope that South Australia is able to hold further events in 2020, although I know that Christmas will be here before we know it! I think we can all be proud of what we have achieved in 2020 and I look forward to catching up with everyone again soon.

My first report as President of the South Australian Division - where to start?! As I sit back and reflect on the past nine months, I am proud to be a member of the AICM and to be leading our Division as we navigate through the remainder of 2020 and into the new year. We have been incredibly lucky in South Australia to manage the current health emergency, which meant we were able to safely and successfully hold our Women in Credit Luncheon at the Mayfair Hotel. The Luncheon remains a favourite event for many of our members and this year was no different. Supporting Beyond Blue, we were fortunate to hear from Emma Missen, who left us all with an important message about having hope, which I think is so crucial, especially during our current times - make sure you reach out to those around you for the support you need. Nikki Govan, Chair of Business SA and our Keynote Speaker then spoke with us both personally and honestly about her journey - Nikki is incredibly inspiring and a great advocate for women in business. The Luncheon had a wonderful energy about it and I certainly enjoyed the opportunity to catch up with colleagues and friends. As we now prepare for what will be a different, but equally rewarding, National Conference, I hope our members embrace the online format and take advantage 76

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– Alice Carter MICM CCE SA Division President

Women in Credit – WinC On 18 September 2020, the AICM’s SA Division enjoyed the Women in Credit Luncheon for 2020, held at the Mayfair Hotel. This year’s event specifically focused on the mental health of credit professionals, their team

South Australia DIVISION REPORT

Debbie Costello and Gail French (both Top Coat Asphalt).

mates, and clients, which proved to be a timely message considering the current turbulent times. The event’s guest speaker was the renowned Nikki Govan, who is currently the Chair of Business SA, the South Australian Chamber of Commerce, and former Chair of the Southern Adelaide Economic Development Board. Furthermore, Nikki owns and manages the popular Star of Greece restaurant in Port Willunga, which our interstate friends and colleagues are encouraged to attend when able. The event provided a message of hope and unity, which is sure to carry through to the impending national conference.

Gemma McGrice (SA Division YCP Councillor) with SA Division YCP winner Briana Harris (Oakbridge Lawyers).

YCPA The South Australian Division’s Young Credit Professional of the year award night, held at Lynch Meyer Lawyers on 20 August 2020 was a great success, and wonderful evening. Not only was the evening a great opportunity to celebrate emerging talent in the credit profession, but was also a long delayed “in-person” event, following the ease of COVID-19 restrictions in South Australia. The race was extremely close to pick a representative as all candidates were very impressive, however the SA Division is delighted to have Briana Harris, Associate at Oakbridge Lawyers to represent them at nationals. The SA Division Council would like to thank Lynch Meyer for hosting the event, and look forward to seeing its young credit professionals excel further.

A word from South Australia’s YCP Finalist for 2020 The South Australian division is delighted to announce Briana Harris, Associate at Oakbridge Lawyers as their finalist for the YCP 2020. As a former South Australian finalist for YCP 2019, I had a wonderful opportunity to catch up with our rising star to discuss her thoughts

South Australian YCP Finalists: Briana Harris (Oakbridge Lawyers), Ryan Osborn (Oracle Insolvency Services), Emma Bird (Brice Metals) and Madison Watts (NCI).

regarding the AICM and YCP. This is what Briana had to say: 1. What interested you in entering the YCP competition? I entered the YCP competition because I am passionate about credit and wanted the opportunity to be an advocate for young credit professionals within the AICM. 2. How has the AICM contributed to your professional development? I have really enjoyed attending a lot of professional seminars on important credit topics. I found these seminars very informative and they have helped me to grow as a credit professional. The AICM also provides

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South Australia a number of fantastic networking opportunities, where I have had the opportunity to meet other passionate credit professionals in the industry, forging long-lasting professional relationships. 3. What current issues in credit management interest you? Obviously the biggest current issue at the moment, and the one on everyone’s mind, is COVID-19. I am very interested to see how the credit industry will develop and adapt to the current climate and its aftermath. 4. How will you be preparing for the national finals? I will be doing lots of reading, research and webinars (particularly with the current climate and how it may affect the applicable legislation) to broaden my knowledge outside of what I do at work, so that I can put myself in the best position to compete with the other finalists. 5. What are your interests outside of work? Outside of work I play a lot of team sport, I love basketball and soccer and I play with my teams most nights after work. I also love doing outdoorsy activities like hiking and kayaking.

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

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I for one, am very excited to see how Briana goes at Nationals, and encourage the SA Division to offer as much support and encouragement as possible leading up to the competition. – Clare Venema MICM YCP Finalist 2019

Emma Bird Emma is a credit officer at Brice Metals Australia and has her Certificate IV in Credit Management. Emma has been in the credit industry for 8 years and appreciates feeling as though she’s assisting companies minimise their risk exposure and helping businesses grow when opening new accounts. Emma Emma Bird considers herself to be quite an introvert, however, she performs dance in front of an audience of 15 thousand people each year.

Madison Watts MICM Madison has been a credit analyst at NCI for the past 3 years. She enjoys the fact her role allows her to conduct thorough investigations and analyse data which helps diversify her knowledge of the credit industry. Madison then uses this information to assist her clients minimise their commercial risk which Madison Watts MICM ultimately supports the growth of their business. In addition to working in credit, Madison is also a cheerleader and has a degree in nursing.

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Ryan Osborn MICM

Official Division Supporting Sponsors

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Ryan is a file accountant at Oracle Insolvency Services and has been in the credit industry for 3 and a half years and has his Bachelor of Commerce in Accounting. Ryan enjoys investigating the reasons and understanding how companies and individuals become insolvent and assists working towards results that provide Ryan Osborn MICM a return for creditors. Ryan is also a magician on the side and recently performed a sold-out season at the Adelaide Fringe.

