Credit Management in Australia - May 2016

Volume 23, No 3 May 2016

The Publication for Credit and Financial Professionals

IN AUSTRALIA

Warning signs of

Big corporate collapses

Tips, updates and changes:  Credit Management  Insolvency  Legal issues

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Volume 23, Number 4 – May 2016

Message From the President

6

Portfolio Review

8

40 NSW Division: Data & Technology Panel and Forum.

By Jeff Hurst

Credit Management

9

Finding the best-fit debt recovery agency

By Amaran Navaratnam

12

Is mediation a useful strategy

By Alison Shaw

15

It’s all about the money

By Kirk Cheesman

43 Qld Division: March CNN: Karl Hill, Roger Masamvu, Anna Taylor and Peter Mills.

16

Identity frustrations

By Alan Harries

22

Manage or be burdened

Legal

24

Important win for creditors defending unfair preference claims

46

By Michael McDonnell and Rhett Kipps

26

Unfair contracts

SA Division: Guest Speaker Rear Admiral the Honourable Kevin Scarce.

By Geoff McDonald

Insolvency

30

Shorter Bankruptcies to save the economy

By Gavin Parsons and Rebecca Ross

49 Vic/Tas Division: Golf Day: Prawn BBQ – Creditor Watch.

9 Amaran Navaratnam

16 Alan Harries

12 Alison Shaw

26 Geoff McDonald

15 Kirk Cheesman

34 Adam Lysle

53 WA/NT Division: Barefoot bowling.

DIRECTORS

Personal Insolvencies rise 2%

33

Early warning signs

34

By Adam Lysle

Australian President – G.L. Morris MICM CCE Australian VP, Legal Affairs – J.A. Neate MICM Professional Development – S.D. Mitchinson LICM

Trends in insolvencies – businesses don’t fail overnight

36

YCPA & CCE – G.C. Young MICM CCE Member Services – J.G. Hurst FICM CCE Finance – G. Odlum MICM CCE

AICM Training news Study tips for online learners

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Trusts

EDITOR/PUBLISHER Nick Pilavidis | Email: nick@aicm.com.au

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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, 2015.

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aicm

From the President

Grant Morris CCE Australian President

W

ell, well, well. Just 12 months ago who

adopt prudent credit policies and ensure our procedures

would have thought we would have seen

are followed.

big Aussie names like Dick Smith and One Steel with the words “In Administration”

following their well known handles.

A few would have had their suspicions and as each

I’m tired of hearing Credit Managers assessing a situation by saying “they’re a bit slow at the moment but they have been there before and always come good so we are continuing to supply”. That’s not a Credit professional

month passed many more astute Credit Managers would

but an invoicing and cash allocation clerk. We need to

have raised their concern level and started to take action.

understand why the customer is dragging his feet and how

Dick Smith was large but Arrium is much larger. It has

he is going to turn the corner so you both march positively

debts of $4B and is having an impact across many industry

forward.

segments not just direct mining product suppliers but

To stay a step ahead of the situation you need to

consider too transport companies (one family company

continue to hone your credit skills. Hawthorn coach,

is reported as being owed $13M) and in our profession,

Alistair Clarkson, didn’t win the 2013 grand final and then

mercantile agents and solicitors who assist with debt

sit on his couch thinking I’ve got this down pat and relax.

recovery of the various Arrium/Onesteel entities. We feel

He continued to personally grow and develop, understand

for the employees of the Arrium group and their families,

the changing pace and tactics of the game, realise that

not just the people in Whyalla where Arrium is by far the

not all competitors (customers) played the game the same

largest employer but across all business units who now face

way or had the same skill set or methods. That is how he

uncertain times. A number of these employees are AICM

has gone on to do a threepeat with further premierships in

members and our thoughts and best wishes are with them.

2014 and 2015 1.

It is times like this we ideally do not rue the day when

We must do the same and stay on top of our game

a decision was made to continue to support or not but

through continued professional growth ie training and

ensure the right decision was made with the appropriate

development, networking and exchanging ideas and

safeguards in place to protect our company’s own

situations with our peers. This means attending workshops,

position.

seminars and network meetings and occasionally letting

I know of at least 1 prudent Credit Manager with a 7 figure debt who had taken a conscious decision to continue to support Arrium and had adopted a cautious

our hair down at more social events and building stronger relationships with our peers.

It also means being across all industry publications

approach by substantially increasing his doubtful debt

whether they be this magazine, the AICM monthly

provisions to give him cover should Arrium come under

newsletters or the myriad of news bulletins put out by

external control. His book loss will perhaps be around 20%

Government agencies like ASIC or professional firms

of appointment date outstandings however he has enjoyed

including our supporting partners Worrells, Ashurst and

the profit leading up to that point and will continue to do

the like.

so on guaranteed future supplies.

As I said at the national conference 18 months ago …….our role is to look forward. No-one ever

A formal CCE exam paper has now been written. It

signed off on a deal for the supply of a

is being trialled in May and June and will then be rolled

product or service knowing they wouldn’t

out nationally. This offer will be in addition to and an

be paid. A loss is the future non payment for

alternative from the existing online short form exam and

goods or services provided previously and

supporting 3,000 word paper.

we must therefore look forward, albeit not forgetting that history is a good teacher. and it serves as a reminder now to always ensure we

6

Don’t you love the new website? Haven’t been there?

Tsk tsk click here

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

Our Webinars have good content and are being well received and supported strongly. I would encourage you to register for the upcoming webinars even if you will

From the President

aicm We regret to advise increased work pressures have led Steve Mitchinson to step down as the WA Division Director.

Steve has very ably represented the WA Division at the Board and conversely very ably represented the Board in the WA Division since his appointment in August 2013.

Steve has been the driving force behind the development of the toolboxes which are now being rolled out nationally and has supported many of the changes which we have made in our darkest hour. My sincere thanks to Steve for his wise counsel and the concerned and professional manner he has brought to every matter. We will miss you Steve but wish you well in the new work undertakings.

I am pleased to announce NCI Trade Credit Solutions have recently joined us as an official partner. NCI are led by Kirk Cheesman who I respect greatly as a very street smart and savvy credit professional. A big warm welcome to Kirk and his team and we look forward to partnering with you for a long time.

Grant’s Soapbox We have received a lot of support of our proposed lobbying of the Attorney-General and ARITA for changes to legislation and practices in the period in which miss the live webinar as by registering you will be sure to

preference claims can be made, recovered funds meeting

receive a recording.

costs and not being paid out as dividends, claims being

The National Conference is being held from October 12 – 14 at the new Seaworld Resort Conference and Convention Facility on the Gold Coast. The program is

inflated and excessive annual fee increases loaded at the front end.

James Neate and our Legal Affairs portfolio now have

well advanced as we take the learnings from the Sydney

carriage of this and were to commence lobbying of the

conference and feedback from delegates and members

Attorney-General however with the recent announcement

to provide you with the best information, education and

of an earlier and upcoming federal election this will be

networking experience that can be packed into 3 days.

placed on hold until after the election.

Plan now to get yourself there

I hope we see you at an AICM event soon as you

zz Include it in your annual budgets when you complete

support the Institute which supports you.

them over the next few months zz Incorporate it as reward and recognition for achieving your KPI’s or targets

– Grant Morris grant.morris@coateshire.com.au

zz Add it to your training and development programme

Ph: 0407 405 198

Use it as motivation and reward for your staff ie offer to send them along as well when they hit their targets.

The cost of the conference is far less than what good organisations spend on the development of their employees.

FOOTNOTES 1 Ross Lyon and the Sydney Swans have learnt a lot and will stop the Hawks and Clarkson’s run this year.

May 2016 • CREDIT MANAGEMENT IN AUSTRALIA

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aicm Portfolio Update Membership portfolio As part of an occasional series, we profile each National Portfolio to better inform members of the role of the National Board, its policy objectives and the work undertaken for members’ benefit.

As the director responsible for Membership my focus is on growing membership and ensuring value to current members.

So I thought it a great opportunity to revisit a few reasons why the AICM is such a worthwhile group. This hopefully will encourage you to get involved with the numerous ways the AICM helps Credit Professionals do their jobs better and for you to spread the word and suggest to those who are in your network to consider filling in the application and joining if they are not members already.

Jeff Hurst

8

Over the past few years we have been one of the main go to groups with regards the PPSA and the more recent Privacy Amendment Act 2012. We are currently pushing for reforms to the way preference claims are treated and have made recent submissions in this area (Law reform Bill and the second to the Productivity Commissions Inquiry into Business Set-up, Transfers and Closure). We are also are currently consulting with other associations in order to shape the Innovation reforms being proposed by Malcom Turnbull such as safeharbour rules, voiding ipso facto clauses and reducing Bankruptcy periods from 3 years to 1 year. This ensures members concerns are voiced directly to those in Government who instigate these reforms that effect how we do our jobs day in and day out.

Our Professional Development/ Education courses (discounted to members) are not only of a high standard but offer practical advice on up to date methods across a variety Credit related issues that we as Credit Professionals see each and every day.

These together with the Divisional seminars, workshops and networking events are regarded highly by a number of businesses and of course our National Conference held each year is always very well attended with in excess of 400 delegates regularly attending plus the may business partners who provide us with the most up to date collection tools available from both overseas and within Australia.

Just to reflect again on what is offered to Members of the AICM: 1. Development – Education via Conferences, Seminars Workshops and the ever popular National

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

Conference. In 2016 we have also introduced complimentary webinars for members, we plan to hold at least 10 this year.

2. Lobbying – AICM will continue to be involved within all areas that effect our day to day activities to make our lives within the Credit area a little more realistic.

3. Recognition – Membership, CCE, YCPA and the Credit Team of the year awards to name a few.

4. Networking/Connecting – providing our members with avenues to discuss and show their knowledge through the many forums (Credit Network Forum), Journal, E-newsletter and the many other activities run within each Division.

This is also a great time to consider the group membership option (Employer Sponsored Memership) which is a cost effective membership option for Credit Teams which makes membership viable for all members of the team to access the benefits and learn more about the Credit Industry.

So I encourage each and every one of you all to spread the word and show to those working within the Credit field who for one reason or another have not joined this Institution to re think and fill in the application – get involved!!!

As National Director for Victoria and Tasmania and director responsible for the Membership Portfolio I am always keen to speak to members or those thinking about membership to discuss any questons and to receive any general feedback. If you have any ideas or concerns please feel free to make contact on 0427945791 or via email at jeff@ jghcreditriskmanagement.com.au.

Credit Management

Finding the bestfit debt recovery agency

By Amaran Navaratnam

Amaran Navaratnam

Net Return

Analytics Analytics have revolutionised the debt recovery industry and the way agencies now collect debt.

In an article written by Nicholas Harrak, Head of Government and Commercial at Recoveriescorp, (May 2014, AICM magazine “Analytics: Why they’re critical for a sustainable business model- Act now!”) he emphasised recoveriescorp’s analytics-based strategy to increase debtor engagement through the ‘propensity to pay’ model that accurately prioritises delinquent accounts and determines enhanced collection strategies based on both the probability of recovery and expected recovery amount.

Debt recovery agencies are now employing smarter and more effective ways to ultimately increase your net return, reduce the volume of write-off and increase customer re-engagement at earlier stages of debt referral.

The best-fit debt recovery agency should not only be effective in recovering debts but innovative in their tactics and strategies to increase net return and reduce your volume of write-off through the use of analytics.

Business Intelligence Business intelligence (BI) is a technology-driven process that analyses data to provide stakeholders with improved risk mitigation strategies.

Selecting a debt recovery agency that is right for your type of referrals involves more than finding the lowest priced agency – it requires careful consideration.

This year, before you refer your debts to any recovery agency, find the one that is ‘best-fit’ for your existing and future recovery needs.

Where do you start? Look within!

Look within your debt portfolio and ask: “what are the pain points in our collection strategy and how could a debt recovery agency assist?”

As a Credit Manager, there can be several competing priorities when selecting a debt recovery agency.

These can include: zz Net return zz Partnership and brand protection zz Compliance and risk zz Customer re-engagement zz Litigation

The best-fit debt recovery agency should not only be effective in recovering debts but innovative in their tactics and strategies to increase net return

May 2016 • CREDIT MANAGEMENT IN AUSTRALIA

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Credit Management

An example of debt recovery BI is the use of ‘intel codes’. Intel codes are used by operators to understand the reason for non-payment prior to and after debt referral. This data can be translated and reported back to your company in order to better understand and predict how many customers will fall into hardship categories for specific reasons.

Your next agency must be able to provide you with data and guidance that assists your credit lending team with strategies to effectively control the volume of debt, improve business processes and understand your customers to mitigate future financial risks. This can assist your company in increasing net return.

Panel Positioning As a Credit Manager, you want the security of knowing that your next debt recovery agency is going to increase net return. When working for ‘Tier One’ clients, it is common for debt recovery agencies to be benchmarked against other collection agencies. This can provide key performance metrics that allow you to determine which of the agencies is effectively increasing your net return in a given period. Ultimately, the agency that is consistently the number one performer will be the ‘supplier of choice’ for present and future recovery needs.

Even if your requirements are not large enough to warrant a panel of providers, don’t be afraid to do your research on the agencies that you are considering adding to your panel of suppliers with this approach in mind.

Speak with other Credit Managers within your industry that are already using the agencies you are considering to find out if they are happy with the agency’s performance against their various KPIs. If applicable, find out how the agency is averaging each month against their competitors as it will assist you in gaining a clearer picture of their ability to increase net return for their clients.

10

“As a Credit Manager, you want the security of knowing that your next debt recovery agency is going to increase net return.”

Partnership and Brand protection Choosing a reputable agency is important but there’s much more than reputation to think about. You need a recovery agency that fits your corporate culture and provides the kind of business relationship you consider important.

Brand Protection Before referring delinquent debts to a recovery agency, look to partner with an organisation that perceives value not only in recovering payment in full or establishing payment plans, but also in preserving a positive relationship between the customer and your brand.

Your ‘best fit’ agency should understand your expectations and partner with you to help you meet your goals with sound advice on reducing delinquency. They will provide you with more than dollars collected – establishing a strong and transparent partnership that will yield long-term value to both parties.

