18 minute read
Smart practices to help you optimise your credit control and strengthen cash flow
Credit & collections: Understanding and navigating the ‘Great Resignation’ in Australia
By Nikki Dennis MICM*
Nikki Dennis MICM
Jokers, nerds, extroverts, introverts, the ambitious, the easygoing, the shy, quiet, watchful, empathetic, apathetic, egocentric, optimist or negative nelly. Whatever the melting pot of personalities and traits await as you burst through the office doors to excitedly greet your new recruits, they all have one thing in common. They are all ready to judge you.
And this is where many Credit & Collections Leaders make the biggest mistake. Pleased to have the gruelling recruitment process well and truly behind them with the best candidates chosen they think,
“Now is their time to shine. To prove to me they are worthy of this role!”
But make no mistake. Bright eyed and bushy tailed as they may be on that first day, thirsty for knowledge and eager to make their mark, it can so can quickly change. From day one your leadership and organisational culture is being assessed constantly by your new recruits.
Consequently, if you’ve ever wondered why several weeks/ months in, the spark has gone, the enthusiasm waned, and you are watching the hunched shoulders of the latest recruits walking for good out of the door…Guess what? They have judged you. And your organisation. And, it ain’t pretty! Welcome to what is being dubbed as the Great Resignation.
There is no doubt about it, finding good people is tough enough – keeping them engaged throughout the months and years beyond, is even harder. And in the challenging world of Credit and Collections, juggling a healthy cashflow with customer expectations, rigorous compliance, rising hardship and vulnerability, and staff retention and wellbeing, is off the charts next level difficult! Which is why many collections teams are struggling.
Don’t despair. There are ways in which your team can thrive in this environment and have an edge over your competitors. But before we get to that, let’s examine
“There is no doubt about it, finding good people is tough enough – keeping them engaged throughout the months and years beyond, is even harder.” “...recent research by PwC has found that as many as 38% of workers plan to leave their current employer during the next year (what-workers-want-report.pdf pwc. com.au) prompting what many are referring to as the Great Resignation.”
the wider stats around the ‘great resignation’ phenomena and some of the reasons why people are leaving.
The Great Resignation – is it really happening, and why?
Despite ABS data showing that overall job mobility was at its lowest in decades at 7.5% in Feb 2021, no doubt due to the uncertainty of the pandemic environment, recent research by PwC has found that as many as 38% of workers plan to leave their current employer during the next year (what-workers-wantreport.pdf pwc.com.au) prompting what many are referring to as the Great Resignation.
Meanwhile in the US – a study by Microsoft revealed that over 41% of global employees were considering handing in their resignation. And in the UK, a study conducted by the recruitment firm Ranstad UK showed that as many as 69% of workers were thinking of resigning in 2022, and the number of open job vacancies has continually hit record levels in recent months.
So, what are the reasons for this mass exodus? The PwC report surmises that it may be created by a ‘sense of restlessness, or looking to regain control, after a significant period in lockdown’. Sociologists have suggested that ‘people have been particularly introspective as a result of the pandemic, which can often lead to job and career changes.’ Yet others believe ‘it has been building up in the background for some time, as people have been reluctant to change employers in an unstable market.’
For those questioning whether the Great Resignation currently being experienced overseas will affect Australia to the same extent – Recent NAB research has already shown that 1 in 5 Australians have quit their job in the last year with close to 3 in 10 workers citing a lack of personal fulfillment and meaning; lack of career growth; their job’s impact on their mental health; and poor pay and benefits as ‘pushing them away’ from their jobs. Others called out poor work/life (23%) balance, burnout (22%), and feeling like a fresh start (20%).
Whatever the reasons behind it, the reality is that this mass resignation has already started, and it’s reasonable to assume that Australian organisations are about to see record numbers of people walking out the door. Which in turn, will result in a corresponding shift in the balance of power from the employer to the employee. In the words of the PwC report;
“in the war for talent, it’s the worker who has the better bargaining position”. ➤
This also begs the question, what will be the real cost of high employee turnover to Australian organisations that don’t find a way to retain the best candidates?