Queensland

Presidents Report Hello to all members! We are now in the home stretch for 2020. What a year it has been! I hope you are all adapting to the ever changing landscape and as things open up, we hope to see a few of you at some face to face events we hope to host over the next few months if the current trajectory persists. A lot has happened since my last letter, as we had our AGM, QLD YCP announcement and National Conference coming closer. We had our QLD Division AGM on the 19th of August, where we sadly had to say goodbye to two councillors who’s contribution to council has been phenomenal. After much deliberation, Julie McNamara who served as QLD Director, and was responsible for the YCP portfolio nationally, has decided to step down. Julie has been a part of council for some years and put her passions into the events portfolio and can thank her for her contribution to WINC, and the many events over the years after we decided to branch out from using the Tatts club as our preferred venue for events. We also see Peter Mills stepping down from his council position. Peter’s contribution on council was Vice President, President and our go to for all matters regarding the law and legislation portfolio. He has been great to work with and is always willing to help where possible. I would like to thank the both of you for your contribution to the QLD council over the years, and I look forward to seeing you all in the near future. After our AGM, we had our first council meeting of the year to re-confirm the setup of council. I was re-confirmed as president and would like to thank the council for agreeing to have me assist in this capacity for another year. We also voted to keep Stacey Woodward as the Vice President. Subsequent meetings saw the council scout and vote on a new state director, and I would like to congratulate Decia Guttormsen as our new QLD state

director! Decia has had a long history with AICM and has contributed a lot. I am excited for her and believe she will do a great job. The remaining make up of council remains the same. Another great announcement was that of Maddison Graham from Stoddarts Group as the QLD state winner of the YCP competition! Maddison did a great job of impressing the judges and we wish her all the best in the upcoming national YCP competition. As for the rest of the year, we are looking forward to our first Virtual National Conference. Given the challenges faced by the team at head office, I think they have really made leaps and bounds in their adoption of digital technology to continue to provide value to members. Please have a look at the line-up of the conference and be a part of this new offering. As always, your feedback post conference will go into planning for future events. Soon after the conference, we will be looking at the QLD WINC event, registrations are still open and we are past the 100 registrations mark, with not many spots left due to social distancing requirements at the venue. If you haven’t booked yet, please don’t run the risk of losing out. I also would like to ask that you keep eye out for events later in the year. We as a council are still looking at hosting a few face to face events if we continue to see a relaxation of restrictions across the state. I would also like to finish off with a big thank you to the QLD state council in all the hard work they have put into making this the year it was. All of this is on a volunteer basis and your time is much appreciated. I also would like to thank our members, for whom we do this for, and who support the organisation. Our sponsors are also a very important part as they continue to offer assistance to keep things going. – Roger Masamvu MICM CCE Queensland Division President

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Queensland YCP FInalists: Maddison Graham (Stoddart Group), Julie McNamara (Qld Division Director), Lachlan McKinnon (Vincents), Skie Stringfellow (Unita) and Shanae Walker (Unity Water).

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Queensland

Qld YCP winner Maddison Graham (centre) celebarates with colleagues from Stoddarts – Maria Schandl and Belinda Hill.

Stacey Woodward (Qld Division Vice President) greets Julie McNamara (Qld Division Director) in a COVID-19 safe manner.

A little bit about our Qld Young Credit Professional finalists Maddison Graham MICM Credit Officer, Stoddart Group (State winner)

2020 has been a crazy year for all of us, what made you decide to take the leap to apply for the Young Credit Professional Award this year? I really wanted to step outside my comfort zone Maddison Graham MICM and I also wanted to see what opportunities AICM offered. How did you feel going into the competition? Very nervous and excited at the same time! How has COVID affected your work and industry? We are very lucky; it has been very busy for us and while we did work from home, the challenge we faced was having to implement 3 new systems while being away from my team.

2019 YCPA Ashleigh Mason welcomes attendees to the National Virtual YCP finalist presentation.

Tell us about your current role? I am currently a Credit Officer at Stoddarts, I look after customers across Qld, NSW, VIC & SA. What do you want to achieve now that you have won? Right now, my focus is on the upcoming competition at this year’s ‘virtual conference’ I’ve been focusing on my presentation and the interview that will take place. After this I would like to further my learning within the credit industry.

How did it feel to win this year? Great! Although we didn’t have the big awards night like previous years, it was nice having a more intimate awards night with my support team by my side.

What is your advice for any upcoming Young Credit Professionals who are on the fence about applying next year? Just give it a go, be confident in yourself and your abilities and utilise your support team.

How is your preparation going? Really well, there’s lots of research to do and lots of practicing to do to make it the best I can.

Tell us something about yourself that others may be surprised to know about? I’m brown belt in MMA.

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Queensland so satisfying when you see people come out on the other side, happier and more financially stable. Working in the credit industry has made me a more humble and understanding person, which I am forever grateful for.

Accountant Insolvency & Reconstruction, Vincents

Current position Accountant – Insolvency and Reconstruction Years within the credit industry One year within the credit industry.

Lachlan McKinnon

What makes you passionate about credit? I am passionate about credit because it allows me to use my technical and interpersonal skills to work with clients in obtaining the best possible outcome. A credit professional has the capacity to assist significantly in the financial position of their clients. It’s a tough industry but I love a challenge and enjoy seeing the effort that I put in directly translate to a difference made for my clients. Highest level of accreditation QUT – Bachelor of Business I am currently undertaking my Chartered Accountant graduate diploma. Fun fact about yourself I once solved the Rubik’s Cube in 24 seconds.