Compliance and Risk Legislation Debt collection activity is heavily regulated by legislation and other obligations to ensure all parties in the collection process – creditors, collectors and customers – are protected. Failure to comply can lead to severe penalties, not only for the collection agency, but also for the creditor. Remember: a creditor’s obligation does not end because they have outsourced the collection activity. Besides financial risk, there is also reputational risk to be considered.

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

Choosing an agency with a strong compliance understanding and culture is vital. Ask your prospective collection agencies to demonstrate how they ensure compliance at all stages of the process, including training programs for collectors and ensure that they are prepared to work collaboratively with you to report back on their performance against legislative requirements. Every agency will claim to be compliant but you should look for the agency that can demonstrate this commitment to your satisfaction. After all, it is your company’s reputation on the line.

Quality Assurance and Data Security In addition to legislation – which can appear opaque at times – it is important to choose an agency that follows international best practice.

Ask your agency if they are accredited to any ISO standards. ISO accreditations go a long way towards ensuring the service you will receive will be of a consistent and auditable quality.

Of the various ISO accreditations available, two non-negotiables are ISO 9001 (Quality Management) and ISO27001 (Information Security).

When an agency is certified to the ISO 9001 standard, it means that their internal quality management systems will meet the needs of customers and stakeholders as well as statutory and regulatory requirements.

With data security and privacy of primary importance in today’s world, an ISO 27001 certification will mean that your agency has in place appropriate levels of encryption and firewalls to rival the Great Wall of China to protect your customers’ private information.

Credit Management

If your next collection agency does not follow the correct procedures when it comes to collection legislation, quality assurance and data security, you could face penalties from regulators and damaging publicity – a nightmare scenario for any Credit Manager.

Litigation While the aim of early engagement strategies is to avoid the need for litigation, most debt recovery agencies in Australia recognise the need to provide end-to-end collection services, including legal recovery. Overlooking this critical stage of the process when selecting a collection agency could result in sub-standard results, or higher costs due to the need to engage an additional collection partner specifically for litigation.

Finding the ‘best fit’ debt recovery agency with a reputable legal recovery arm attached is surprisingly simple. First, ensure that the partnered law firm is specialised in your industry, whether it be insurance law, commercial litigation, debt recovery or contract law.

Then ensure your next debt recovery agency has highly professional and knowledgeable in-house counsel that can provide you with the sound and actionable legal advice you need when it comes to legal action, enforcement of judgements or bankruptcy.

Customer Re-engagement Debt recovery agencies that suffer a negative image in Australia are generally inexperienced in the art of debt recovery, with unskilled or poorly trained employees that are easily

frustrated. If the agency is skilled at collections and mastering debt recovery, the process will incorporate a high level of customer service, enhancing customer engagement and improving financial results. Customer service is the key to effective collection in today’s environment.

Enhancing the customer service experience should not be limited to interactions between the agency and your customers. It should also extend to the agency offering your company stakeholders transparent reporting, auditing, and compliance oversight that enhances your experience.

operators have sound industry, client and product knowledge.

To guarantee a positive outcome, provide your best fit recovery agency with client specific training on a granular client level, based on your specific challenges and requirements.

Only this way can you ensure that you will be provided with effective, knowledgeable leaders and operators to work your debt portfolio.

Learning and Development Programs When selecting your next recovery agency, find out whether their employees receive ongoing training, education and career development programs supporting their career development. Your debt portfolio deserves highly trained, engaged and effective leaders, qualified in areas such as Emotional Intelligence (EI), negotiation techniques, leadership and customer service skills.

Having highly trained and skilled operators representing your debt portfolio will ultimately increase your net return, reduce your write-off volume and ensure collection activity attracts a low – or zero – complaint ratio, protecting your brand image.

It is a high risk to refer your debt recovery needs to an agency that does not appropriately train their staff.

—— What are some examples of innovation you have implemented in your business?

—— How will you apply analytics to my portfolio?

—— What unique service approach do you employ in debt recovery to make you stand out?

—— Where you serve in panel arrangements, how are you positioned against your competitors?

—— How can you demonstrate your company’s commitment to the personal and career development of your staff?

—— How does your agency handle complaints to better protect your clients’ brand image?

—— Will your operators be trained on our specific collection requirements?

—— Do you have a leading edge propriety owned IT infrastructure to effectively manage referrals?

—— Is the agency able to tailor solutions specifically to our business recovery needs?

Client-specific Training As a Credit Manager, you want a seamless end-to-end referral process.

You want the transition to be so smooth that your customers build trust with the agency because their

“Having highly trained and skilled operators representing your debt portfolio will ultimately increase your net return...”

Questions to Ask Credit Managers, when selecting your debt recovery panel in 2016, don’t be afraid to ask an agency the following questions:

Asking these questions will assist you in determining which agency is ‘best fit’ for your recovery needs and increasing your customer engagement and net return. n

Amaran Navaratnam is Portfolio Manager at RecoveriesCorp www.recoveriescorp.com.au

May 2016 • CREDIT MANAGEMENT IN AUSTRALIA

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Credit Management

Is mediation a useful strategy for Credit Managers dealing with debt recovery?

By Alison Shaw

Credit managers and not just those employed by lending organisations are responsible for debt recovery from customers who have failed to pay up their debt. This is a task that requires great sensitivity and emotional intelligence, as credit managers are often exposed to underlying human emotions and personal difficulties the debtor may be experiencing during debt recovery.

When all attempts to recover the debt fail, litigation is commonly used as a final resort. While litigation is one solution to deal with recovering debt, many credit managers will agree that it is often not the best, citing the following reasons:

1. Litigation is expensive Litigation is an expensive process both for the credit lending organisation and the debtor who may choose to appear in court to defend their case or delay the collection of the debt. There are court fees to be considered apart from hefty legal fees that need to be paid to lawyers by both parties to comply with the process.

2. It is time consuming and long

Alison Shaw

12

Litigation is a time consuming process wherein, once the case is filed, you need to wait for court availability for the hearing to start. The hearing is unlikely to conclude in a single

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

session, in which case, additional court appointments need to be taken.

Depending on the complexity, a case can drag on for months before a trial is reached. The value of recovering the debt today is reduced by the delay taken in court.

3. Both parties walk away dissatisfied During litigation, lawyers representing both sides present and contest evidence and facts from which the court delivers a judgement. Often, neither party feels they have had a say or been heard properly. Once delivered, a judgement would often leave both parties feeling dissatisfied.

There is no guarantee that either party gets the result they want going into litigation and by delegating the outcome to the magistrate or judge, risk the outcome they would even be prepared to settle for.

4. Litigation is not always successful in recovering the full debt By going to court, there is no option for the debtor to work with the creditor to draw a feasible payment plan. Rather, the limited solutions of debt recovery delivered by the court is what both debtor and credit manager will have to accept. As mentioned earlier, neither party gets a say in the judgement delivered which

Credit Management

also means that there is no guarantee for the credit manager that the debt will be recovered in full.

5. Litigation discourages confidence in the credit organisation When credit managers resort to litigation, it will damage on-going relationships and may harm the company’s reputation and discourage prospective customers from wanting to deal with the business. Potential customers may lack the confidence to work with the company and be concerned about the hard-nosed attitude to debt recovery and fear the possibility of a lawsuit being filed against them if they default on any payments for any reason. Such unfavourable perception toward the company is certainly not helpful for future business relationships nor an ideal image to have within the industry.

What is mediation and what makes it a good alternative to litigation for debt recovery?

Mediation is a voluntary, alternative form of dispute resolution and facilitated discussion where people in conflict come together in a safe and fair environment to try and settle disputes with the support of an independent third party – the mediator.

So instead of going to court and awaiting an outcome that you cannot determine, going for a mediation session could prove more effective and satisfactory. By bringing in a third party mediator who acts as a neutral party and sole purpose is to help both sides work toward resolution, mediation enables negotiation of solutions toward a joint agreement.

As compared to litigation, mediation has the following advantages: zz It is more cost effective than

litigation, since both parties share the cost of mediation benefiting the business and the debtor. It also allows for quicker resolution of cases, which helps in cutting down on the legal costs and maximises the value of the debt being recovered as quickly as possible. zz It is quick and easy to arrange, all to your convenience. Only one party needs to contact the mediator and the mediation session can be held at the earliest date when both the parties are available. This is unlike litigation where a date will be given based on court availability and both parties will have to make themselves available at that date. zz Mediation is less intimidating compared to litigation since it is held at a time and place that both parties find convenient and have agreed on. The mediation environment also offers privacy

May 2016 • CREDIT MANAGEMENT IN AUSTRALIA

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Credit Management

zz

zz

zz

zz

14

that makes both sides feel comfortable thus facilitating easy and open discussions.

Mediation is also a completely confidential process, which protects the reputation of the debtor as well as the credit manager and the organisation.

Going for mediation will help prevent the case from going public which can be harmful for everyone.

In a joint session, both parties will be given the opportunity to share their perspective about the issue and express how it affects them. This builds compassion and empathy as both sides gain a greater understanding of the situation from the perspective of the other. This encourages a willingness to cooperate in order to seek a satisfactory outcome for both the business and the debtor.

The biggest advantage mediation has is it can allow for creative solutions as opposed to going to court where a judgement is passed on the case and leaves little room for negotiation.

Through mediation, it is possible to work out feasible payment plans that do not overburden the debtor while ensuring that the credit organisations get the owed amount back with agreed default provisions that can be made enforceable. Both credit managers and debtors are free to discuss and choose an outcome that is best suited to their interests. This ensures both sides walk away feeling heard and satisfied with the outcome.

Building on the fact that mediation enables creative solutions, it also gives more power to both parties to control the topics for discussion and the flow of the conversation.

They get equal chance to present their point of view, express their expectations and constraints and work with the other side to arrive at an agreeable solution

“...mediation is a quick, effective, flexible and cost-efficient solution that could assist credit managers in debt recovery.” that best meets their needs and expectations. zz Bringing about a mutually satisfactory outcome by going for mediation also helps preserve current business relations between the creditor and debtor.

Litigation on the other hand usually results in strained relations that ruin any chance of future business transactions between the two parties.

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Tips for credit managers to maximise debt recovery with mediation:

1. Include a mediation clause in all contracts, terms and conditions as the primary dispute resolution process.

2. Approach the debtor and put forth the idea of going for mediation first instead of sending them a legal notice. This shows sincerity on your end in working toward the issues and establishes trust, encouraging greater chances of a quicker payment and settlement.

3. If you do not wish to initiate mediation yourself or find that the client is uncooperative, approach a mediation agency, such as SHAW Mediation, who can talk to debtors and invite them to participate in mediation. This will help disabuse them of any misconceived or misunderstanding about the mediation process and assist in answering any questions they may have.

4. Meet with the mediator prior to the mediation session to explain your situation and discuss any concerns and potential barriers to the settlement. The mediator

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

will not proceed with any joint mediation sessions until everyone is in the right mindset to proceed.

5. Collate all relevant documentation prior to meeting the mediator to discuss what information and documentation might be needed to ensure a smooth process.

6. Be willing to generate and explore options with the debtor as this improves your chances to recover the debt without having to resort to litigation. You would want to keep in mind that if the case moves to litigation, you might receive a judgement in recovering the debt where the order is only as good as the debtor being able to meet it.

7. The final outcome of mediation is a mutually agreed upon solution that can be legally binding, if you wish. This protects your interests by allowing you to take legal action if the debtor defaults on the agreement. However, if the debt is paid, you may not need to go to the expense of legally formalising a past event by way of a Deed.

Overall, mediation is a quick, effective, flexible and cost-efficient solution that could assist credit managers in debt recovery. It provides for a winwin solution between both debtor and creditor all the while preserving business relations. This ultimately adds to the good reputation of the credit company and builds faith among potential customers. n This article was originally written by SHAW Mediation, a national mediation firm comprising of nationally accredited mediators whose services span across Australia. At SHAW, we can help you to resolve all kinds of disputes – no matter whether the dispute is personal or commercial, and across all ages, genders and industries. Let’s talk!

Credit Management

It’s all about the money

By Kirk Cheesman* In January 2011 English songwriter, Jesse J, released her single, ‘Price Tag’. The number one hit proclaimed “it’s not about the money”. In the trade credit world, 2016 will be ALL about the money and much may hinge on cash flow, capital reserves and credit availability.

In the Australian financial half-year reporting season (31 December 2015) there have been many businesses who have reported deteriorating

profitability as well as more than the norm reporting ‘impairments’ further impacting on their profit.

Whilst this simply may be a moment in time result, it reminds companies who are constantly assessing credit risk, the importance of knowing your customer and their financial position.

Only a small percentage of our clients admit to annually approaching their large customers for updated financial statements to ensure the levels of credit that they have justified in the past can continue to be justified into the future.

ACTION – So what should you be considering to combat future credit risks?

1. Take a moment to conduct a spread of risk of your debtors aged trial balance. This will provide you with a snapshot of where your income is generated from.

2. Undertake a full review of your top 10 customers, including obtaining financials and understanding their

Kirk Cheesman

market and trading conditions.

3. Focus on their net worth and liquidity. Analyse what available capital they may have within their balance sheet and how long they could endure poor financial results.

We have already experienced a number of major failures in 2016. Many of these are linked to poor cash flow, lack of capital, losing bank support or simply due to market conditions.

And whilst I enjoyed the Jesse J ‘Price Tag’ hit, I have to disagree with the chorus and say that ‘it’s all about the money’. n Kirk Cheesman is Managing Director for NCI. Ph: + 61 8 8228 4869, Mob: +61 419 865 313 E: Kirk.Cheesman@nci.com.au About National Credit Insurance (Brokers) Pty Ltd: National Credit Insurance (Brokers) Pty Ltd are Australia’s leading specialist trade credit insurance broker in Australia, New Zealand and Singapore, with offices in all major capital cities. NCI is an Australian owned and operated organisation established in 1985, and are wholly owned by Steadfast Group Limited (Australia’s largest broker network).

For more information on National Credit Insurance (Brokers) Pty Ltd, please visit www.nci.com.au.

CONNECT WITH THE

TRADE CREDIT SOLUTION SPECIALISTS Navagating credit risk management requires expert advice.

THAT’S WHAT YOU’LL GET WITH NCI. • 30 years experience

• National coverage

To find out how we can assist you and your clients, contact us today.

