Debt recovery in times of crisis

It is no surprise that the multiple lockdowns and restrictions imposed by governments due to COVID-19 have caused serious financial strain on many Australian businesses. Although we can now see the light at the end of the tunnel, some businesses are yet to recover and/ or are struggling to re-establish their cash flow to keep them trading solvently. This has a domino effect on the industry, where one business fails to pay their debts on time, thus affecting another businesses cash flow and so on. However, there are ways to help reduce, if not prevent, falling into this pattern.

1. Your Contracts/Sub-Contracts/

Service Level Agreements

Review and understand the following clauses in your agreements: ½ payment clause; ½ each party’s responsibilities set out clearly; ½ director’s guarantee clause; ½ penalty interest clause; ½ enforcement costs clause; ½ enforce the agreement where necessary – don’t shy away from referring to it in your correspondence and enforcing it when you need to.

2. Accurate and safeguarded payment claims

½ all details, figures and itemisation of work is included; ½ payment terms reiterated; ½ Security of Payments Act phrasing included – “This is a payment claim made under the Building and Construction Industry Security of Payments Act 2002 (Vic)”.

3. Consistency with invoicing and reminder notices

½ have a set time for invoices to be sent out pursuant to your agreements ; ½ make sure invoices are sent out promptly and on time; ½ send out periodic reminder notices, and if payment is not received after a set time issue final notices.

4. Offering early payment discounts

½ offering a small discount on invoices can help you get paid faster and build long-term working relationships ; ½ organising payment plans can help keep cashflow in the green.

5. Strategic supply of goods and services

½ do not release goods and materials until payment is received; ½ include and enforce PPSR clauses in your agreements ; ½ always obtain deposits for work upfront; ½ do not release compliance certificates etc. for services until paid.

6. Dispute resolution avenues

½ enforce the Security of Payment

Act in the first instance; ½ mediation and/or arbitration.

unfortunately, business is rarely black and white and regardless of implementing policies and procedures it is important to ensure you are aware of your rights and responsibilities to ensure you come out with the maximum return.

Internal process

½ having automated reminders sent out assists debtors to pay outstanding invoices; ½ sending a final notice when escalating matters; ½ making direct contact to avoid lengthy legal process and assist in building a better working relationship; ½ formally putting them on notice with a Letter of Demand.

Debt collectors/solicitors

½ enlisting a debt collection agency for a fee or percentage of the debt – they can register defaults on credit reports on your behalf, which gets flagged when creditors seek loans and credit accounts; ½ engaging solicitors to escalate matters when necessary; ½ remember, you are never guaranteed a favourable outcome, and will have some out-of-pocket expenses; ½ in some cases, this can be the trigger to get some debtors to pay;

Voluntary administration/liquidation

½ regularly check the insolvency notices website to see if debtors are facing financial difficulties; ½ contact administrators’ and negotiate for a percentage of debt to be paid or a payment plan and look at entering into a debt agreement, request a proof of debt form from the liquidators to be recognised as a creditor; ½ attend creditor meetings or request the minutes so you can see, if any, the assets of the debtors against its debts; ½ understand you may not get a return at all, and if you do it may be only 10%.

If you have questions on any of the above or require assistance with managing bad debts, contact your local neCA legal team –neCA ACT/QLD/nSW/TAS .... 1300 361 099

neCA SA/nT ................................... (08) 8272 2966 neCA VIC .......................................... 1300 632 247 neCA WA .......................................... (08) 6241 6129.

Reem Hacioglou

Constructive Legal Solutions www.constructivelegalsolutions.com.au

RED SKIES

IN A BLUE-SKY WORLD

A GOOD TRADeSPeRSOn WOuLD GIVe Me CLeAR InSTRuCTIOnS. A GReAT One WOuLD LeT Me KnOW eXACTLY WHAT We WeRe DOInG THAT DAY, AnD POSSIBLY THe ReST OF THe WeeK. A LOuSY One WOuLD uSuALLY JuST SAY, ‘DO WHAT I TeLL YOu TO DO’. THAnKFuLLY, I HAD PLenTY OF THe FIRST TWO, AnD nOT SO MAnY OF THe LATTeR.

Some three decades on, the adage, ‘if you fail to plan, you plan to fail’ still rings true. Getting the right gear out of the van and having the tools ready to pass on, sets the foundation for planning out a job. It’s a fundamental part of training in the apprenticeship.

As much of this edition has identified, preparedness is the key to navigating the uncertainty of the world we now live in. While we can’t predict the future with any great certainty, red sunrises or sunsets have long been used by sailors and farmers alike to prepare for the next day’s activities. So what skies are we seeing right now?

We currently live in a world where the focus is on international issues. Climate, politics and economics are inextricably linked to strategy and planning, yet how do we distil that down to everyday planning, particularly in the training environment? Do I need to upskill, or can I employ someone skilled? What skills are we even talking about?

The rabbit hole of ‘Blue-Sky Thinking’ (actively looking for new ideas) could have us trying to meet every possible outcome, leaving us more confused, and critically, without a true plan.

So, what does each sky mean for us as far as skills and knowledge go?

Red Sky Night – Shepherds Delight

normally, as the setting sun casts a red twilight, shepherds would know that the next day held good weather. So, are we seeing a red sky night in the electrical industry? Yes.

Technological changes in the past 20 years have brought higher levels of safety, greater energy conservation and new technology. In the trade colleges, there’s less focus on the old technologies, such as fluorescent and incandescent, and more on the light emitting diode (LeD) and renewable energy sector. Advanced manufacturing techniques have seen higher efficiency motors and reduced energy starters become the norm in industry.

At current progression, we can expect more Industry 4.0 innovations finding their way into the domestic market. 3D printing is already available to the home user, and with open-source automation technologies, it isn’t hard to envisage our lives being more automated and less ‘hand-draulic’.

But is there a downside?

Red Sky Morning – Shepherds Warning

While Blue-Sky Thinking has been all the rage – are we able to meet the dreams of the future with our current workforce? It is well known that student participation in the higher mathematic fields at school, such as applications or specialist is dropping, and those who do undertake those levels aren’t passing. As per a quote in The Australian, “As Australia transitions from a resourcesbased economy to one that is technologically based, the skills required to create and find work will be significantly STeM (science, technology, engineering, and maths) based. We are already experiencing a significant skills shortage that is threatening not only our Covid recovery but our future prosperity. If we don’t act now, Australia will be left behind.”

Source: www.bit.ly/ausredsky

In the trades, we have seen fewer students with the ability to comprehend and apply mathematic and scientific principles, such as algebraic expressions, transposition and notations.

So how do we prepare for the impending storm? Firstly, educate parents and guardians about what skills their children will need and how they relate to maths and science. Secondly, inspire those children to see that as they navigate their secondary school journey, they will need to arrive at a destination. If both parties can grasp their respective roles, undoubtedly, we can face these challenges and reap the benefits of Industry 4.0. For as every storm abates, a blue-sky awaits.

Steve Hall

General Manager, College of Electrical Training