Highest level of accreditation I have a Diploma in Events Management which isn’t really relevant to the Credit Industry…and a Cert IV in Occupational Health & Safety. I have completed multiple short courses over my time within Credit, such as the Emerging Leaders program in 2019 and am currently enrolled in a course in Business Analytics and Visualisation at RMIT University. My employer is also putting me through a Cert IV in Leadership & Management later this year. Fun fact about yourself I love scuba diving, travelling and all outdoor recreation activities. I once had the opportunity to work in Laos for a month teaching English to children rescued from human trafficking which was one of the most eye opening and rewarding experiences I have had to date!

Skie Stringfellow Account Receivable Officer, Unita

Current position Credit Officer at Unitywater

Current position I currently hold an Accounts Receivable Officer position at Unita, a fit out & design company performing various accounts receivable tasks and collection of debt throughout NSW QLD VIC & WA.

Years within the credit industry 3 years, 2 months

Years within the credit industry I was given the opportunity 5 years ago, where I took on my first ledger of 6,000 sites for NSW Gov Education.

What makes you Shanae Walker passionate about credit? The thing I enjoy the most about working in the credit industry is the variety it involves; meeting new and interesting people constantly. The credit world is changing and there is definitely a larger focus on identifying customers who are vulnerable and in hardship. Working with people earlier to help them get on top of their debt, is not just about collecting money for an organisation – it is so much more than this. It comes with bigger responsibilities and can be

What makes you passionate about credit? I am a big problem solver and love to negotiate on almost everything, and debt collection is about listening, negotiating and working together with the client to achieve results. I love talking! I love working with a client to help solve the problem, no matter how big or small or even how long it takes to achieve the end result. Every result is a win in my eyes.

Shanae Walker Credit Officer, Unitywater

Skie Stringfellow

Highest level of accreditation Cert IV in Bookkeeping. I am continually attending

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Lachlan McKinnon

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Queensland Toolbox & Workshop to further my development. A lot of my achievements are on the job training. Fun fact about yourself I am a big country girl. Every chance I get I am out boating, fishing and camping, whilst listening to my country gal Dolly Parton. I am her No 1 fan.

Meet a Councillor Steven Staatz MICM CCE Qualifications: BCOM, BLLB, CAANZ, CCE, Registered Liquidator. In other words, numbers are my currency and I work every day to assist individuals, businesses and related stakeholders who are experiencing or involved in situations of financial distress. Steven Staatz MICM CCE Current Position: Director & Head of Insolvency & Reconstruction at Vincents. Employer: Vincents – a fully integrated professional services firm, boasting access to expertise that caters for every business need where numbers are involved. Commenced with employer: I’ve been a part of the Vincents family since 2011 and I consider myself extremely lucky to be supported by one of the strongest insolvency practices in the country. During my time here our specialist practice has grown to 7 expert partners and 50 highly skilled staff within a greater national firm of over 230 staff at seven office locations Australiawide. Credit/professional background: I like to think of myself as a quiet achiever who remains calm under pressure in my role as a financial solutions expert. I have over 20 years of insolvency industry expertise across a range of bankruptcies, voluntary administrations, liquidations and receiverships and place a great importance on delivering these often challenging and emotionally charged insolvency services in an empathetic, practical, fair and outcomes focussed manner. Portfolio: This financial year is Law & Legislation, last year I shared the Professional Development portfolio with Michelle Kirkby. 82

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Why I volunteer on the AICM council/Goals as Councillor: It’s a great way to get involved in the credit community and to learn from and share ideas with likeminded professionals. Now more than ever it’s important that we stick together and use our collective skills to help as many as we can to manage, mitigate and move forward from these challenging times. Achievements with AICM: Vincents have had a long and valued relationship with AICM and have been QLD divisional sponsors since 2016. This year it is an added honour for me to serve on the committee of the QLD chapter and we look forward to continuing to work with AICM into the future to empower credit professionals to continue meeting financial challenges for their clients with as much added value as we can. Value I have gained through volunteering with AICM: Our relationship with AICM is one we place a lot of importance on because it gives us a platform to, as experienced insolvency accounting experts, continually aim to help value add and educate members to be in the best position to help their clients navigate difficult times (especially now). My passions aside from Credit/work: Travel (pre-Covid), enjoying time with family.

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

Trusted Insights. Responsible Decisions.

Divisional Partners

Official Division Supporting Sponsors

New South Wales

NSW FInalist Nathan Abellanoza (Rentokil) zooms into presentation.

NSW Presidents Report

motivated individual who will be instrumental in changing the credit industry and raising the profile of the AICM. We look forward to you all getting to know Christopher over the coming months. As we continue to closely follow the restrictions unfolding around COVID-19, the health and safety of our councillors, members and broader community is of paramount importance. With that said however, we look forward to being able to share with you some upcoming professional development and networking events.

Change is inevitable, and during a time of constant change, be it in our professional lives, our families, or the economic environment, here too in NSW we are doing the same. Sadly, we have had Gregg Odlum and Sue Day resign from their positions on the NSW Council due to career changes, other commitments and life taking on a different direction. Both Gregg and Sue served the NSW Division diligently and their devotion to the Institute is commendable. A big thank you to Gregg and Sue who remain heavily invested in the AICM and the special projects. We are pleased to welcome Arthur Tchetchenian and Kimberley Watts who have re-joined the NSW Council. Both Arthur and Kimberley bring a great energy and enthusiasm to the dynamics of the team, as they all have a real drive for the AICM, and engagement with our internal and external stakeholders. In 2019 we welcomed Theresa Brown to the NSW Council, and in such a short time she has made a great impact on the Division. Her dedication and commitment to the AICM was recognised when she was formally voted by her peers as the NSW Vice President. Theresa is an asset to the AICM, and a well-respected friend and colleague to me also. The virtual Young Credit Professional (YCP) was held on 20 August 2020, where the young, bright, and talented professionals of NSW were introduced to the AICM. In its 23rd year, there was a buzz which circulated around the room as we celebrated past and present winners alike. Unfortunately, there must be only be one winner, and Christopher Holden of Electrolux Home Products was awarded NSW’s YCP for 2020. A big thank you to the NSW YCPA judges who took time out of their busy schedules to attend to the judging. Christopher is a hardworking, tenacious and extremely