WWW.NCI.COM.AU

1300 654 500

INFO@NCI.COM.AU

National Credit Insurance (Brokers) Pty Ltd ABN 68 008 090 702 | AFS Licence No 233817

May 2016 • CREDIT MANAGEMENT IN AUSTRALIA

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Credit Management

Identity frustrations Alan Harries* ponders the conundrum impacting IMA Members effective engagement with consumers which is the role of identification during telephone contacts before the purpose of a call is disclosed.

Alan Harries

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This is the equivalent to the old challenging question of “what comes first, the chicken or the egg?”

Both the Institute of Mercantile Agents and Australian Collectors and Debt Buyers Association offices receive regular calls and messages each week from members of the public expressing frustration in relation to contacts from parties they understand or suspect to be collectors who more often than not are seeking out someone unknown to that individual: sometimes it might be seeking a previous tenant of their address; or someone who reportedly lived next door; or perhaps someone with the same surname.

The most common thread to these calls and messages is the concern of the perceived attempt by the party initiating the contact to deceive or be tricky. Well you may ask, what were the deceptions or the trickiness allegedly being used by those making such contacts? The refusal to say on privacy grounds exactly who they are and why they are calling!

Therein lies the disconnect between the position embraced by legislators and interest groups justifying strict privacy regulations and what the general community actually want and expect in their dealings in everyday activities such as someone making a telephone call to them. I’m sure many other Australians are frustrated by this overzealous “nanny state” privacy protection which makes even the simplest of transactions more convoluted and difficult to navigate than is really warranted.

Ever received a call from your health insurer, your bank or insurer and been annoyingly asked “before I can discuss with you the reason

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

for my call can you please properly identify yourself”. When this happens to me, my response is usually “Well yes I can, but you know who I am – can’t you remember, you called me on my mobile telephone number and I announced my name as I answered the call!”

Guideline requirements The ACCC/ASIC Debt Collection Guideline at Part 2: Practical Guidance specifically provides what a collector should do when: “1. Making contact with a debtor (a). Under the privacy laws, you have obligations to protect the privacy of debtors. When making direct contact, your first task must always be to ensure the person you are dealing with is the debtor.

This must be done every time you make contact before you divulge any information about the debt, the process for its recovery or before providing any other confidential information. (b). If you consider it necessary to divulge your identity as a debt collector before being sure that you are dealing with the debtor (for example, if requested by the person you are dealing with) then you may do so if that would not have the effect of divulging that the debtor has a debt.

Particular care should be taken when speaking to a person at a debtor’s workplace.

Example: Calling from or on behalf of an organisation with a descriptive name If you are calling from or on behalf of an organisation whose name

Credit Management

Both...offices receive regular calls and messages each week from members of the public expressing frustration in relation to contacts from parties they understand or suspect to be collectors not know, who lives at a different address, and whom I have never had any form of relationship with.

These calls have been ongoing since the beginning of this year.

is more revealing or descriptive in relation to debt collection practices (for example, ‘Collections R Us’) then revealing the name of the organisation is likely to divulge the existence of a debt. (c). The limits on disclosing information to third parties apply to the debtor’s spouse, partner and/or family as much as they apply to other third parties. (d). Having established the debtor’s identity, you should then identify who you are, who you work for

and explain the purpose of the contact. Failing to clearly identify who is calling and the purpose of the call will most likely confuse the debtor and may lead to the debtor avoiding subsequent calls….”

Privacy frustration Below as an example, is a recent email received by the IMA from a distressed individual: I am receiving frequent calls from a debt collector on my personal mobile number regarding a debt that is held by a person a named ‘Wahid’ – a person whom I do

The collector will not tell me how or why they believe I know this person or provide me with their contact details, and as such I have no way of knowing if it is the same agency contacting me on each occasion.

The agency in these calls advise me my details have been obtained from a ‘public database’. I have an unlisted mobile number, which is not recorded on public databases.

When I ask them to provide me with the name of the public database so I can have my details corrected, they refuse to provide it to me. The calls usually end with the agency refusing to answer any questions and hanging up on me.

May 2016 • CREDIT MANAGEMENT IN AUSTRALIA

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Credit Management

A number of months back the NSW Sheriff attended my residential address and spoke with my wife regarding this debt owed by ‘Wahid’. They were satisfied we had no relation to the debt or the person and left but due to privacy reasons the Sheriff Officers could not disclose who had sent them. The calls (presumably from the agency) however, have continued.

I have had my phone provider place a trace on my phone number to identify the details of the caller, however as the agency does not call more than the required times each month the phone company cannot provide me any further details.

As the body representing debt collectors I am hoping you can assist me in some way with: - identifying the agency contacting me and request they delete my contact details and cease contacting me; and - providing me with details of ‘public databases’ used by collection agencies who I can contact to have my details corrected.

Telephone contacts with consumers are problematic for many industries especially for those where any element of sales is involved but the situation for collectors making legitimate calls is much more difficult given the initiating party is restrained from being upfront and open as to the purpose of the call until such time that the other party to the call has been properly identified!

Establishing the bona fides of any caller in order to have a meaningful communication with the other party is very much dependent upon explaining the purpose and the context of the call. This is simply

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achieved for most calls except for those made by collectors!

Consider these two typical business related calls: “Hello, this is Mary from Dr Smith’s office just calling to change your appointment time for tomorrow” and “Hi this is John from Curtains–R-Us, I will be at your place at 9.30am in the morning to do your measure and quote”.

In both examples, the party receiving the call can quickly understand the reason and recognise the legitimacy of the call and is not confronted or positioned for a wary, guarded or hostile response to a request to provide personal identification details before the caller can properly identify himself and the purpose of the call.

The adverse response often encountered to a contact made where the collector was unable to divulge the identity of his or her employer and the reason for the call is capably demonstrated by a complaint an IMA member recently received – a simple contact quickly spiralled to a complaint all because the collector correctly followed the privacy requirements: The call initiated in response to an updated contact point for a borrower in default on an account was to a third party who took offence when the collector politely declined due to privacy reasons to name the company she was calling from.

The third party was insistent in wanting to know the identity of the company involved and would not accept that due to privacy reasons the caller could only say she was from a financial

company and couldn’t provide the company’s name. The third party demanded the call be transferred to a supervisor and in the process of that transfer, the call connection was lost.

The collector’s supervisor recontacted the third party again, advised her name and apologised for the earlier call connection being lost. She attempted to assure the third party as to the need to make contact with the consumer – the third party however was determined to argue about the lack of identification of the company being provided. The third party asserted the first caller and now the supervisor had breached the privacy laws by not providing the company’s name and that she had previously worked in a government department so she knew!

The third party expanded that older people if contacted as she had been might give out information and so it was a breach of privacy!

The supervisor attempted to acknowledge the third party’s perspective and to explain the onus in any conversation is always upon the person giving information not to breach another’s privacy.

The third party returned to insistent criticism of the initial caller’s refusals to identify the company she was calling from – the supervisor again explained she and the original caller were restrained from providing such information due to a specific regulator requirement. The third party asserted she knew who the regulator was and so the supervisor invited her to check the guidelines

Telephone contacts with consumers are problematic for many industries especially for those where any element of sales is involved...

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

Credit Management

Establishing the bona fides of any caller in order to have a meaningful communication with the other party is very much dependent upon explaining the purpose and the context of the call.

– however it was quickly apparent the third party was unaware of the identity of the regulatory agency involved.

Increasingly agitated she would not be provided with the name of the employer involved, the third party then asserted an intention to call Kochie (Sunrise) and Lisa (Today show) to see if it is allowed!

The supervisor explained a journalist with either morning TV show would be able to check industry requirements and confirm all the dealings in the telephone calls had been done correctly and again expanded it would be easier for the two staff to provide their employer’s name but the intention is to protect the privacy of the individuals they are attempting to speak directly with.

Finally the third party claimed that “calling” is harassment – this was politely disputed with the supervisor noting she saw no evidence of any harassment. Several attempts to engage the supervisor in further argument were unsuccessful with the supervisor drawing the third party back to the reason for the call. At this impasse, the supervisor advised she was happy to stop calls to the third party’s number – the third party advised she would tell her fellow residents never to provide information to any caller from financial companies and then terminated the call.

If we were scoring this contact the result would have to be judged as: Privacy frustration 1 vs Effective engagement Nil!

Pesky letters Written contacts can be problematic too. Another example of the frustration of third parties encountering privacy restrictions was evident when the IMA office was contacted some months back by an elderly female who was very upset that she was receiving mail at her address for a previous occupant for whom she did not know a forwarding address.

Instead of simply returning the mail to sender with an appropriate notation such as “Not Known At Address” – this third party explained she was so offended by the steady stream of mail being received in her mail box for the previous occupant and so she googled the PO Box address on the back of one of the envelopes and discovered it related to a collection firm based in Sydney.

The Third Party then decided she would call that collection agency to get her address removed from their records only to discover she was met by a refusal on privacy grounds to discuss whether the company were chasing the previous occupant for a debt as the third party was unable to identify herself as the consumer concerned or as an authorised representative of the consumer.

The next call was to the IMA to complain about the collection company for writing to her and then refusing to discuss anything about the previous occupier of her address on privacy grounds.

Impact of contacts Whilst writing this article, a call was received at the ACDBA Office from a female who had moved from Australia to Singapore and was having difficulties with repeated contacts from an Australian collection firm (which she named) asking her to pass on a message to her boyfriend who remained in Australia. She claimed she had received perhaps 6-7 calls over recent months from the same collector who was getting increasingly insistent that she pass on a message to her boyfriend to call the collector. She explained she had passed on the earlier messages but could hardly compel her boyfriend to call in response.

This female explained the collector seemed to believe her relationship with the boyfriend was much closer and more serious than it actually was and despite her explaining they were no longer living together but simply remained friends, the calls to her workplace in Singapore asking her to pass on messages had continued.

In response to the question of how the collector held her workplace number in Singapore she explained the collector had claimed to have tracked her down via her LinkedIn profile, established her new employment and then called through.

According to the third party, the repeated calls to her workplace were now causing her embarrassment with those working in close proximity taking an interest such that she had to explain that she did not owe any money but the caller was asking for a message to be passed onto someone else.

Not a scam!

Coincidentally, a male called through to the IMA Office around the same time to complain about a call he had received from the same collection firm. He gave an account that he had received a call and then

May 2016 • CREDIT MANAGEMENT IN AUSTRALIA

19

Credit Management

before the caller would proceed further to explain the reason for the contact, had asked for his personal identification details. The caller told him the company’s name but otherwise would provide no other details or the context for the call being made to him.

When he refused to provide his personal details, he claims the caller became “rude and hung up”. Upset by this call, this male then googled the company name and discovered it was a collection firm so he called that company as he believed he had no outstanding accounts and wanted to know why it was calling him. On this occasion he spoke with a collector and then a manager – neither would assist him and were again in his view rude – he admitted however he had again refused to supply any personal identification details as he was genuinely concerned the call to him may have been part of some elaborate scam.

Frustrated by the discussion with the two persons at the collection firm, he then rang the IMA to complain. IMA staff explained the reason for the company’s request for him to personally identify himself was to ensure it did not breach privacy and collection regulatory obligations.

After establishing the company concerned was a member of IMA and obtaining an alternate contact number for the company this male decided he would again call back to the company and provide his personal details so as to get this matter sorted out. He apparently spoke to someone who he later said was polite and so he provided all his identification details – in return he was able to establish the debt being chased actually belonged to a former acquaintance of his from 5 years earlier – as it happened, the male was able to provide a contact number for that acquaintance’s girlfriend.

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“Something has to give to restore common sense to such simple everyday transactions as a telephone contact” The male subsequently called back to the IMA to advise the outcome of his further interactions with the collection company and to thank the IMA for the reassurance and assistance provided in response to his concerns.

Something has to give Undoubtedly privacy and regulatory obligations surrounding contacts made with debtors and third parties is well intended but from the industry’s perspective it seems those obligations are increasingly causing quite some collateral damage. Damage to the reputation of responsible professional collectors diligently meeting those obligations as they go about their work and more importantly, real and costly impediments to effective engagement between collectors and debtors to quietly, calmly and efficiently discuss an outstanding account.

The same regulators who have established the privacy and collection obligations surrounding contacts are amongst those which regularly implore Australians to watch for deceptive scams and to always avoid passing their personal identification details to persons they do not know.

This is the conundrum – the role of identification during telephone contacts before the purpose of a call is disclosed.

The reality of society today is that most Australians are aware of and have access to the power of the internet where search engines such as Google are so fast and helpful in returning results such as listings

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

for specific telephone numbers or addresses. Leaving a non-descript message inviting a return call to a specific telephone number or a letter with just a return address on the reverse will not stop determined individuals from making their own online enquiries to learn more about the message left or the identity of correspondence received and intended for others.

The examples detailed above of individuals distressed by contacts received where the caller is refrained from divulging the context or purpose of the call made until first prevailing upon the receiving party to divulge his or her personal identification details clearly demonstrate the artificial regime prescribed under the privacy and regulatory guidance is increasingly unworkable as it fails to meet what contemporary Australia requires when a contact is made in this age of being on guard to the possibility of scams being perpetuated against them.

The industry is willing to meet and discuss the issue of appropriate contacts with legislators and regulators as clearly something has to give to restore common sense to such simple everyday transactions as a telephone contact. n

*Alan Harries is the CEO of the Institute of Mercantile Agents and Australian Collectors & Debt Buyers Association – he can be contacted at akh@imal.com.au

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Tel: 1300 560 996 Level 3, Suite 303, 1-9 Chandos Street, St Leonards, NSW, 2065 | CONTACT US

Credit Management

Manage or be burdened How to avoid your inbox being a controlling burden and impediment to your work efficiencies.

A recent report by researchers argues that to manage the stress from a constant flow of incoming emails people should consider doing without emails but in this day and age, such a recommendation is pretty well unrealistic and unachievable.

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It is common to hear colleagues despairing at the volume and demand of email traffic to their inboxes – even using auto rules to weed out the scams and unwanted promotional and sales messages seems an inadequate defence to keep this vital but at times overwhelmingly communication medium under control.

The receipt of constant email updates, requests or queries are a source of stress to many credit professionals. This is not to mention all the promotional emails and unsolicited emails that infiltrate most inboxes. A recent report by researchers argues that to manage the stress from a constant flow of incoming emails people should consider doing without emails but in this day and age, such a recommendation is pretty well unrealistic and unachievable.