Reasonably recent data from the Work Institute’s 2020 Retention Report estimates that it costs as much as 30% of a worker’s annual salary to replace them. The average Australian salary in 2022 is $65,539 per year according to Talent.com. Therefore, in an organisation of 100 staff, if 38% walk out of the door as indicated by the PwC report, that could cost close to $750k!!
But here’s the good part…by spending just a tenth of that on quality training and development for staff and leaders, you can position yourself as an ‘employer of choice’ which will give you a good chance at attracting and retaining the best staff. Tips for credit & collections leaders to combat the Great Resignation
1 Invest in your staff Out of adversity comes opportunity. There’s no doubt about it. Investing in your team has never been more pertinent and the benefits for those that do will be considerable.
Richard Branson, known worldwide for his great leadership skills and the value he places on his employees, offers this:
“Train people well enough so they can leave, treat them well enough so they don’t want to.”
Never has that advice been so relevant as now in the aftermath of the pandemic. Conducting regular training sessions for employees and rolling out quality leadership programs increases motivation, improves skills, raises confidence, and improves workplace culture. It shows that you care about their career development and where you see your employees in the future. All of which addresses many of the key reasons why people are leaving or looking to leave their jobs in the first place.
Empowering your team with the soft skills to better connect, negotiate, and resolve conflict (both externally with customers and internally with staff) not only benefits your bottom line but gives them life skills that they can take into their personal relationships too. Therefore, adding meaning, fulfillment, and purpose to their roles, both in and out of work. Additionally, giving them practical training and guidance around dealing with challenging conversations and vulnerable customers protects their own emotions and well-being, making burnout and other mental health issues less likely.
2 Tap into Government funding To encourage organisations to employ, upskill, and retain staff throughout the challenges of the pandemic environment, the federal government introduced the Boosting Apprenticeship Commencements (BAC) Scheme in October 2020. Due to finish, it was extended in the recent budget announcement until 30th June 2022.
As part of the scheme, any employer who engages a new employee and enrols them in a certificate program could attract up to $28k in Government funding per person. Many organisations are using the funding from enrolling new employees in these programs to reinvest into wider training across the entire team. It’s the perfect time to take advantage of this funding initiative, upskill your team, and gain the competitive edge!
3 Recruit smarter It’s no secret that Collections and other front-line Leaders are struggling to find good staff. The onset of the pandemic and the related border restrictions put a stop to overseas workers and sent many of those already here scrambling back to their homelands to be close to family. The available workforce practically diminished overnight.
In this environment, it is tempting to spread the net wider and not be as fastidious when hiring, in the desperation to attract anyone. This is a mistake. There is no use hiring someone if they don’t stay. Make sure you are clear on the role and requirements in your adverts and give yourself the best chance of matching the right person to the job by accessing collector behavioural profiling tools. This will help ensure that the person you are hiring has the right personality traits to suggest longevity in the role. As well as highlighting any areas in which they may require additional support through the onboarding process and beyond.
4 Outsource when needed If you are finding it a real challenge to recruit and train internally then don’t be afraid to outsource when needed. Many organisations are turning to outsourcing for temporary or more permanent elements of their collections process. Gone are the days of only outsourcing contingent debt at 90 + days for your traditional debt collection services.
Progressive agencies are now offering all sorts of outsourced assistance to assist with ‘billing resolution’ and ‘credit support’ in addition to the more standard thirdparty collections. From customer re-engagement campaigns and early receivables management to hardship assessment and monitoring, any of which can be conducted as first party in your company name if required.
5 Go digital If you are bursting at the seams with overworked staff and struggling to bring on more people, it is worth investigating how digital technology can be employed within your team to free up time spent on manual collections processes to streamline efficiencies. The modern world moves fast. People are on the move and want to pay their bills at a time convenient to them with as little effort and human intervention as possible. The best solutions out there are AI driven meaning that your customer gets to communicate with you exactly how they want to and in the language they choose.
Think of the time you could save if over 80% of your customer base settled their account digitally within the first 24 hours of receiving their bill. How much more efficient (and happier) could your team be if they were there just to help the customers who needed to speak to someone and less bogged down with unnecessary and outdated manual processes?