– Balveen Saini MICM CCE AICM NSW President

Meet a NSW Councillor Kimberly Watts MICM Kimberly Watts is currently Recovery Specialist for ComfortDelGro Corporation Australia Kimberly started her journey in Credit as operations in credit receivables, insurance and transitioned into transport sector. She loves AICM council as Kimberly Watts MICM it gives her the opportunity to be at the forefront of industry change and stay current with technology advancements and regulatory improvements. She also enjoys networking and being involved in events and hold meaningful conversation with likeminded individuals. Kimberly has been a member of AICM for 2 years now and was the NSW Young Credit Professional Finalist and winner for 2015. Kimberly has a passion for dining on lovely food and wine with those she loves, and you can likely find her on a netball court.

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Grant Morris (Southern Steel), Kevin Driedger (NSW YCP Finalist), Christopher Holden (NSW YCP 2020), Peter Morgan (NSW Director) and Theresa Brown (NSW Vice President).

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New South Wales Aha Moment “Our deepest fear is that we are powerful beyond measure”.

Meet a Sponsor Miral Sarvaiya MICM How long have you been working at AMPAC? I started working at AMPAC 1.5 years ago What is your position? Relationship Manager – in my role I assist clients (existing & prospective) with finding the best possible solution Miral Sarvaiya MICM to manage their receivables arrears and overdue debts which assists them with improving cash flow and growing their business with confidence. Another aspect to my role is client satisfaction and ensure they achieve full value from all our AMPAC’s services What are your passions aside from work? I put high priority on my health, so I am really passionate about body engineering (mind, body and soul) – helps me stay happy, focused, disciplined, learn what works for me and where I can improve in my short and long term fitness goals. Lately, due to COVID-19 I have been spending more time running and focusing on gut health. Passionate about learning I have a bachelor’s in economics and master’s in business administration. An interesting fact about yourself. I am a novice share trader.

Credit Quote of the Month “Beware of little expenses; a small leak will sink a great ship.”

YCP Finalists NSW Extraordinary times call for extraordinary solutions and virtual Young Credit Professional Award (YCPA) event was no exception. As a result of COVID restrictions the bulk of the event took place virtually with each state taking their turn in the spotlight. While technology meant that the viewing experience was not always flawless (“you’re on mute” being the catch phrase of the year) we were all able to come together to celebrate the credit professionals of the future and in some ways feel even 84

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closer at a national level than the usual state based events allow. For the small number of people who were able to attend in person the YCP event was for some the first face-to-face activity that they had been able to attend since early in the year. For those watching online it was a great way for credit professionals across the country to get to know the talented YCP finalists who put themselves forward for this challenging but fulfilling award process. Despite being a little bit different, this year’s YCP event was a welcome return to some level of normality, and it was a privilege to again experience what is always one of the cornerstone events of the AICM calendar. Congratulations to the finalists and winners alike, and best of luck to those vying for the national title in October.

Chris Holden MICM 1. What’s your name and where are you from? Chris Holden – I work for Electrolux 2. What are your interests outside work/credit? I play prems football and coach sporadically for Parklea Soccer Football Club

Chris Holden MICM

3. Why did you apply for YCP? James Smith called me one day encouraging me to apply. He outlined the countless benefits and guided me through what the process requires. For me, continuously learning is at the centre of my satisfaction professionally, and the YCP program looked to foster this (and it has!) 4. What did you like about the process? What I have liked about the process is that it forces you to work on yourself. Too often in the professional environment, we work too much in our jobs, but not on bettering ourselves. This process has opened a network of incredibly intelligent and supportive credit professionals to me, and their guidance has been priceless. 5. Would you recommend it to others? Definitely! The exposure within the industry and my business has been invaluable. I am still shocked that I was selected as the NSW divisional winner against such incredible company. I define a fulfilling life by experiences and relationships and the YCP program offers both in abundance.

New South Wales anything else. For 2020 I applied again to shine recognition to the team in Rentokil who have supported me since day 1.

1. What’s your name and where are you from? Kevin Driedger – I work for Hotsprings. 2. What are your interests outside work/credit? Outside of work, I enjoy cooking, road trips, trying different foods, travelling, aviation, running, hosting dinner parties and photography.

4. What did you like about the process? I quite enjoyed the Panel interview, although it was quite nerve wracking, I found it quite fun preparing for it and just discussing credit with industry professionals with how many years of experience in the industry Kevin Driedger MICM

3. Why did you apply for YCP? YCP is great recognition for young adults who are passionate about credit and the YCP helps not only young adults, but everyone to grow in their professional career.

5. Would you recommend it to others? I would 100% recommend this program to anyone looking to try as it has been a brilliant learning experience for me.

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

4. What did you like about the process? I love the community of AICM and applying for YCP helps get your foot in the door and meet other experienced Credit Controllers and Managers. Back in May, work was busy and receiving a phone call from James Smith really motivated for me to apply. 5. Would you recommend it to others? Yes, I would recommend YCP to anyone who qualifies and has a passion for credit. YCP is a very unique program which will help you grow professionally and personally, regardless if you win or not.