The report from the Londonbased Future Work Centre which conducts psychological research on people’s workplace experiences included a key recommendation to not have your email app running at all times. Understandably, many in our industry would find this hard if not impossible to implement.

The psychologists in their report following a survey of almost 2,000 workers in the UK across a range of industries and occupations, were

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

urging users to seize control of their email instead of being ruled by it and suggested “you may want to consider launching your email application when you want to use email and closing it down for periods when you don’t wish to be interrupted by incoming emails… use email when you intend to, not just because it’s always running in the background.”

Interestingly, the researchers found two of the most stressful habits of those surveyed was leaving emails on all day and checking emails early in the morning and late at night. They concluded that “higher email pressure was associated with more examples of work having a negative effect on home life, and home life having a negative impact on performance at work”.

The report’s lead author Dr Richard MacKinnon said: “our research shows that email is a double-edged sword. While it can be a valuable communication tool, it’s clear that it’s a source of stress or frustration for many of us. The people who reported it being most useful to them also reported the highest levels of email pressure. But the habits we develop, the emotional reactions we have to messages and the unwritten organisational etiquette around email, combine into a toxic source of stress which could be negatively impacting our productivity and wellbeing.”

Credit Management

Heavy traffic A report “Email Statistics Report, 2015-2019” prepared by The Radicati Group provides some context as to the extent of email traffic and usage: in 2015 worldwide email users numbered nearly 2.6 billion, with the average number of email accounts per user being 1.7 accounts whilst the number of emails sent and received per day across the world was a staggering 205 billion!The same report details that in 2015 the number of business emails sent and received per user per day totalled 122 emails.

How does your inbox traffic stack up against that average rate? Quite likely given our industry’s reliance upon emails, your inbox traffic will be much higher.

Manage the traffic Getting serious with managing your emails. The first step will be to recognise how you respond to incoming messages. The sad reality is it is now common place that email has imposed upon many of us, a form of business attention-deficit disorder, such that whatever comes into your inbox trumps anything else you’re working on!

If managed effectively, email doesn’t need to be a burden.

Management requires some strategies such as those suggested

by Steuart Snooks, the Email Strategist & Productivity Expert who presented sessions at the 2014 IMA National Conference: Snooks advocated a www strategy to take control of email traffic – the www representing WHEN, WHAT and WHERE. We have reproduced the outline of his strategy below.

suggest restricting looking at emails to just 4 times per work day, such as: zz Early in the day zz About 30-45 minutes before your lunch break zz Any time that suits during the afternoon zz About 30-45 minutes before you finish for the day 2. Turning off all Outlook email alerts.

Such alerts typically are any one or combination of a sound, a change to the mouse pointer, displaying an envelope icon in the taskbar or displaying a desktop alert – all of them are a distraction to your efficiency.

3. Managing the expectations of those who email you – this can be achieved by a simple message above your signature block on ongoing messages advising you only check emails 3-4 times per day but if an urgent response is required to telephone you directly.

WHERE 1. Reduce mailbox size

WHAT 1. Handle each email only once by adopting the proven 4D method: zz DITCH/DELETE zz DEAL (immediately handle any email that you can read and respond to in two minutes or less) zz DELEGATE zz DECIDE {{ Where – file/move to a Folder {{ When – convert to a Task or Calendar item {{ Wait – add to a Watch List (pending a reply)

WHEN 1. Controlling when you will look at your email (a). Schedule times to check email (rather than reacting as they arrive). Efficiency experts

Clarify expectations and parameters in the messages you send: (a). No question = no reply —— Send a one off notification —— Add a PS to signature that a reply is not required —— To reduce unnecessary email (b). Establish thresholds —— To allow for independent decision making —— To reduce back and forth emails (c). Use if/then instructions —— To prevent follow up questions —— To speed up decision making —— To reduce back and forth emails

2. Use Outlook rules to automate processes such as moving messages to specific folders eg Newsletters/ezines, personal emails and Google “alerts”.

2. Use document links in your messages rather than adding attachments – not only will it reduce the size of your message but it will improve the speed of the transmission whilst improving the version control, security and compatibility for the documents shared with the email recipient 3. Simply your email folder structure in Outlook: (a). Separate “finished” from “unfinished” work; (b). Create 4 or 5 primary folders to sort and store your messages. n

Adapted from an artice in The AGENT February/March 2016

May 2016 • CREDIT MANAGEMENT IN AUSTRALIA

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Legal

Important win for creditors defending unfair preference claims

By Michael McDonnell and Rhett Kipps*

Michael McDonnell

The ‘PPSA defence’ has, in recent times, become a very valuable tool used by creditors to defend unfair preference claims.

The Supreme Court of South Australia recently overturned the decision of the District Court of South Australia in Matthews v The Tap Inn Pty Ltd [2015] SADC 108 that was being relied upon by liquidators nationwide to limit the value of the PPSA defence.

This decision focused on whether a creditor’s security is to be valued as at the date of liquidation. This is relevant because liquidators can only pursue unfair preference payments provided they are in respect of an unsecured debt, hence the time for valuing that security can also be a key consideration.

There are competing arguments as to which of the following times are correct for valuing the security under the unfair preference regime because the legislation is not clear.

1. The date of creation of the security interest; or 2. The time of the relevant payments; or 3. The date of liquidation of the company.

The decisions

Rhett Kipps

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In July 2015 a District Court Judge held that the value of the creditor’s security was to be assessed as at the date of liquidation, thereby ignoring the reality and value of the security as at the time of the relevant payment.

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

This impacted the creditor because the value of the security interest as at the later date was substantially reduced, exposing the creditor to a claim.

The finding was overturned by the Full Court of the Supreme Court of South Australia. However, unhelpfully, the question was not resolved in this case and is yet to be determined by a superior court in Australia.

A copy of the judgment of the Full Court of the Supreme Court of South Australia is available here.

The impact of the decision is that it remains uncertain as to when the assessment of the valuation of a creditor’s security interest is to occur in respect of alleged unfair preference payments.

For creditors, it is pleasing that the Full Court allowed the appeal and that there is no superior court decision that requires the valuing of the security as at the date of the winding up (usually when the security is likely to be of less or no value).

Unfair preference claim must relate to unsecured debt Creditors are frequently able to reduce, and in some cases wholly defend, claims on the basis that they held valuable security. Security interests for this purpose include: 1. purchase money security interests (PMSI) relating to goods supplied or hired on credit; 2. registered mortgages (land and chattel mortgages); and

Legal

3. charges arising from credit applications and personal guarantee documentation.

Creditors may have defences available that are not immediately obvious.

It is best practice for creditors to engage specialist solicitors, such as Results Legal, to undertake a detailed security review (including any priority considerations) as part of the assessment of unfair preference claims to ensure all grounds of defence are considered.

Earlier Superior Court decision The reasoning in the overturned District Court of South Australia decision was not consistent with

the relevant comments in an earlier decision in the Queensland Court of Appeal in 2011 in Bradnam’s Windows and Doors Pty Ltd v Offermans [2011] QCA 106 (view here).

Take away points zz We consider that the relevant time to assess the security interest is as at the time of the relevant payment and not at the time of liquidation, and that the Queensland Court of Appeal decision supports this view. zz These decisions are important for creditors with potential exposure to unfair preference claims and for insolvency practitioners seeking to pursue such claims on behalf of creditors.

zz The industry would benefit from statutory clarification on the issue. zz We will continue to monitor the development of the law in this area, including any further litigation that ensues between the parties to the Tapp Inn decision. n *Michael McDonnell is a Principal at Results Legal, mmcdonnell@resultslegal.com.au *Rhett Kipps is a Senior Associate at Results Legal, rkipps@resultslegal.com.au Results Legal specialises in credit based litigation including legal recovery, insolvency law and commercial disputes. In particular, Results Legal has extensive experience in acting on behalf of trade creditors to successfully defend unfair preference claims and promote their rights under the Personal Property Securities Act. If you wish to discuss the impact of these decisions, or require any insolvency law advice, please contact Results Legal on 1300 757 534.

May 2016 • CREDIT MANAGEMENT IN AUSTRALIA

25

Legal

Unfair Contracts Law Reform – issue identified

by Credit Managers

By Geoff McDonald*

As mentioned in the previous edition of Credit Management in Australia, we recently presented an interactive seminar with members of the AICM at the NSW Credit Symposium. There was a great amount of discussion regarding a number of practical issues that are expected to arise as a result of the legislative changes to the Competition and Consumer Act 2010 (Cth) (CCA) and the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act). The Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 (Cth) (Act) will bring about those changes, which principally have the effect of extending the protection for unfair consumer contracts to small business contracts. The Act will commence on 12 November 2016 and will apply to contracts entered into, or varied, after that date.

For credit managers the Act is expected to create the following issues.

Is each new order from a customer going to create a new contract?

Geoff McDonald

26

For each order that is placed (and accepted by the supplier) a new contract is usually created between the customer and supplier.

Each contract for the supply of particular goods or services, the subject of the order/invoice, will be for the “upfront price” specified on the invoice and subject to the supplier’s

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

Terms of Trade (where applicable).

As the Court explained in Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2015] VSCA 92 (12 May 2015) at [15]: Plainly enough, each contract between Central and Swan for the sale and supply of particular equipment was ‘an agreement to sell subject to retention to title’.

If the “upfront price” (invoice price) is up to $300,000 then the Act will apply to that contract for supply, unless the contract duration is more than 12 months – in which case the greater threshold of $1,000,000 will apply.

Why doesn’t each new order create a new security interest under the Personal Property Securities Register if each new order/supply creates a new contract?

Whether a supplier’s security interest in their goods needs to be registered each time a contract for supply is entered into (an order is placed and accepted) depends on the supplier’s Terms of Trade. A security interest needs to be registered each time it is provided for or created.

The Personal Property Securities Act 2009 (Cth) (PPSA) draws a distinction between an agreement that creates a security interest and an agreement that provides for a security interest.

Section 12 of the PPSA defines a security interest. A security interest includes an interest in personal

Legal

property provided by a number of different transactions, comprising, amongst other things, a conditional sale agreement (including an agreement to sell subject to retention of title).

If a supplier’s Terms of Trade provide for security in all supplies, present and future, then, despite the fact that there is a contract between the supplier and customer for each supply, the security interest is provided once (for all supplies including future supplies) and only needs to be registered once.

The Court, in Central Cleaning Supplies, gave a helpful example to draw the distinction between an agreement that creates a security interest and an agreement that provides for a security interest.

In Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2015] VSCA 92 (12 May 2015) the Court of Appeal noted that: 19. In the first of these, the genesis of the security interest is to be found in the agreement or act itself. The entering of the agreement, or the doing of the act, ‘creates’ the security interest. An example of this would be a contract for the sale of the goods which itself includes a retention of title clause. That is an agreement which creates the security interest in the vendor of the goods. By contrast, an agreement or act will ‘provide for’ a security interest if it makes provision for the creation of a security interest in the future and/or by some other agreement or act.

Will the new laws apply as soon as the customer places an order? What if there are already Terms of Trade in place with that customer?

The Act will not apply to a contract entered into before 12 November 2016.

However, because each order and

invoice will constitute a new contract, any order placed from 12 November 2016 will give rise to a contract to which the Act will apply.

As readers will know, many standard Terms of Trade are designed to apply to all future supplies to customers. As a result, even where a supplier’s Terms of Trade or Credit Application was accepted by the customer before 12 November 2016, those Terms of Trade will often apply to supplies to the customer after 12 November 2016, and therefore will be caught by the Act.

How can the sales team be expected to negotiate every contract with a customer?

This issue was of great concern for attendees of our seminar. The Act protects small businesses from standard form contracts that contain unfair terms. An unfair term of a standard form contract will be void.

A contract will continue to bind the parties to it if it is capable of operating without the unfair term.

In assessing whether a contract is a standard form contract a Court must take into account the following: (a) whether one of the parties has all or most of the bargaining power relating to the transaction; (b) whether the contract was prepared by one party before any discussion relating to the transaction occurred between the parties; (c) whether another party was, in effect, required either to accept or reject the terms of the contract (other than the terms referred to in section 26(1)) in the form in which they were presented; (d) whether another party was given an effective opportunity to negotiate the terms of the contract that were not the terms referred to in section 26(1); (e) whether the terms of the

contract (other than the terms referred to in section 26(1)) take into account the specific characteristics of another party or the particular transaction; (f) any other matter prescribed by the regulations.

There is little to no doubt that, if a supplier provides its standard Terms of Trade to a customer and does not provide that customer with the opportunity to negotiate those Terms, that document will be a standard form contract.

If it is accepted that a supplier’s Terms of Trade are the terms of a standard form contract, then it is a matter of either negotiating those Terms of Trade with the customer, or ensuring that the Terms of Trade are not unfair. At the NSW Credit Symposium, the thought of a sales person being required to negotiate and then vary the Terms of Trade was not well received.

We suggest that, rather than negotiating the terms with each customer, it is easier to ensure, that a supplier’s Terms of Trade are fair.

It is important to keep in mind, when assessing whether a term is unfair, that the Court must consider the extent to which the term is transparent and the contract as a whole.

What should I do to minimise the risk that my terms are unfair?

One thing that can be done quite easily is to increase the “transparency” of terms that are at risk of being found to be unfair. Suppliers should increase the font size of these terms and possibly bold certain terms where possible. A transparent term must be expressed in reasonably plain language, be legible, presented clearly and readily available to the customer.

It is suggested that the more significant the term (e.g. a charging clause within a director’s personal guarantee), the more transparent it must be.

May 2016 • CREDIT MANAGEMENT IN AUSTRALIA

27

Legal

How will suppliers know if the customer is a “small business” – are we expected to monitor the number of employees of each customer?

The Act applies to small business contracts. A contract is a small business contract if, at the time the contract was entered into, at least one party to the contract is a business that employs fewer than 20 persons.

The popular consensus at our Symposium was that it is just too difficult to monitor the number of employees of each customer.

In order to assess whether their customer is a small business, the supplier would have to know the number of employees at the time the contract was entered into (which, as discussed above, is not necessarily the time when the Terms of Trade are accepted) and whether the customer’s employees are employed on a full time or a casual basis.