In summary, for collections and other front-line leaders with teams already under the pump, some facing record levels of debt that need collecting whilst simultaneously struggling to both attract and keep good staff, there are solutions out there to help you thrive in these uncertain times. The trick is to look for ways in which these solutions can work for you, whilst you continue to take the credit.
“Conducting regular training sessions for employees and rolling out quality leadership programs increases motivation, improves skills, raises confidence, and improves workplace culture.” “As part of the scheme, any employer who engages a new employee and enrols them in a certificate program could attract up to $28k in Government funding per person.”
*Nikki Dennis MICM Managing Partner/Co-Founder SalesCRED (specialists in credit management solutions). T: 0437 652 562 E: nikki@salescred.com.au www.linkedin.com/in/nikki-dennis
Small Business Restructuring Plans – a tool for the future?
By Michelle Shackles and John Carrello MICM*
Michelle Shackles
John Carrello MICM
We are sure there is some level of familiarity around the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 passed by the government mid-December 2020. At that time, the purpose of the legislation was to provide support to small business after the lifting of the temporary legislative measures on 31 December 2020 imposed by the government to respond to the impact of COVID, and was effective from 1 January 2021.
Part of this legislation was to provide the introduction of the Small Business Restructuring Plan (“SBRP”). There was an expectation that there would be a significant number of these SBRPs put to creditors for their consideration, however as twelve months of hindsight has told us, this simply wasn’t the case.
So now that we are moving into 2022, and the economic landscape is again shifting, can we expect to see an increase in the use of these SBRP?
Let’s revisit the purpose of the legislation and consider some practical aspects to assist you in your role as a credit manager.
Small Business Restructuring
In summary, these reforms provide for the directors of a company to appoint a Restructuring Practitioner (“RP”) (who must be a Registered Liquidator) to enter a restructure phase and develop a Restructure Plan for the company moving forward.
Key elements are summarised: — To be eligible, a Company must meet certain criteria which includes not having debts greater than 1 million dollars (not including employee entitlements which must be able to be paid in full). — The directors pass a resolution that the company is insolvent or likely to become insolvent and an RP should be appointed. — Once an RP is appointed, the company is in a proposal period for 20 business days, during which time the company can continue to trade while a
Restructure Plan is developed. — During this period the company continues to trade in the
“ordinary course of business”. — If a Restructure Plan is developed, the RP must provide a declaration that the eligibility criteria have been met, the company is likely to be able to discharge their obligations under the Restructure Plan, and all required information has been provided. — At this time, the company must have paid all employee entitlements and ensured that
all ATO lodgements have been made and are up to date. — Creditors are provided with the Restructure Plan and the declaration of the RP and are provided with 15 business days to vote on the Restructure Plan, which cannot be for a time period longer than 3 years. — Different classes/types of creditors are treated differently under the plan. — Secured creditors retain the ability to realise their interest during the period. Alternatively, they have an admissible debt to the extent of an estimated shortfall in value between the asset and the debt. — A majority in value of the creditors entitled to vote must be in favour of the plan for it to be accepted.
Moving Forward
The legislation is complex, and the above is a simplified overview. The aim of the legislation was to provide small businesses with a mechanism to continue trading while being given time to deal with their asset and creditor position.
But where does that leave credit managers trying to manage their debt collection process?
In essence, this legislation is basically designed “to do a deal” with creditors, no investigation of the past is specifically required of the Director’s conduct, which is impractical given that the RP is required to make a recommendation to creditors (which means it must be done in any event).
Ultimately where parties are owed money, they want to ensure it will get repaid or that there is the potential of a long-term future that is in their best interests and that of the other creditors if they accept the proposal.
The legislation provides no protection to creditors who have continued to trade with a company during this period, in that if the company goes into liquidation and a creditor has provided credit, that creditor may be subject to a preference payment claim. Our recommendation would be to only provide goods on a Cash on Delivery basis during this period.
The treatment of secured creditors is complex, and the interaction of their security and the concept of an admissible debt may create some confusion in the plan.
If you are a secured creditor, ensure you obtain advice to understand your individual position.