Nathan Abellanoza MICM

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CREDIT MANAGEMENT SOFTWARE

1. What’s your name and where are you from? My name is Nathan Abellanoza and I’m a credit controller for Rentokil Initial. I’ve been in the role for a little over 2 years now and look after our Melbourne Pest side. Previously before working in credit I was working as a Nathan Abellanoza MICM contractor 2. What are your interests outside work/credit? Outside of work I love cooking, hanging with friends/ family and gaming 3. Why did you apply for YCP? I was a finalist for NSW in 2019 at the recommendation of my manager, more out of an innate curiosity than

Official Division Supporting Sponsors

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.

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Kevin Driedger MICM

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Victoria/Tasmania President’s Report

Life member – a story to make you smile

I write this report as we are still in stage 4 lockdown. What a year it has been for Victorians! Nevertheless, it is great to see our members adapting with us and engaging in zoom sessions for education, training, webinars and events. Our membership has grown from this time last year and I think it’s because more than ever, staying connected to the AICM is critical to the information sharing and success of businesses during this pandemic. We are all excited to have had the opportunity to win the President’s award at nationals last year, after 13 years. Without the commitment and drive from the Vic/Tas councillors this achievement would not have been possible. Publication has been strong this year with new insight from Michelle Carruthers looking after this portfolio. Michelle has taken the time out to talk to a lot of our members and written a lot of articles in the national magazine on events such as the Golf Day, Pinnacles awards and focused heavily on connecting with members that have reached 5, 10 and 15 pins as well as staying connected to our life members. Our Young Credit Professional Award night was our first online virtual event. Another exciting year for us to have had 3 strong credit professionals from different backgrounds: z Thai Nguyen (recoveriescorp) z John Torounoglou (illion) who won the Tony Mammone Award z Rebecca Roberts (Sensis), “the Vic/Tas winner” who will represent us at Nationals in October. Since the AGM, we have said goodbye to 4 of our councillors, Rex Cheng who stepped down as our Treasurer last week due to family commitments, Sunny Sharma from Viva Energy, Katheryn Kershaw and Frank Gambera. At the same time, we gained 4 new councillors being Farhan Hossain, Ricky Forster, Michelle Carruthers and Alan Izra. The four new members completed and submitted their nomination for election forms to join the Victoria/Tasmania Division Council 2020 – 2021. Welcome officially aboard! We continue to drive the best service to our Vic/ Tas members and both our national and state sponsors. We look forward to our membership engagement and returning to our face to face events soon. Thank you to my long-term councillors, Catrina Galanti, Robyn Erskine, Mary Petreski, Amaran Navaratnam and our Director Lou Coldararo. I’m really hoping to see you all face to face at the WINC Luncheon 2020, which will be held on the 11th December. – Sherif Hussein MICM CCE Vic/Tas President

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Henry (Harry) Sampson LICM Harry started in the credit industry in 1959 and joined the AICM in 1978. After spending 25 years in the Institute, or a lifetime of around 40 years associated with the Credit Industry, he is now retired. It was a pleasure chatting with Harry and we had a lot of laughs about how times have changed. For most of this career he worked at Kenworth with overall responsibility for Treasury, Credit and Dealers’ financial well-being. Here is one of Harry’s favourite stories that he wanted to share. “In the 50 and 60’s many, many workers stayed with the same employer for what seemed decades, however after some 10 years with the Wool Broker I decided my credit skills could be better used with a Finance company so in 1969 off I went into the big wide world of finance thinking I knew everything there was to know about money and credit. What a shock I was to receive when as part of the early training I had to spend about a month on the road doing monthly collection of car Hire Purchase and Chattel Mortgages on past due debtors. My very first call at night (I took my new bride, Ros along for company) was to collect 2 instalments from a character in Doncaster who was well known to police but unknown to me. Anyway, I had tow truck backed up his drive ready to repossess his Chevrolet if he didn’t pay, however I did collect 2 rentals and costs in cash. Next day the Credit Manager asked how I got on and when I showed him the cash and receipt, I was asked don’t you know this person was – NO, he was a person who had a reputation of dealing with people with a gun – OOPS. Thereafter my wife never joined me on my rounds.” He wanted me to leave you all with the below thought; “As you grow old and retire don’t become a bore to your partner or your young ones, keep active go see this country AUSTRALIA in your vehicle or you may find you will be in need of the services of a nurse or carer sooner rather than later.” – Michelle Carruthers MICM CreditorWatch

YCP Virtual Awards Night 20th August 2020 Congratulations to the 2020 Vic/Tas finalists: z Rebecca Roberts; Sensis z John Torounoglou; illion z Thai Nguyen; Recoveries Corporation Congratulations to Rebecca Roberts for her incredible achievement as 2020 AICM Young Credit Professional of the Year Vic/Tas! It was a fantastic evening celebrating incredible talent in the industry. The AICM held the very first virtual YCP Awards

Victoria/Tasmania

– Mary Petreski MICM CCE Asahi Beverages

A little bit about our Vic/Tas Young Credit Professional finalists Rebecca Roberts MICM Senior Collections Specialist, Sensis (State winner)

About Rebecca “personal and work life”? Rebecca fell into her role 2 years ago and she has loved every minute, saying “there is so much to learn and no day is the same.” Two weeks ago she was promoted and now manages a team of 3, which I know she Rebecca Roberts MICM will be successful at because she is humble, listens and really does take the time to develop relationships. Outside of work Rebecca is an adventurer and loves to travel, however whilst the borders have been closed,

she has been baking up a storm and indulging in her foodie passion. Why did you apply? “My manager, Michelle Span nominated me”. What was it like going through the process? “It was interesting, I learnt a lot about credit, but what surprised me the most was how much I learnt about myself. The process put me outside my comfort zone and made me confident in what I know about credit and also to trust in my abilities. It is definitely going to help me in my new role as a manager and leader to my team knowing what I know now”. How did you feel when you won? “Shocked, but excited and overwhelmed with joy”. What advice would you give to others to apply next year?” Just do it, don’t over think it, research it and give yourself time during the process to absorb and learn as much as you can. It’s not as scary as you think”.