For purposes of the Act, a casual employee is not to be counted unless he or she is employed by the business on a regular and systematic basis.

Suppliers should err on the side of caution and, where in doubt, assume that the customer is a small business, that the Act will apply, and consider whether their Terms of Trade could be held to be unfair.

What sort of terms will be unfair?

The CCA provides examples of terms that may be unfair. As mentioned above, a term must be considered in its context, so as a result, it cannot be said that any term would definitely be found to be unfair. (a) a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract; (b) a term that permits, or has the effect of permitting, one party (but not another party) to terminate the contract;

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Suppliers should err on the side of caution and, where in doubt, assume that the customer is a small business (c) a term that penalises, or has the effect of penalising, one party (but not another party) for a breach or termination of the contract; (d) a term that permits, or has the effect of permitting, one party (but not another party) to vary the terms of the contract; (e) a term that permits, or has the effect of permitting, one party (but not another party) to renew or not renew the contract; (f) a term that permits, or has the effect of permitting, one party to vary the upfront price payable under the contract without the right of another party to terminate the contract; (g) a term that permits, or has the effect of permitting, one party unilaterally to vary the characteristics of the goods or services to be supplied, or the interest in land to be sold or granted, under the contract; (h) a term that permits, or has the effect of permitting, one party unilaterally to determine whether the contract has been breached or to interpret its meaning; (i) a term that limits, or has the effect of limiting, one party’s vicarious liability for its agents; (j) a term that permits, or has the effect of permitting, one party to assign the contract to the detriment of another party without that other party’s consent; (k) a term that limits, or has the effect of limiting, one party’s right to sue another party; (l) a term that limits, or has the effect of limiting, the evidence

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

one party can adduce in proceedings relating to the contract; (m) a term that imposes, or has the effect of imposing, the evidential burden on one party in proceedings relating to the contract; (n) a term of a kind, or a term that has an effect of a kind, prescribed by the regulations.

Is the Act going to mean I can’t vary my Terms of Trade and/ or publish variations on the Internet?

Given the abovementioned examples of unfair terms, any term that allows a supplier to unilaterally vary their Terms of Trade will likely be unfair.

This is a difficult point of law, given the varied nature of agreements between trade suppliers and customers, as it may be reasonably necessary for a supplier to vary its Terms of Trade in order to protect its legitimate interests. In this context, such terms allowing a variation may be permissible. However, any term that is unilaterally varied by the supplier (relying on a unilateral variation clause) could itself nonetheless be deemed to be unfair. The principal reason that we take this view is that any term that is unilaterally varied by a supplier will not have been negotiated by the customer and will (in many circumstances) be to the detriment of the customer. Again, if the varied term is reasonably necessary to protect the legitimate interests of the supplier it may be considered fair.

A good example of a necessary variation would be the variation of a retention of title term to bring it into compliance with the PPSA. Any term that allows a supplier

Legal

to unilaterally vary their Terms of Trade, by simply publishing those terms on the Internet, is highly likely to be unfair because that term would reduce the transparency of any variation. The customer may not visit the supplier’s website and may place a further order with the supplier without realising the variation has occurred.

The issue comes back to the term which the supplier seeks to impose on the customer; is it unfair?

Revisiting your Terms of Trade The reform to unfair contract laws is significant. The effects won’t be known for some years when a customer cross claims against the supplier alleging a breach of the law.

We acknowledge that it will be difficult to balance the inclusion of unfair terms within the Terms of Trade against protecting a supplier’s legitimate and reasonable business interests.

Where at all concerned, it is best to seek legal advice.

To conclude, we provide the following peculiar example of a term that the Federal Court of Australia has recently found to be unfair in the context of consumer to business contracts.

The case below relates to the terms of supply of Christmas hampers.

Chrisco Hampers had included a term in its contract that allowed Chrisco Hampers to continue to withdraw funds from its customers’ bank accounts after the customers had completed payment for their hamper, on the basis that the amounts withdrawn would be held as a prepayment for any future hamper purchased. The term would apply unless the customer opted out of it.

We expect that, as a result of the Act, a similar term would be found to be unfair if it existed in small business to business contracts; such as a supplier’s Terms of Trade.

This case may also be of assistance to suppliers in considering the use of terms that the customer may opt out of and how to otherwise present their Terms of Trade so that they are transparent for purposes of the Act. In paragraphs 71 to 97 of the Judgment, the Court considered the transparency of the HeadStart term by reference to the placement of the term, the placement of the opt out box, the language of the term (was it confusing), and the size, colour and style of the font of the term in comparison to other terms in the contract.

In Australian Competition and Consumer Commission v Chrisco Hampers Australia Limited [2015] FCA 1204 (10 November 2015), his Honour Justice Edelman stated: 3. Chrisco’s contracts with its customers contained a term (called the HeadStart term) that required the customers to allow Chrisco to continue withdrawing funds from the customer’s bank account even after the customer had made full payment for the goods. The term would apply unless the customer opted out of it. The money withdrawn from the customer’s bank account would be used for any future order made by the customer but the customer would not obtain any discount on a future order and if the customer did not place an order, but requested a refund of the money paid, the money

would be refunded without interest.

4. The first issue concerns whether the HeadStart term is an “unfair term” within the meaning of s 24 of the ACL. The essential issue in this case is whether the HeadStart term caused a significant imbalance in the parties’ rights and obligations arising under the contract. One of Chrisco’s submissions was that the demographic of its customers, some of whom were described as “unsophisticated”, was such that it was an advantage for them to have money removed from their accounts prior to placing another order unless they elected to the contrary or sought a refund. Chrisco submitted that the removal of the money from the customers’ accounts without interest, and without any discount on a prospective order, conferred a benefit on the customers.

Chrisco said that the benefit was that the customers were given the ability to pay for prospective orders by smaller instalments over a longer period of time (albeit at a higher cost taking into account the time value of money). As I explain in the body of these reasons, such a “benefit” is not substantial. I consider that in all of the circumstances of the HeadStart term and Chrisco’s contract the term was unfair. n

* Geoff Mc Donald is Barrister at 9th Floor Windeyer Chambers.

Any term that allows a supplier to unilaterally vary their Terms of Trade, by simply publishing those terms on the Internet, is highly likely to be unfair because that term would reduce the transparency of any variation.

May 2016 • CREDIT MANAGEMENT IN AUSTRALIA

29

Insolvency

Shorter Bankruptcies to save the economy?

ARITA concedes that the Government’s proposed Insolvency reform could leave the system open to rorting

By Gavin Parsons and Rebecca Ross*

Gavin Parsons

Rebecca Ross

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Welcome to the Ideas Boom reads the tagline for the Commonwealth Government’s National Innovation & Science Agenda’s webpage.

Under the heading Insolvency Law Reform the reasons behind the proposed changes to our personal and corporate insolvency legislation are explained (our emphasis): More often than not, entrepreneurs will fail several times before they make it and will usually learn a lot in the process. To help these entrepreneurs to succeed will require a cultural shift. We need to encourage Australians to take a risk, leave behind the fear of failure and be more innovative and ambitious.

The Government’s proposed changes should reduce the fear of personal and corporate insolvency for directors and sole traders. It is proposed that the term of a bankruptcy be reduced from 3 years to 1 year and directors be allowed safe harbour from insolvent trading liability if they appoint a restructuring advisor (read on for recommendations from the Productivity Commission as to who will be qualified for that appointment).

But will the Government’s initiative create the desired cultural shift and change the stigma of bankruptcy, and at what cost to creditors? The Government’s proposal paper is expected later in the year. Until then we provide the following observations in relation

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

to the Inquiry Report produced by the Productivity Commission (the Inquiry Report is being considered by the Government in deciding the extent of legislative reform) and note the response from ARITA to the foreshadowed reform.

In deciding the extent of the insolvency law reforms to be implemented in 2017, the Government will consider the recommendations of the Productivity Commission as published in the Inquiry Report on Business Set-Up, Transfer and Closure.

Safe Harbour Provisions The Productivity Commission has recommended some conditions for the Government to consider when drafting legislation to amend the Corporations Act 2001 (Cth) to provide a ‘safe harbour’ defence to directors. As mentioned above, the director must appoint a restructuring advisor, but who will qualify for that appointment? The conditions proposed by the Productivity Commission include: 1. When appointing a restructuring advisor the director must approach the appointment with clean hands; this will mean that the director must provide the complete books and records of the company upon the advisor’s appointment.

2. The company must be solvent at the time of the appointment of the restructuring advisor.

3. The restructuring advisor must be

4.

5.

6.

7.

8.

registered with ASIC and have at least 5 years’ experience as an insolvency and turnaround practitioner.

The restructuring advisor will be required to verify that the company was likely to have been solvent at the time of appointment, and if not, the adviser should withdraw and advise ASIC accordingly.

If the restructuring advisor does not think the business can be turned around they are under a duty to terminate the safe harbour period and advise the directors that a formal insolvency process should commence.

The restructuring advisors will only be allowed to perform subsequent insolvency processes for the company with leave of the Court.

Appointments should not be publicly disclosed, as this could damage the prospects of a successful restructure.

The director must be able to show that they took all reasonable steps to pursue the restructure of the company as advised by the restructuring advisor.

Changes to the Bankruptcy Act 1966 (Cth) The Commission considered the following in the context of changes to the existing personal insolvency regime to shorten the period of bankruptcy: 1. An extended period of bankruptcy may have negative economic consequences.

2. Potential business owners may be deterred by the fact that individuals are forced to endure a lengthy ‘exclusion period’ before recommencing business activity following bankruptcy.

3. For those that have failed once, the spectre of bankruptcy can loom large in any consideration of efforts to ‘restart’ a second business.

4. Longer bankruptcy periods may therefore discourage ‘latent’ potential business owners who are risk averse from entering the market.

5. Lenient bankruptcy laws may increase the risk associated with lending and therefore the cost of capital in the economy, however, retaining regulatory oversight should minimise such risks.

The Commission also considered the extent and success of reform undertaken in the United Kingdom.

Guidance from the UK In 2004 the United Kingdom amended the Insolvency Act 1986 (UK) to reduce the duration of bankruptcy from 3 years to 1 year.

The Commission noted that the research regarding the UK’s insolvency reform shows that the reform led to a reduction in discrimination against bankrupts, and to a small extent encouraged

Register your interest

Insolvency

business set up. As a result, some of the goals of the UK insolvency reform were achieved.

Some of the goals of the UK reform however were not achieved.

There still remained a ‘fear of failure’ and bankrupts continued to be hindered in their ability to recommence trading (for reasons including their restricted access to financial markets and business’s attitude towards bankrupts). It should be noted that cultural shifts in business’s attitude towards bankrupts was not expected to change over night. Cultural changes are long term goals of the insolvency reform undertaken in the UK and to be implemented here in Australia.

For purposes of considering the lasting effects of bankruptcy on a debtor’s ability to re-establish themselves in business, it is interesting to consider the differences between the practice in the UK and Australia for publishing bankruptcies on the public record.

In the UK, bankruptcies are published on the Individual Insolvency Register during the term of bankruptcy and then removed 3 months after discharge. This is a stark contrast to the situation in Australia where bankruptcies are published on the National Personal Insolvency Index, and remain forever on that index after the bankrupt is discharged.

Perhaps the difference in the stigma surrounding bankruptcy in the UK and in Australia is at least partially due to the different approaches to maintaining a public register of discharged bankrupts.

After considering this international perspective, and balancing the protections for creditors against the benefits to bankrupts (and the economy), the Commission concluded that a reduction in the term of a bankruptcy appears justified.

recommended that we retain the power for trustees to extend a bankruptcy in certain circumstances (again guided by the UK).

Under the current regime, a trustee is able to object to the discharge of a bankrupt at the end of the normal 3 years if the bankrupt has engaged in misconduct of the type set out at section 149D of the Bankruptcy Act 1966 (Cth).

An objection to discharge filed by a trustee with the Official Receiver has the effect of extending the relevant bankruptcy to a term of up to 8 years. No application to the Court is required. In the UK, a Court application is required for the extension of the term of bankruptcy (also to up to 8 years).

As a result, it is possible that the Government’s insolvency reforms may, if in alignment with the position in the UK, have the significant effect of reducing the power of a trustee to extend a bankruptcy, by requiring the decision to be made by the Court.

Data provided by AFSA indicated to the Commission that objections to discharge were rare; extensions were enforced for approximately 4.5 per cent of all bankrupts due for discharge in 2014 15 and where bankruptcy was initiated by a debtor through a debtor’s petition (90 per cent of bankruptcies), objections to discharge represented 3.4 per cent of all cases.

Interestingly, the Commission was not concerned that if the default length of a bankruptcy is reduced, objections to discharge may increase. Instead, the Commission identified that if reform had that outcome, it could be of assistance in reducing the stigma of bankruptcy by differentiating between honest bankrupts and culpable bankrupts (who will face a longer term of bankruptcy).

obtaining finance to international travel. There are also a number of obligations on bankrupts during bankruptcy, including the obligation to pay income contributions if they earn over a certain income threshold.

Whilst the Commission identified the merit in reducing the term of bankruptcy to 1 year, it also recommended that bankrupts nonetheless remain liable to pay income contributions to their trustee for a 3 year period. Further, it was recommended that the trustee have the power to extend the period for income contributions to up to 8 years.

Shorter term and income contributions

*Gavin Parsons is Managing Director, Gavin Parsons & Associates.

Extension of a default 1 year term of Bankruptcy

Under the current regime, there are a number of restrictions on bankrupts during the term of bankruptcy; from

The Commission nonetheless

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CREDIT MANAGEMENT IN AUSTRALIA • May 2016

Public Concern We look forward to reporting to you again when the Government publishes its proposal paper later in the year and otherwise conclude with the comment provided by John Winter of ARITA to Fairfax Media (extract from the Sydney Morning Herald): When asked whether the reforms would make it easier for fraudsters and corporate crooks to be back in business, Mr Winter said: “Look, yes it could, but people do need to be aware of who they are dealing with.”

“There’s some famous people who have cycled in and out of bankruptcy over their lives. There’s a whole bunch of other people who are out there trying to build a business and it didn’t quite work and yet they get very heavily penalised and they can’t restart,” he said.

Mr Winter said the law changes were aimed at trying to help the “good guys” in the system get back on their feet. But he conceded the reforms announced today without further legislative changes could leave the system open to rorting.