This legislation has no influence on the ATO’s existing powers as they relate to a Director’s personal liability in certain instances, which means a company can restructure its debts by way of compromise, continue trading, only to find that the ATO then pursues the director(s) under a Directors Penalty Notice.
The ideal scenario for a successful SBRP is one where a company has need of this legislation as a result of an unforeseen event ... such as COVID. In addition to meeting the financial criteria, the company should have (sufficient) cash at bank to continue trading, have no secured debt, solid financial controls, a track record of ATO compliance (by way of lodgements) and the ability to satisfy all employee entitlements for there to be a successful outcome.
Ensure that you receive sufficient information about the SBRP that you are being asked to consider.
That would involve; — Specific details of the proposal itself; — If it is in the best interests of the creditors and in doing so, compare it to Liquidation; — What time period is the SBRP proposing (legislation specifies a maximum 3 year period however commerciality suggests a shorter time frame would increase the success of the plan); — Will the business have a future and how important is this creditor to your business; and — If there any other matters that creditors should be aware of in making their assessment.
Don’t be afraid to ask questions and seek further information if it is required to make a better assessment.
We expect that the SBRP will become more widely used in the short to medium term. There will be queries and clarification along the road going forward, and the directors of BRI Ferrier Western Australia are here to assist. If you have any questions, please feel free to contact any of our directors on 08 6316 2600.
*Michelle Shackles Director
*John Carrello MICM Principal
BRI Ferrier T: +61 8 6316 2600 www.briferrier.com.au
Preference Claims and Insolvency Indicia
– when is a company insolvent from the court’s perspective?
By Andrew Blundell*
Andrew Blundell
Justice Black, in the recent matter of Custom Bus Australia Pty Ltd (In Liquidation) [2021] NSWSC 1036 dealt with the issue of company solvency for the purposes of a preference claim. The judgment helpfully worked through the numerous factors that may indicate a Company is insolvent and provided a timely reminder to credit managers around the warning signs that they may encounter when dealing with clients that may find themselves in a position of financial distress.
Background
Custom Bus Australia Pty Ltd (In Liquidation) (“the Company”) operated a bus building, service and maintenance business in both New South Wales and South Australia.
My colleague, Mr. Simon Cathro, was one the Administrators appointed by the Company on 18 January 2018. I managed the ongoing trading of the business of the Company subject to the administrator’s appointment.
The business turned over more than $43m for the year ended 30 June 2017 and at the time of the administrator’s appointment employed more than 150 people.
Unfortunately, a major supplier withdrew support for the business during the voluntary administration process which resulted in production substantially ceasing. The administrators subsequently entered into a business/asset sale agreement prior to the second meeting of creditors, at which creditors present resolved to place the Company into Liquidation.
Post liquidation, mothership preference proceedings were commenced against fourteen defendants whom the liquidators contended had been party to payments made by the Company within the relation back period, being the six-months prior to the
appointment of the administrators. The proceedings sought the courts confirmation that the Company had been insolvent for the entirety of the relation back period to assist in establishing that those payments constituted voidable preference claims.
Preference claims – what’s required?
For a preference claim to be established, pursuant to s588FA and s588FE of the Corporations Act, the following elements need to be present: 1. The company and the creditor are parties to the transaction (even if someone else is also a party); 2. The transaction results in the creditor receiving from the company, in respect of an unsecured debt, more than the creditor would receive from
the company in respect of the debt if the transaction were set aside and the creditor were to prove for the debt in a winding up of the company; 3. Generally, the transaction was entered within six months of the relation back day, being the day either winding up proceedings were commenced or alternative the date the Company appointed a Liquidator and/or
Administrator; and 4. The transaction was an insolvent transaction (i.e., it occurred at a time when the Company was insolvent).
Key test for solvency
The solvency of a company is determined by applying section 95A of the Corporations Act, with the key test as to whether a company is solvent being the cash flow test. That is, a company’s readily available resources determines whether it can pay its debts as and when they fall due. If a company is not solvent, by definition, it is insolvent.
Justice Black, in coming to his determination considered the position of the Company, its unique circumstances and referenced the findings in various ➤