John Torounoglou MICM National Account Executive, illion

John is currently the National Account Executive for illion with over 10 years’ experience within Credit & Risk management. John built his career from the grass roots, seeing him take on a leadership role within illion in their collections team and then utilising his skills and attributes in Credit Management.

John Torounoglou MICM

Thai Nguyen Account Lead, Recoveriescorp

Thai is a credit professional that is passionate about guiding, advising and providing support to his clients to meet their financial goals, restore peace of mind following the resolution of his clients, obligations. Thai enjoys being Thai Nguyen part of their journey to move them forward into a financially sustainable future. Thai has over 5 years’ experience and truly loves his job. Outside of work, he is a massive foodie who enjoys working on cars with his friends and going on road trips.

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

DIVISION REPORT

night, not even COVID will stop us from celebrating the AICM’s most prestigious awards. Delegates and sponsors all around Australia joined the virtual night via Zoom. While most states were able to share a drink together, Victoria’s supporters, sponsors and finalists were at home by the computer. It was a very different experience to last year’s awards night, but nonetheless the calibre of the finalists was evident. Amaran Navaratnam from Mecwacare presented the Victorian finalists from his office in Melbourne. The anticipation was palpable as we all were listening patiently to the magnificent bios of our 3 finalists, each have achieved so much yet have not reached the age of 30. WOW! When Rebecca’s name was announced we all typed our congratulations through zoom chat and clapped loudly in our loungerooms. Rebecca was overwhelmed and excited to have been selected the Vic/Tas state finalist for YCP 2020. On behalf on the Vic/Tas council – congratulations to Rebecca Roberts and all the other state finalists. Looking forward to seeing you all at the AICM National Conference 2020, where we will hear who will take home the YCPA for 2020.

DIVISION REPORT

Victoria/Tasmania Tony Mammone Victorian Councillor 1990 – 2001 Fond Remembrance

With the recent winners of the Young Credit Professional of the year announced nationally, our interstate counterparts got to see the Victorian Council present our “Tony Mammone Award” for the first time. We saw this as a good opportunity to give our members a chance to find out more Tony Mammone about this dignified man. I sat down (via Zoom, of course) with former Victorian Director – Jeff Hurst to discuss and share this with our members who may not have had the pleasure of meeting him. C: What is the first word that comes to mind when you think of Tony?

EDUCATION J: Tony was a strong advocate for furthering the education and knowledge of the AICM members. He strongly believed that all Credit Managers should know their rights and really pushed to get improved delivery methods in place. C: What was his biggest achievement within the AICM? J: Tony believed that a true Credit Manager has strong interpersonal skills and saw that as a way to improve collections rates. Tony created the first of many “telephone techniques” short courses. He also implemented the 6 week night school Credit Short Course and other softer skill classes. C: What impact did he have on the council? J: Tony was always focused and dedicated. He applied himself fully to everything he did within the AICM. The passion he had for the council and the AICM was second to none. Tony was a lecturer at Prahran TAFE, the National YCP Chairman and also the Victorian YCP Chairman. He was a true champion for informing those new to the industry. Tony always said that giving people credit was like giving people physical money and those of us in credit needed to be assisted to get the most out of the service they are providing. When Tony passed suddenly in 2001, the remainder of the Victorian council wanted to commemorate his service and let his legacy and passion for education continue. The Tony Mammone Award is not a runner up, it is an 88

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

Education Grant, given to those who show a true passion for growing within the credit industry. Our goal as Victorian Councillors is to continue to provide knowledge and education to our members and support our youngest members in their professional development. So, to Tony Mammone, thank you once again for your contribution and passion for education in credit. – Catrina Galanti MICM CCE Victorian Vice President

Member in Spotlight Cedric Bywater MICM Regional Credit & Collections Director, APAC, ANZ at Sealed Air Corporation

Cedric has been in the credit industry since 1975 (45 years). He started out by studying science in England and then entered into a legal assistant’s role at Phillips UK, which he enjoyed because he got to witness a lot of interesting court cases. From there a credit controller role was vacant and Cedric stayed in that role for 3 years before moving to Australia. Containers-Amcor Ltd (7 years), Phillips & Motorola (3 years each), John Sands (14 years), Bosch (10 years) and Sealed Air (Since 2013) are some of the companies that Cedric established his knowledge and reputation as a leader in the credit space. As I spoke with him he was reminiscing back to his studies in the 1990’s about the 5 c’s of credit and how the principles still stand the test of time (character, capacity, capital, conditions & communication). I’m impressed by the way he manages his team by having an open door policy even though he is incredibly busy – his motto is that he wants the younger generation to keep asking questions no matter how many times as long as they finally understand. Cedric’s tips for succeeding in the credit industry; 1. Litmus test – all falls back on how strong your credit policies are and how tactful you are! 2. Look at every account on its merit 3. Understand the industry your customers are in 4. Understand the supply chain 5. Register PPSA on everyone (Australia & New Zealand) 6. Build a relationship with the sales team Cedric’s final comment was that “overall it’s your duty to do your best to keep your customers going, as well as to not prevent a sale, where it makes sense, while ensuring risk and exposure are at acceptable levels.” Outside of work Cedric has a passion for 4WD driving and camping, his favourite spot is Wonnangatta Valley. A fun fact is that he used to go gliding, for which his father sparked the passion as he used to fly Jets. – Michelle Carruthers MICM CreditorWatch