“Addressing people who are trying to rort the system is another set of regime change,” Mr Winter said. n

Rebecca Ross is a Solicitor for Gavin Parsons & Associates Phone: (02) 9262 4471, Fax: (02) 9290 2616 www.gplaw.com.au

Insolvency

Personal insolvencies rise 2.0% in the March quarter 2016 The Australian Financial Security Authority recently released the personal insolvency activity statistics for the March quarter 2016.

Personal insolvency in the March quarter 2016 Total personal insolvencies increased 2.0% in the March quarter 2016 compared to the March quarter 2015.

This is the fourth consecutive rise when compared to the same quarter in the previous year. This is the first time four consecutive rises occurred since 2009.

By type of personal insolvency: zz bankruptcies fell by 5.8% zz debt agreements increased by 15.6% zz personal insolvency agreements fell by 9.5%.

Queensland and Western Australia accounted for most of the national rise in personal insolvencies in the March quarter 2016 compared to the March quarter 2015. Debt agreements in Western Australia in the March quarter 2016 are the highest on record.

See the personal insolvency statistics for the March quarter 2016.

Debtors with a business-related personal insolvency In the March quarter 2016, 16.1% of debtors entered a business related personal insolvency. This is a decrease from 17.7% in the December quarter 2015.

In the March quarter 2016: zz economic conditions (410 debtors) was the most common business related cause zz unemployment or loss of income (1,970 debtors) and excessive use of credit (1,908 debtors) were the most common non-business related causes.

See the business and non-business related personal insolvency statistics for the March quarter 2016. n Source: AFSA Media Release 13 April 2016

Personal insolvency in Australia: % change compared to same quarter in previous year 8%

6.1%

6%

Percentage change

4% 2%

0.9%

0.6%

Jun-15

Sep-15

1.5%

2.0%

0% -0.2%

-2%

-1.4%

-4% -4.5%

-6% -8% -8.7%

-10% -12%

-8.1%

-9.0%

-8.7%

-11.1% Mar-13

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Dec-15

Mar-16

Quarter

May 2016 • CREDIT MANAGEMENT IN AUSTRALIA

33

Insolvency

Early warnings

By Adam Lysle*

This year has seen some elevated focus on Australia’s business community by the media and the public at large in relation to corporate collapses. In 2015 we have had the failure of Homeart, Hooters, Koko Black and My Baby Warehouse and 2016 has seen Laura Ashley succumb to external administration as well as the Dick Smith saga continue to play out. This combined with the ATO has been instrumental in the heightened activity in external appointments since March 2015, it’s timely to look at the early warning signs that are available to creditors and lenders and learn from those who have prevented financial disaster by doing so.

Take Dick Smith for example which is currently subject to a Senate Inquiry, ASIC investigation and a focused attention from the Australian media that we haven’t witnessed for some time. Two major suppliers, Apple and Samsung, appear to have utilised advanced information systems to detect trouble within Dick Smith before Receivers were appointed.

Put simply, though there are some key indicators that whilst on the face of it would ordinarily attract suppliers and lenders the lesson from the Dick Smith case is that they had dire consequences for some. Some of these are:

Organisational structural changes within a short period of time

Adam Lysle

34

Dick Smith went from being owned

by Woolworths to being purchased by private equity operators Anchorage, to having a new management team, to being floated. All of these changes took place within 2 years. Change can be good for organisations, particularly when in a competitive market and the retail industry appears to become

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

stable. To the normal supplier and distributor, these types of changes usually provide an opportunity for growth in revenue and certainly are attractive to jump into.

Staff members employed by Dick Smith were unsure of what was going on for some time and the consumers were only interested in the great deals that may have been enticed purchasing gift vouchers for loved ones at Christmas. Suppliers and key stakeholders needed to look at the changes going on and perhaps a maintaining of the PPSR could have assisted.

Massive Growth in Sales It is reported that Dick Smith went through a massive phase of sales growth after Woolworths sold it to Anchorage. Again, suppliers and distributors would ordinarily be immensely attracted to this and not be blamed for it. However, there were a number of distributors to Dick Smith and unless their insurer pays, there will be a further fall out as well.

Sales growth should be interrogated and understood as to its origination be it an opening of new stores, expansion of line items, variations in the Australian dollar or more focused marketing campaigns as three examples. In the case of Dick Smith, there are media reports that accredit the marginal sales growth to heavy discounting put in place to drive sales targets, however ultimately left suppliers and distributors holding the bag for debts of over $250 million.

Changes in Payment Arrangements With the significant growth in sales, the temptation was certainly there for suppliers and distributors of Dick Smith to extend payment terms.

Insolvency

Lucky for two suppliers, they refused and in fact, insisted on the residual debt being paid back in full and COD status being initiated. As a result, when Dick Smith did fall over, they were protected. There is a risk that may prejudice suppliers to ‘preference payments’ once a Liquidator is appointed and is afforded specific powers under the Corporations Act, however, that’s another topic for a future article. That said, it is understood that the restrictions on the credit provided to Dick Smith were made long before the first public signs of trouble were surfacing in early November 2015.

The key point here is that if payment term relief is requested, it’s often because of other factors that aren’t disclosed to suppliers, distributors and lenders. More detailed analysis, investigation and interrogation are required to protect any potential exposure. Responding to such requests with a reciprocal request for increased security, bonds, bank guarantees and the like are often a great tool to test the validity of the initial request and further, ensure your exposure is registered appropriately on the PPSR. That is, if the payment term relief is of a genuine nature, there would be no resistance to providing more protective measures for the creditor.

There is merit in having good information flow, credit reporting systems, regular credit file reviews and taking a stand against debtors from time to time to ensure that the market understands that a creditor isn’t a soft touch. However, such protective practices need to be married with the sales side of the organisation.

We often see creditors suffer the consequences when the sales side of the organisation get dazzled by the flashing lights of growth in sales and the change evolving within the customer’s organisation.

There is nothing wrong either with strengthening the utilisation of the Personal Property Securities Act.

Ensuring that transactions involving the provision of inventory, equipment, plant, vehicles and other supplied goods are recorded on the Personal Property Securities Register (“PPSR”) is more than a valid notion but it’s more important to ensure that the recording on the PPSR is accurate and within the correct categories rather than to use a ‘hit and miss’ approach.

The investment inadequate recording systems and annual review models often prevent disasters and are just as important as to reviewing trade credit insurance policies.

There is a lot of talk about the economy coming off the rise we are currently enjoying and using some of the profits being generated now to boost protection regimes is not a fanciful idea.

Veritas Advisory provides confidential advice to: zz lenders on their security and likely exposure; zz retailers, suppliers, distributors who want to grow their business; zz directors who could be exposed due to personal guarantees; zz retailers who have stretched their ability to meet obligations with existing turnover; and zz representatives of employees that routinely become the real sufferers of collapses.

We are expecting a long list of collapses in 2016 and hopefully by considering some of these observations, we will be able to contribute to the prevention of some. n *Adam Lysle is Senior Manager at Veritas Advisory.

May 2016 • CREDIT MANAGEMENT IN AUSTRALIA

35

Insolvency

Trends in insolvencies - businesses don’t fail overnight Insolvency on the rise The number of insolvencies in Australia rose 13 per cent year-on-year in 2015, according to ASIC insolvency statistics released in March this year.

Insolvencies jumped from 8,794 in 2014 to 10,164 in 2015, marking a reversal of the downward trend in external administrations that had been seen since mid-2013. The most frequently cited causes of failure in 2014-15 were cash flow issues, poor strategic management and trading losses.

The number of companies entering external administration rose in all Australian states and territories except Tasmania, with insolvencies in Western Australia hitting a record high in 2015.

businesses failing ‘out of the blue’. But the reality is, these events can be seen well in advance.

In the case of Dick Smith, the signs of financial difficulty were clear for two years before the business folded. The company was trading in a competitive space and had slow turnover, poor capital structure, unsustainably high levels of debt and poor cash flow.

Over those two years, Dick Smith’s credit behaviour became increasingly unreliable, which should have been a red flag to its lenders and suppliers.

Similarly, the closure of Koko Black was preceded by the business paying its creditors later and later over a period of several months.

Business failures no surprise

Understand the warning signs

The upward trend in insolvencies has been illustrated by a number of recent, well-publicised cases of business closures, including major retailers Dick Smith and Koko Black.

These are the kinds of closures that spark headlines about big

When a company starts experiencing financial trouble, one of the first things it will do is stop paying its suppliers.

Cash flow can make or break a business. If a company stops paying its suppliers, a ripple effect can begin, radiating out from the original insolvent business and damaging any unprepared company it comes into contact with.

To avoid being caught unawares, business owners and operators need to be able to see the signs of financial distress ahead of time, and have proper processes in place to keep themselves safe.

Doing an initial credit assessment before taking on new customers, maintaining regular credit monitoring practices and registering interests and assets on the Personal Properties Securities Register (PPSR) can help businesses significantly minimise their losses in the event of customer insolvency.

Imelda Newton

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CREDIT MANAGEMENT IN AUSTRALIA • May 2016

If a company is showing signs of being at risk of insolvency, that doesn’t necessarily mean other organisations shouldn’t do business with them – they just need to go into these relationships with their eyes open.

Veda’s top tips to keep your business safe Veda’s wealth of data and expertise means we are well placed to help organisations see potential risks when renegotiating terms with clients or entering into new business relationships. Try these three tips to steer clear of risky relationships: 1. Be careful when signing new customers – Businesses can be blindsided by the promise of big revenues. But there’s no point signing up a customer who seems lucrative if the payday never comes. Do your due diligence before you take on a new business relationship.

2. Do checks upfront – Don’t be shy when it comes to doing initial checks. If you know your customers’ credit profiles you can minimise risk and won’t be caught unawares by a business entering external administration.

3. Don’t get complacent – Ensure you have a structured process in place for all existing customers.

Cash flow is king, and a customer’s cash flow could change at any time. Check in with all your customers on a regular basis and use the available tools, like the PPSR, to protect your business against losses. n Imelda Newton is General Manager Fraud and Identity Solutions, Veda. www.veda.com.au

aicm Training News Study tips for online learners Online courses are a great way to improve your skills and knowledge whilst fitting in around busy professional and personal lives. Another benefit of online learning is that it is a great way to put your time management skills, self-discipline, willpower, and motivation to the test. In this article, we would like to share 9 key study tips for online learners, in order to help you stay focused and motivated when taking courses online.

1. Understand online learning practices and expectations.

The first thing you need to realise is that online courses are not an easier way to learn, but rather a more convenient one. Just as you would for a regular course, to successfully learn online you need to dedicate blocks of time, consistently attend the program, be concentrated while studying and fully commit to your learning process. You should also have in mind that when you take an online course, you may be expected to: zz Fully commit yourself and participate in the forums as required. zz Be, or be willing to become, tech-savvy. zz Work with others effectively. zz Complete your learning tasks and assignments on time. zz Be self-disciplined.

If you are not able or willing to do all of the above, you will probably not be a very happy online learner.

2. Make sure that you have reliable internet access.

Technology glitches happen all the time. Imagine you are working in the middle of the night and your computer crashes. To avoid mishaps, ensure that you save your work repeatedly and backup regularly using Cloud storage, for example Dropbox or Google Documents, in order to be able to access your previous work from your smart phone or tablet, if needed.

Furthermore, ensure that you not only have a backup of your online course material and assignments, but also you have saved your instructor’s or trainer’s contact information in your cell phone or in your email. A reliable internet access will also give you the opportunity to check in, stay current with your eLearning course, and deal with sudden schedule changes.

3. Have a dedicated study space.

Whether you decide to study in your workplace or in your living room, ensure that this place is quiet, organised, distraction-free, and available for use at any time. Your study environment should be one of your main concerns when you are an online learner, so make sure that it enables your study routine. Furthermore, ask your friends, relatives, and colleagues to respect your “work mode” and consider turning off your phone and logging off of all social networks when studying; you will want to be neither interrupted nor distracted.

4. Identify your learning objectives and goals.

To stay on track with your online course, make sure that you always keep in mind what you hope to accomplish by the end of it. The learning objectives and goals of the eLearning course can be an excellent road map during online learning; read carefully your online course requirements, create notes that are closely related to your objectives, and make sure that you review them thoroughly every time you start an assignment, so that you stay focused on your goals. Finally, consider starting with the most difficult tasks, as this will improve both the effectiveness of your study and your performance.

5. Build a study plan.

A study plan is critical to online learning. Here are some tips to help you build it: zz Plan ahead.

Never wait until the day before an assignment due date to start working on it. It will stress you and stress will prevent you from effectively completing the online task. Furthermore, knowing when all of your assignments are due until the end of the eLearning course will facilitate your time management; for instance, if you are going on vacation in the middle of the eLearning course, you can study ahead.

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37

aicm Training News zz Have an effective calendar system.

Online learning needs structure; create a study calendar that will help you remember all important dates, or deadlines for submitting your assignments.

You can save your calendar in your computer or in your mobile device, or you can even create a wall planner, which you can mark up and check every time you study. zz Create to-do lists.

At the start of each week, make a to-do list of the tasks you need to complete by the end of the week.

This is an excellent way to prioritise your study plan and stay on track with your studying. zz Set time limits.

Before you start studying, estimate how much time each task will take to complete, whether it is a specific assignment or simply reading a chapter.

Try to stick to your time limits, as this will help you develop your self-discipline. Furthermore, when you realise that despite your best efforts you cannot concentrate, consider stopping for an hour or for the night; it is better to wait until you are able to start afresh than to waste your time trying to focus. zz Stay on schedule.

Finally, stick to your study plan. Procrastination is the worst enemy of online learners, so make sure that you stay organised and you are not falling

behind in your online class. If you are having difficulties submitting your assignments on time, contact your online course instructor and let them know, so that they can help you create a consistent study routine.

6. Ask for help when you need it.

While it may be constructive to look for answers to your online course-related questions independently, hesitating to contact your online facilitator when you are stuck may be problematic. If you don’t ask for help when necessary, you may end up falling behind, which may lower your self-esteem, as you may not be able to keep up with the online course. By asking your online instructors to clarify problems, you will also help them not only to evaluate learners’ level of understanding of the online material, but also to get an idea of the overall effectiveness of the online course. Finally, due to the open nature of online courses, by asking a question, you also help at the same time your other online classmates, in case they are having similar difficulties. Keep in mind that if you don’t ask for help when you need it, your online instructor may never know that something is wrong.