Victoria/Tasmania Rex Cheng MICM CCE CGU

What was your biggest highlight/achievement at council? Highlights definitely are the relationships I’ve able to create with my fellow council members. I’ve been on the council since 2014, and able to learn from the likes Rex Cheng MICM CCE of Lou, Jeff, Sherif, Donna, Robyn, Frank and many others, which has been such an invaluable experience. Forming great friendships with Amaran and Catrina and seeing year to year growth of Vic/Tas council has been a great reward and satisfaction. Things you will miss? Catching up with the Councillors on a monthly basis, where we are serious for council matters but also enjoy the banter around the table. Why you are leaving? Juggling a few added responsibilities around the house. We’ve now got a 1 year old boy, who is keeping us busy while we are managing a knock down and build of our future home. Anything else you would like to share? Once again just want to thank Sherif and Lou for their leadership over the years. I know the council is in great hands with our leaders and looking forward to returning to council soon!!!

Pinnacle Awards committee. This included taking part in deciding judging formats, judging itself, process reviews and I was honoured to be the MC for the Vic/ Tas awards night. It was a spectacularly memorable night and it was amazing to be a part of the buzzing vibe. I also really enjoyed speaking to YCP 2020 applicants via the webinar to provide insight into why entering the YCP program will be one of the best decisions they would ever make, and additionally providing some tips and tricks to have a successful YCP journey. Overall, the monthly meetings at Frank’s office were always enjoyable, catching up with the familiar faces, whilst also being on the frontline of credit. I felt like I have found a community that I would certainly call my own, made so many friends during the process and looking forward to lifelong friendships! I’ve always looked forward to attending the National Conference (2 and counting) which has every single time been an absolute blast, a perfect balance between deriving knowledge and entertainment.

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

National Partners

Trusted Insights. Responsible Decisions.

Divisional Partners

Sunny Sharma MICM Viva Energy

What was your biggest highlight/achievement at council? I thoroughly enjoyed being a part of the YCP process and was honoured to win the National YCP award in 2018. This propelled my career in a direction I never thought Sunny Sharma MICM would happen and I am forever grateful to the AICM for providing me with the opportunity. One of my highlights was being part of the

CREDIT MANAGEMENT SOFTWARE

Official Division Supporting Sponsors

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

DIVISION REPORT

FAREWELL AND THANK YOU to Rex and Sunny

DIVISION REPORT

New members The Institute welcomes the following credit professionals who were recently admitted to membership in July, August and September. New South Wales

Queensland

Violet Alexander Alejandro Angulo Richard Atkinson Renea Balmer Kristy Bartlett Andrew Bui Adrian Cunningham Gary Deigan Bianca Delise Gary Donovan Robert Fossano Ramon Gardiner Dominic Gattellari Jarrod Kennedy Melissa Khalil Melissa Mackey David Mastrobattista Candis-Gemma Ormsby Kelly Peisley Kim Puckeridge Kalpana Ravichandran Jenny Reitano Katherine Rodwas Lauren Shears Alex Simmons Kieran Somasunderam Nitin Soni Nicholas Sussman Shaun Swinton Daisy Tocha Daniel Todd Melissa Tokelau Edwin Tolentino Yao Tseng Khaya Williams Wendy Yip

Minter Ellison Collexa Recoveries & Investigations illion ARC - The Australian Steel Company GFG Alliance Finstro Finstro Trace Personnel Liberty GFG IPF Digital Collexa Recoveries and Investigations Financial Trading Corporation Cirralto Ltd Finstro Holdings Pty Ltd Optus Credit Corp Valmont Industries Transurban Linkt GFG Alliance Transurban St John Ambulance Australia (NSW) Transurban Limited Transurban ATCO Structures & Logistics Optus Finstro Collexa Recoveries & Investigations Finstro Finstro Transurban Credit Corp Group Transurban illion Australia Synergy Transurban Finstro

Dennis Balen Emanuel Calligeros Julie Christensen Wayne Davis Suyog Deshpande Justin England Alison Evans Valerie Finnis Emily Fryer Glen Giles Maddison Graham Adrian Hansen Carmen Hernandez Keri Hobday Luperosa Isaako Ros Jones Karen Kahui Zayd Kathrada Taranjit Kaur Chris Larkin Ross Leggett Patrick Magnan Katherine McLean Mark Moorhouse Madison Neal Noelle Nicoll Jennifer Pinchen Cara Ryan Quinn Schmidt Neil Sharman Terrence Snow James Taplin Joanne Thornton Patrick Wells Elise Williams

CREDIT MANAGEMENT IN AUSTRALIA • October 2020

illion Australia Heritage Bank ATCO Structures and Logistics Stonegate Legal Cleanaway Queensland Rural & Industry Development Authority Queensland Rural & Industry Development Authority BIS Industries Limited Queensland Rural & Industry Development Authority Queensland Rural & Industry Development Authority Stoddart Group Pty Ltd Transurban Ashdown Ingram Atco Structures and Logistics Transurban Queensland Rural & Industry Development Authority ATCO Structures & Logistics Cleanaway Waste Management Limited Transurban Brisbane City Council Queensland Rural & Industry Development Authority Cleanaway Stoddart Group Cleanaway ATCO Structures & Logistics Queensland Rural & Industry Development Authority Cairns Hardware Company Pty Limited Transurban Ltd ATCO Structures and Logistics Sharmans Investigations and Process Serving Queensland Rural & Industry Development Authority BRI Ferrier Queensland Rural & Industry Development Authority Stoddart Group Pty Ltd Queensland Rural & Industry Development Authority

New members

Mira Abu-Shama Michael Bayly Cameron Henderson Robert Jackson Alicia Labrosciano Paige Walker