7. Take study breaks.

Your performance will decrease if you are feeling tired or frustrated while studying. Integrate some personal time into your study routine and you will be able to work more effectively on your online course goals. When taking a break, make sure that you get

Congratulations to…

The following have recently completed whole qualifications: Neddieco Francisco Annabelle Aquino Janice Tolosa Mike Butcher Nykky Storm

Certificate IV in Credit Management Certificate IV in Credit Management Certificate IV in Credit Management Certificate III in Mercantile Agents Diploma of Credit Management

The following have recently successfully completed assessments: Kim Tu Christine Adams Lola Teece Kelly Dunlop Helen Fraser Donna Smith

FNSCRD401 Assess credit applications FNSCRD504 Manage the credit relationship FNSCRD504 Manage the credit relationship FNSCRD404A Utilise the legal process to recover outstanding debt BSBCUS403 Implement customer service standards BSBCNV506 Establish and manage a trust account

In-House Training has recently been completed at the following companies: BOC Baiada Australia

38

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

aicm Can We Help?

away from your study space; you need to have a change of scenery. A mild physical activity, such as a walk around the block, will help you maintain balance, renew energy, and go back to studying with a clear mind.

AICM receives questions from Credit Managers that it puts to a panel of lawyers, insolvency experts and credit professionals to answer. The brief is not only to answer the question but to look into the root cause of the problem and contribute strategic thought.

8. Participate in online discussions.

Online learning doesn’t necessarily mean learning in isolation. Connecting with your virtual classmates on social media or your online course’s forum will enhance tremendously your eLearning experience, especially if you are an introvert and visual barriers hinder you in expressing yourself. Participate actively in online forums and activities. Just ensure that you are mindful of your online tone; be respectful when you disagree with other members of your online group, and always write in complete and clear sentences to avoid misunderstandings and tone mishaps.

All articles contain general information only. They are not legal advice. You should seek your own legal advice if faced with a similar situation.

Trusts Question We receive a lot of questions about how to deal with trusts and how to make my debt more secure, but just how many trusts are trading in Australia and what do we need to consider when dealing with trusts?

Answer From Giles Woodgate, Senior Partner and Richard Rowley,

9. Stay motivated.

Finally, don’t underestimate the effort needed to fully commit to your online course. To make sure that you stay motivated and engaged in your online learning experience, consider following these tips: 1. Feel free to create your study routine at your own comfortable pace.

2. Decorate your study space with inspirational quotes and pictures.

3. Never forget the reason why you have undertaken your online course.

4. Accept that you will have productive and less productive days.

5. Have healthy snacks nearby to boost your energy.

6. Reward yourself every time you complete a challenging task or assessment.

7. Make sure that you take some time for yourself from time to time, it is all about balance.

Partner WOODGATE & CO. Chartered Accountants According to statistics released by ASIC, in December 2015 there were 2.3M companies incorporated in Australia.

The latest statistics from the ATO recorded that there were 780,105 trusts that filed income tax returns, of which 609,450 were discretionary trusts. Given the role of the discretionary trust in tax planning and asset protection, it would be reasonable to assume that most of the trustees were companies with nominal capital. The ATO recorded that there were 448,225 self-managed superannuation funds, many of which would also have companies as trustees.

Therefore, it is probable that about a third of companies are trustees of trusts or self-managed superannuation funds.

This creates a real public policy issue in insolvency situations, if the Corporations Act (Cth) 2001 does not apply when a trustee company becomes insolvent in respect of trust assets and liabilities, as noted by Justice Brereton In the matter of Independent Contractor Services (Aust) Pty Ltd (in liquidation) (No2) [2016] NSWSC 106. In that case the company was in liquidation. Its only function was to act as trustee of a trust. It owned no assets in its own right and there was a significant deficiency in trust assets compared to the claims of trust creditors.

There is no central public registry of trusts. Consider

AICM online training courses are available for immediate enrolment, so if you feel you have what it takes to undertake training and advance your career go to the aicm website for more information.

performing ABN searches and obtaining copies of the trust deed and ancillary documentation. Providing credit to a trust can result in increased credit risk. Guarantees from trustee company directors and possibly the beneficiaries are more important than usual.

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AROUND THE STATES

New South Wales

Data & Technology Panel and Forum Chair David Hunt.

Data & Technology Panel and Forum Panel: Terry Eames, Kristin Witt and Brad Smith.

President’s Report Wow another frantic start to the year with a lot going on.

Since the March issue NSW has been busy with some great sessions that have informed and connected members.

On 16 March, Joseph Scarcella Partner at Ashurst Lawyers presented Practical Steps to Maximise Recoveries. Joseph and Ashurst provided a great morning with all leaving with some inside tips on how to get the best results from legal action and enjoyed the breakfast in the brand new Ashurst meeting rooms on Martin Place.

The Ashurst breakfast was followed by the Wine tasting night and Data and Technology events, see reports below.

We are very lucky to be supported by great Partners in NSW. Our partners support us in many ways including extending the reach of the AICM beyond its members and providing their expert knowledge. I would like to thank all of our National Partners Dun and Bradstreet, Veda and Austral Mercantile as well as our divisional partners Randstad, Results Legal, AMPAC, OnGuard and NCML. In addition to our National Partners we have received great support from Ashurst, KPMG and Austral Mercantile who hosted events, making them much more viable than when utilising commercial venues.

I urge you to make a conscious effort to return the support these organisations give to our industry body whenever you can.

A reminder that the WINC luncheon is scheduled for the 20 May a great opportunity for Women in Credit to get together and network, I encourage everyone to support such a great cause and get out there and enjoy the day.

Lastly the applications for the Young Credit Professional (YCP) close on the 31 May. This award is very close to my heart and with NSW having so many past winners I am sending a call to arms to all the Credit Managers, Supervisors and Team Leaders who read this and feel that they have a standout credit professional within their team who would do NSW proud and represent the State as our YCP delegate for the National title.

Equally any credit professional who feels they are ready to approach your manager and foster their support in applying.

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Data & Technology Panel and Forum – guests.

The roll call of past winners and finalists is quite impressive with all of them going onto big things in their career. Be part of an impressive alumni and make sure you send in your applications before the close date.

– Arthur Tchetchenian

Data & Technology Panel and Forum – 5 April A very informative night thanks to our esteemed panel, Terry Eames Director of Accounts Receivable & Payment Automation at Icepay, Kristin Witt Solutions Consultant and founding Director at Decision Intellect and Brad Smith National Credit Manager at Network Ten. This is a huge topic and one the panel and myself could of spent all day on.

We discussed where we have come from as well as the goals and challenges in implementing a Data & Technology strategy. The panel provided excellent insight into their experiences with implementing Data & Technology strategies, how they themselves identified the goals, overcame the challenges and implemented the strategy.

New South Wales AROUND THE STATES

Events Calendar

Friday 20th May 2016

WINC Luncheon

KIRRIBILLI CLUB, MILSON POINT

Tuesday 14th June 2016

Networking Breakfast – Fraud PARRAMATTA

Thursday 14th July 2016

YCPA Dinner

KIRRIBILLI CLUB, MILSON POINT

Wine Tasting.

Tuesday 9th August

City Networking Night VENUE: TBC – CITY LOCATION

Friday 9th September

Golf Day OATLANDS GOLF COURSE

9th-12th September 2016

Online CCE Exam Friday 16th September

WINC High Tea VENUE: TBC

Tuesday 11th October 2016

National Golf Day GOLD COAST

Wine Tasting.

12th-14th October 2016

Thanks to some great commentary from the audience we covered off some of the products available to: – Automate the new business process including an online credit application form, credit scoring, etc, – Credit Management systems including automated customer notifications, prioritised daily work runs, an online customer web portal, etc, – Automated PPSA management systems, – Payment Gateways, “how easy are you to pay?”

– Electronic statements and invoicing, – Automated litigation software, “you actually don’t need a lawyer to litigate!”

Including many more options with the goal to create a “seamless automated end to end credit management solution.”

A case study on how a data and technology strategy is being developed at Fujifilm was used to focus how automation can help with: – Auto Stop and Release, – Auto Cash Allocation, – Automated Claims Process including approvals, – Approving and processing write offs, refunds, etc,

AICM 2016 National Conference SEAWORLD, GOLD COAST

Thursday 17th November 2016

YCP Barefoot Bowling VENUE: TBC

Thursday 8th December 2016

Masterclass and Pinnacle Awards VENUE: TBC

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AROUND THE STATES

New South Wales

Wine Tasting.

Wine Tasting.

The Australian Institute of Credit Management welcomes our Partners for 2016.

National Partners

Divisional Partners Wine Tasting.

– Auto reporting to sales, management, etc, With the goal to reduce the manual tasks to free up Credit Controllers to make that all-important phone call!

Many thanks to Austral/QBE for hosting the event.

For any more information on this presentation contact Dave Hunt.

NSW Wine Tasting evening Sparked by the enthusiasm of members for an opportunity to connect with other credit professionals over a shared passion… wine, the event lived up to its promises.

The evening was held at the KPMG offices overlooking Darling Harbour and everyone enjoyed learning about and sampling some of the best wines from South Australia’s Bird in Hand winery.

The networking discussion focused on the Dick Smith collapse and considering what lies ahead in 2016. A considerable debate was also held on which was the best wine. The opinion was split between the Mt Lofty Ranges Shiraz and the Adelaide Hills Pinot rosé.

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Professional Partner

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.

Queensland AROUND THE STATES

March CNN: Anna Taylor.

March CNN: Karl Hill, Roger Masamvu, Anna Taylor and Peter Mills.

President’s Report Recent AICM Qld events have proven that topics bring the crowds and the topics presented have stimulated conversation as well as member numbers. Some attendees have even travelled to Brisbane from as far away as Northern New South Wales (thank you John Playfair) for these events.

Firstly (as always) the ongoing support in 2016 from our Partners, Veda, Dun & Bradstreet, Austral Mercantile, Vincents, Results Legal and Randstad is greatly appreciated. The engagement and commitment by their people make us all proud to be AICM members.

As you all know, “save the dates” have been sent out for 9 September 2016 Qld WINC Luncheon, with generous support from our Premium Sponsors Veda, and supporting sponsors Results Legal and NCI. Make sure that you get your seats booked early as Julie McNamara (Patane Lawyers) will likely have to knock back late comers.

Our March CNN was entitled “How the PPSA can help you defend against preference claims” and was extremely well supported. Anna Taylor (Results Legal) provided excellent practical advice on how and what to do, both at the “front end” compliance through to the “back end” disputes to reduce unfair preference claims by liquidators being successful. I am sure that members will appreciate the tips and took plenty of value back to their employers.

Our April CNN breakfast panel discussion format held at the offices of Randstad Brisbane tested many an early riser

March CNN.

(p.s. my apologies, however I was at Emerald in outback Qld testing their golf course). The question of what employee engagement tools to use, as well as generational differences in engagement, are fascinating topics. I understand that the audience both brought and took away valuable tips from the superb panel.

On Council, we lost “half” of a YCP/Youth Development councillor in Maria Schandl (currently on reduced AICM workload) but gained a superb portfolio collaborator in Melinda Grob (councillor and of AICM Partner Randstad) to share the portfolios with Maria. We also gained a “whole” new membership councillor in Felicity Ford (of national Partner Austral Mercantile). For those of you who have not met Felicity before, she is a fantastic promoter of AICM and is working hard 24/7 to engage new and old members alike all over Queensland. Felicity has been engaging with organisations such as CCIQ and brings lots of fresh ideas as to how other organisations engage with their members.

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AROUND THE STATES

Queensland

Events Calendar

11th May 2016

Credit Network Night – Compliance VENUE: TBC

13th May 2016

Credit Toolbox – Collect with Confidence RANDSTAD OFFICES

8th June 2016

Credit Network Night: Q&A – Time Management TATTERSALLS CLUB

April CNN: Greg Young, Diana Tartaglia, Paul Burgess, Julie McNamara and Melinda Grob.

13th July 2016

Personal Development Breakfast – Insolvency VINCENT’S OFFICES

20th July 2016

AICM AGM RYDGES SOUTH BANK

20th July 2016

Awards Dinner – Young Credit Professionals RYDGES SOUTH BANK

August 2016

Personal Development Magistrates Court Visit and Procedures MAGISTRATES COURT

8th August 2016

Credit Toolbox – Risk Assessment RANDSTAD

April CNN: Paul Burgess and Diana Tartaglia.

9th September 2016

Women in Credit Luncheon CUSTOMS HOUSE

9th-12th September 2016

Online CCE Exam 14th September 2016

Personal Development Breakfast Q&A – Credit Network Forum VENUE: TBA

11th October 2016

National Golf Day

Speaking about “new members”, Maria Schandl and her partner Greg have a new addition, Lachlan Schandl, born just recently. You do not get a bigger AICM event than that I am sure.

Qld AICM is also organising local assistance for the AICM 2016 National Conference. Carla Seirlis (CCE and PD) was recently appointed to also head a state sub-committee for welcoming and making sure our interstate colleagues enjoy their stay at conference.

Thank you all again for your support to the Queensland Council and making the AICM informative and “fun” for its members.

– Peter Mills MICM, President

GOLD COAST

12th – 14th October 2016

AICM National Conference SEAWORLD GOLD COAST

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CREDIT MANAGEMENT IN AUSTRALIA • May 2016

9 March CNN – PPSA and how it can help defend preference claims The wonderful Anna Taylor was our speaker for the night presenting – PPSA and how it can help defend preference

Queensland AROUND THE STATES

New Members: Gemma Poore, Dane Lydford, Maria Teodosio, Kirsty Gray and Erin Stewart from Stoddard Group.

claims at Tattersalls on 9 March. Anna did a brilliant job and had the audience engaged in what was a very insightful evening around the PPSA.

13 April CNN – Employee Engagement and Retention The topic of Employee Engagement and Retention is one of the most important HR topics facing organisations. The QLD division of AICM hosted a great breakfast event on Wednesday 13 April to discuss the importance of employee engagement and retention within Credit teams as a panel discussion.