Oakbridge Lawyers Pty Ltd National Credit Management Limited Oakbridge Lawyers Pty Ltd Beaumont Tiles CCC Financial Solutions Group Oakbridge Lawyers

Tasmania

Melissa Guy

Woolworths Group Limited

Victoria Alana Andrews Farhan Ansari Michelle Battye Kylie Black Boyana Boukalis Shanita Cedras Ross Charles Paraag Chawathe Yogita Contractor Steven Deglas Ruth Erika Esther Fono Laura Gangemi Hagji Gashi Jessica Goodchild Theo Gouletsas Coleen Hamlett Tania Horsburgh Bridget Hume Christine Iorlano Shivani Jain Peter James Aji James Soraya Jara Charmaine Jeganathan Kylie Jones Blair Jorgensen Michelle Little Stephen Lynch Janine Lyons Alan McKinlay Lorraine Miller

National Credit Management Ltd (NCML) illion Geelong Bank CommsPlus Distribution Pty Ltd Lion Dairy & Drinks Lion Dairy & Drinks Optus Lion Dairy & Drinks N/A illion Clifford Hallam Healthcare Clifford Hallam Healthcare Lion Dairy & Drinks Lion Dairy & Drinks Clifford Hallam Healthcare illion Clifford Hallam Healthcare Lion Dairy & Drinks Lion Dairy & Drinks Cliffordhallam Healthcare Lion Dairy & Drinks Lion Dairy & Drinks Lion Dairy & Drinks Lion Dairy & Drinks Wurth Australia PFD Food Services Pty Ltd Lion Dairy & Drinks ATCO Structures & Logistics Lion Dairy & Drinks Saputo Dairy Australia National Credit Management Limited Lion Dairy & Drinks

Michelle Osborne Anita Pari Khai Sing Phua Justin Pierce Ana Plesa Angela Porritt Stuart Rattray Rebecca Roberts Mario Rukavina Janaki Sanagavarapu Christine Sayers Rushiv Sisodia Michelle Span Natalie Stankovic Kavita Subramaniam Jeremy Tan David Tenuta Sanidhya Thapa Rhiannon Thredgold Huy Tran Julie Truong Nitin Vadera Melanie Voss

DIVISION REPORT

South Australia

Aggreko Generator Rentals Pty Ltd Lion Dairy & Drinks Lion Dairy & Drinks illion Lion Dairy & Drinks Nutrien Ag Solutions Limited illion Sensis Pty Ltd Middendorp Electric Co Pty Ltd Lion Dairy & Drinks Lion Dairy & Drinks Lion Dairy & Drinks Sensis Pty Ltd Lion Dairy & Drinks Lion Dairy & Drinks illion Lion Dairy & Drinks Lion Dairy & Drinks Lion Dairy & Drinks Lion Dairy & Drinks N/A Optus Clifford Hallam Healthcare

Western Australia Danica Arnold Shaun Boyle Steve Brooks John Carrello Rajiv Castello Adrian Floate Leonard Fong William Grassick Agus Halim Sally Hutchinson Margaret Ings Lauren Jones Sandra Jones Katherine Lau Angelene Neville Joanne Orfeo Natasha Petrie Mark Ranson Emily Taplin Kin Yeung Tsai

Synergy BRI Ferrier WA Synergy BRI Ferrier Western Australia Baycorp (WA) Pty Ltd Cirralto Synergy BRI Ferrier Synergy BRI Ferrier WA Atco Structures and Logistics Spenda Cirralto Electricity Generation and Retail Corporation Synergy GFG Alliance BRI Ferrier WA Baycorp WA Pty Ltd Synergy Synergy

October 2020 • CREDIT MANAGEMENT IN AUSTRALIA

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

CreditorWatch

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.

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.

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.

CONSULTANCY 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 • October 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

TECHNOLOGY

LEGAL AICM Divisional Partner

CreditSoft Solutions Equifax

Nova Legal

Tel: 13 83 32 Web: www.equifax.com.au

Level 2, 50 Kings Park Road West Perth 6005 Tel: 08 9466 3177 Web: www.novalegal.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.

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.

AICM Divisional Partner

INSOLVENCY

Tel: 1300 720 164 Email: info@creditsoft.com.au Web: www.creditsoft.com.au TCN offer a variety of cloud-based technology solutions that are designed to reduce operating costs, resources and increase the amount of productivity within your company. Software includes virtual call-centre tools, predictive dialling, interactive voice messaging and innovative sms communication tools. TCN’s software requires no excess hardware or maintenance fees and is distributed throughout Australia by technology providers, CreditSoft Solutions.

TRADE CREDIT INSURANCE National Supporting Sponsor

AICM Divisional Partner

Results Legal

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

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

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

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

Trade Credit Risk Pty Ltd

TurksLegal Insolvency Intel

National Credit Insurance Brokers

Tel: 02 8257 5700 Web: www.turkslegal.com.au Contact: Daniel Turk

Tel: 03 9842 0986 Email: Siobhan@tradecreditrisk.com.au or Sharon@tradecreditrisk.com.au Web: www.tradecreditrisk.com.au

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.

Trade Credit Risk (TCR) is a Boutique Specialist Broker for Trade Credit Insurance. TCR has a very experienced team to provide personal service on all aspects of credit management. We provide the following services: l Insurance against bad debts for domestic and export ledgers l Credit Checks l 24/7 Monitoring of debtors for adverse information l Credit Limit Opinions

AICM MARKETPLACE

October 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 - October 2020

Articles inside

Recent graduates

Third party payments

Training

Why it is important to be a secured creditor

Masterclass

Revenge of the zombie company?

Insolvency trading relief extended to 31 December

Planning for the cliff

Insolvency