Speaking with two highly experienced National Credit Managers – Julie McNamara from Patane Lawyers, and Paul Burgess from Steelforce – facilitated by Diana Tartaglia (Operations Manager from Randstad’s HR Consulting division) we had great interaction from the audience and it was very interesting to hear the successes (and learnings) from some of the Credit industries most respected Credit professionals.

Councillor Profile

April CNN: Jason Spencer, Julie McNamara and Michael McDowell.

The Australian Institute of Credit Management welcomes our Partners for 2016.

National Partners

Divisional Partners

Felicity Ford – MMIC, PGDIPBUS Austral Mercantile Collections, Queensland Sales Manager Felicity has over 20 years’ experience in Sales and Marketing, 6 years of which were spent with her own contracting company as a Sales and Marketing Consultant.

Having relocated from New Zealand to Australia 10 years ago, she has worked across a broad variety of industries including 9 years in FMCG as well as Pharmacy and now Debt Collection.

Felicity specialises in business analytics, key account, sales, product and relationship management, bringing a strong business acumen to Austral Mercantile Collections. She is also on the AICM council as Membership Councillor.

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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AROUND THE STATES

South Australia

April Breakfast meeting: James Neate.

April Breakfast meeting: Guest Speaker Rear Admiral the Honourable Kevin Scarce.

April Breakfast meeting: Attendees at the breakfast.

April Breakfast meeting: Gail Crowder (State President).

President’s Report

Honourable Kevin Scarce as guest speaker. He captured the audience with his findings on the Nuclear Fuel Cycle. It would be great to hear the outcome once the final report is submitted on 6 May. Should they receive the ‘green light’ this will certainly have an impact not just on South Australian business, but all of our wonderful country. It was good to see some members attend that do not have the opportunity to make it to many functions. Hope to see you more often in the future.

The Professional Development committee are busy working on the full day symposium which is sure to be a cracker with star speakers and a great confirmed venue – the Bendigo and Adelaide Bank in the CBD. Vice President, James Devonish is well known to put together a great day and we look forward to a brain-smashing day on credit management.

Women in Credit (WinC) is being launched in late June. Some of our well-known female Credit Managers will be sharing their stories, good and bad, and enlightening us with their challenges in this ever-changing industry. Certainly an event to look forward

We would like to welcome our members to Autumn! A little depressing as daylight saving ends but refreshing for the garden and those of you who like to throw on your track suits when you walk in the door at night! This weather change does not dampen the SA councillors who are heating up with constructive ideas on how to educate members and credit professionals in 2016!

St Pat’s Power Panel was full of whit, wisdom, enthusiasm and most of all knowledge. Three long standing Credit Manager’s gave their time to answer all the questions you dared to ask and more. Those who attended certainly went away with a lot to think about and a new respect for credit managers’ of this calibre. The day-to-day hurdles that they face by ‘thinking on their feet’ and ‘outside the square’ to gain the best results was very enlightening.

SA’s first breakfast for 2016 welcomed the Rear Admiral the 46

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

South Australia AROUND THE STATES

Events Calendar

19th May 2016

Networking YCPA VENUE: TBA

2nd June 2016

Credit Symposium 23rd June 2016

Women in Credit 22nd July 2016

Function – Quiz Night April Breakfast meeting: Michelle Moore (Lynch Meyer), Jeremy Pomeroy (Metcash), James Devonish (Lynch Meyer), James Neate (Lynch Meyer), and Alice Carter (Lynch Meyer).

14th September 2016

Mock Court – Preferences 6th October 2016

Breakfast 12th – 14th October 2016

AICM National Conference SEAWORLD GOLD COAST

9th November 2016

Meeting of Creditors 24th November 2016

End of Year Event

April Breakfast meeting: Attendees at the breakfast.

to so watch for the flyer coming out over the coming weeks.

Some committee news! I would like to congratulate Nick Cooper and Yulia Petrenko, from Worrells, who got married earlier this year. A well-kept secret event! We all wish them much happiness for their future together.

Don’t forget to always speak with our committee and give us your feedback and thoughts for future events. We welcome your feedback at all times.

See you soon.

– Gail Crowder, SA Division President

Breakfast Function The South Australian division held its first Breakfast Network function for 2016 on 8 April at the Next Gen Memorial Drive Function Centre located by the picturesque River Torrens and Adelaide Oval complex.

It was a privilege to have as our guest speaker Rear Admiral the Honourable Kevin Scarce AC CSC RAN (Rtd). Kevin currently serves numerous roles which include Commissioner of the Nuclear Fuel Cycle Royal Commission. Kevin’s honest and open approach was well received. He spoke to attendees on the tentative findings from the Commission which everyone found extremely interesting and informative. The commission have been very thorough and looked into all aspects, even travelling overseas to compare and receive input from countries around the globe.

It was a great opportunity for the 72 people who attended to hear from the leading authority on a topic that is making national headlines and has significant implications for the South Australian business community.

Born and educated in Adelaide Kevin is also well-known as he was the 34th Governor of South Australia from 2007 to 2014.

All attendees enjoyed the serenity of the venue, its central location and the quality and service it offered.

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AROUND THE STATES

South Australia

Merna Spain (Southern Steel Group) , Rod Sims (NCI), John Antoniadis (NCI) and Laurie Pengelley (Metal Manufactures).

Guest Speaker Rear Admiral the Honourable Kevin Scarce and Gail Crowder (State President).

The Australian Institute of Credit Management welcomes our Partners for 2016.

Nigel Hillier (Coopers Brewery) and Des Munro (BRI Ferrier).

National Partners

We look forward to seeing you all again at our next event which is in the planning stages. Details to be released shortly.

– Trevor Goodwin and Gail Crowder, Functions

Panel Report – April 2016 The Credit Pearls of Wisdom “secret stories from insiders” breakfast was an engaging morning featuring an esteemed panel of Credit professionals including Peter Brewer LICM Former National Credit Manager with Hills Industries, Rachel Coomblas MICM CCE National Credit Manager, Walker Stores Pty Ltd, Paul Westo MICM National Credit & Consumer Financial Solutions Manager, Toro Australia Pty Ltd. The panel created lots of discussion with all attendees sharing some of the great ideas and insights that are only learned from sharing experiences with like minded professionals in a forum such as this. Everyone, including the panel members, left with thoughts and ideas to implement within their business.

The Quote of the day was – “Praise in Public, Counsel in Private” The realisation of the day for many was – “No one withholds information in the Credit industry. Credit Professionals share, we use each other to be the best we can.”

– Anne Wilkins FICM CCE, Councillor SA 48

CREDIT MANAGEMENT IN AUSTRALIA • May 2016

Divisional Partners

Official Division Supporting Sponsors

Our National and Divisional Partners support and work with the AICM to promote the Institute’s activities, represent the Credit Industry and develop the careers of all Credit Professionals.

As these organisations support your Institute and your Industry please consider them when you require assistance.

Victoria/Tasmania

Golf Day: Prawn BBQ – Creditor Watch.

Golf Day – Winning team (prize donated by Veda).

Golf Day – Runners up.

President’s Report The Vic/Tas division has commenced with some great Network and Social events, the first being the CCE event network evening hosted by our newest state partner Sharp and Carter.

In February the famous Golf day took place which always has a fantastic attendance and enjoyable day. Mid-March had the first professional network night on bankruptcy.

Well done to all the members who sat and were successful in passing the CCE exam, congratulations and well done. CCE is an award given for recognition of best practice and credit knowledge in the credit industry.

The Young Credit Professional award has been opened and we are seeking worthy Young Credit Professionals to participate in this award. This award is held in the highest regard within the credit profession. I therefore encourage all Credit professionals under 30 years to give it a go when the new application window is open.

All members are encouraged to attend our upcoming professional Network and Social events, we have some great

AROUND THE STATES

Golf Day: Intense Concentration – Putting competition.

speakers lined up. This is an important opportunity to meet industry peers and other credit professional. The calendar of events can be downloaded from the AICM website and I look forward to meeting many of our members and non-members at monthly upcoming events.

– Lou Caldararo MICM CCE, Vic/Tas President

February Network Night – CCE Information and Evolving in the Digital World A very successful Network Night with 27 members and guests attending on the 17 February, where Sharp & Carter Recruitment Specialists, our new national partner, hosted the CCE Information Night and delved into the fascinating topic of ‘Evolving in the digital world’. Stephen Sharp (Sharp & Carter) spoke enthusiastically about how technology has revolutionised the credit industry in Australia and how it is continually evolving.

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Victoria/Tasmania

Events Calendar

5th May 2016

Youth Networking

Topic: Creating high performance work teams VENUE: TBC

19th May 2016

Network Event

Topic: PPS Registration Made Easy VENUE: TBC

16th June 2016

Network Event

Topic: Being Up Front- Presentation Skills VENUE: TBC

21st July 2016

Awards Dinner: Young Credit Professional

QBE Golf Team.

VENUE: TBC

18th August 2016

Network Event Topic: Time Management Skills 25th August 2016

Youth Networking Topic: The future and direction of debt recovery 2nd September 2016

WINC Luncheon VENUE: TBC

9th-12th September 2016

Online CCE Exam 22nd September 2016

Golf – Prizes Galore as the Presentation Dinner is Prepared.

Seminar/Workshop Topic: See you in Court!

12th-14th October

National Conference 28th October 2016

Youth Networking – Trivia Night 11th November 2016

CCE Breakfast 17th November 2016

Network Event Topic: Telephone Techniques 1st December

End of Year Function – Pinnacle Awards

We covered how the onset of paperless invoices being delivered via email systems has reduced mailing expenses for many businesses and has increased net returns, by providing a faster and more trackable delivery service. The night included an information session about becoming a Certified Credit Executive (“CCE”).

A fantastic evening of information about technology and the CCE was enjoyed by all, with special thanks to Sherif Hussein (Credit Manager – REA Group) for organising key speakers Stephen Sharp (Sharp & Carter), Nick Pilavidis (AICM CEO), David Haysom (National Credit Manager – Fuchs Lubricants (Australasia)), and Lou Caldararo (Vic/Tas AICM President).

In the latter part of the session prospective CCE candidates gained valuable information regarding the CCE exams and what to expect. We experienced a lot of interest on the night with seven registering for the CCE exam.

– Amaran Navaratnam

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CREDIT MANAGEMENT IN AUSTRALIA • May 2016

Victoria/Tasmania

driving range followed by social time and a fabulous barbeque lunch, with steak and sausages supplied by Centreway Steak House in Keilor, and prepared and served by Southern Golf Club.

The course as usual was in great condition with the greens running a medium pace. A shotgun start had the players away at about 12:30pm finishing with a dinner and presentation.

Winners: Michael Caporale, Angelo Demon, Tim Noonan, Jeff Hurst with a handicap of 10 and final score of 56.

Runners Up: David Graer, Merryn Graer, Russell Allen, Luke Young with a handicap of 6.75 and final score of 56.25 coming in at second place on a count Network Night – Bankruptcy: Carole McTavish (Toll), Lou Caldararo (Spicers), back.

Donna Smith (Reliance Recoveries), Ersilia Barbone (White Cleland), Piera Third Place (Surnames Missing from Rushton (White Cleland), Daniel Sutherland.

Scorecard): Aidan, Jonnie, Anthony, Mark with a handicap of 8.75 and a final score of 56.25.

CCE Exam 11-14 March 2016 The NAGA award for our last place getters goes to Congratulations to all who sat the exam, fourteen sat the exam Will Gilbert, Joshua Shardlow, Mac Hill and Michael Hartman, nationally in March, with seven from Victoria. I have it on good with a handicap of 10 and final score of 74. authority that there was a 100% pass mark on the exam in Our other winners on the day were: March, however that only forms part of the CCE requirements.

Nearest the Pin (“NTP”) 6th Hole – Craig Adams 113cm, All registrants must now submit their essay before NTP 16th Hole – Craig Adams 130cm, September to complete the CCE application process. If you Longest Drive (Men) 7th Hole – Steve Schofield, would like more information about becoming a CCE, please Longest Drive (Ladies) 4th Hole – Merryn Graer, contact Sherif Hussein via email sherif.hussein@rea-group.com Longest Drive (Ladies) 13th Hole – Kristie Gatt, Longest Drive (Men) 17th Hole – Steve Schofield, and Straightest Drive 1st Hole – James English.

We must express our most sincere and gracious thanks VIC/TAS Annual Golf Day to all of our Event Sponsors for the day, without whose – Friday 20 February 2015 generosity it would not be possible to bring you these AICM Vic/Tas Annual Golf Day held on Friday 20 February prodigious events at such a reasonable price; National 2016 was another sellout event this year. The weather looked Collection Services (Naming Day and Dinner Sponsors) and in ominous in the morning but held out to unfold another glorious no other particular order Veda , Brooke Bird. ARMA, Advisory day for the Best Call Ambrose Competition which kicked off Business Solutions, QBE Insurance, Atradius, Melbourne 11:00am at Southern Golf Club in Keysborough.

Parkview Hotel, Kemps Peterson, Forbes Dowling, Mercantile The day began with punters being able to practice at the CPA, Sharp & Carter, Rodwells, Doncaster Volkswagen, Euler,

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Network Night – Bankrupcty: Ersilia Barbone (White Cleland Lawyers) presents on Bankruptcy.

Network Night – CCEInformation: Nick Pilavidis (ACIM CEO), David Haysom (Fuchs Lubricants Australasia), Lou Caldararo (Vic/Tas President and National Credit Manager Spicers).

AROUND THE STATES

Network Night – CCE Information: Chris Belegrinos (Sharp & Carter) and Maria Quayle from HJ Heinz Co Australia Pty Ltd.

Network Night – CCE Information: David Haysom (Fuchs Lubricants (Australasia), Carole McTavish (Toll) and Wade Bekesi (Mercantile CPA).

Hall & Willcox, D&B, ARL, Ampac Debt Recovery, Mills Oakley Lawyers, Cor Cordis, KBH Solutions, ALM, Creditor Watch, Advisory Business Solutions, Credit Solutions/Smith Leonard Fahey, Trade Bureaux Australia, Mint Payments, Austral Mercantile, and Lindt.

Thank you again for all your invaluable support. We cannot thank you enough for your generosity, participation and support of the AICM. We ran a raffle at dinner and doubled efforts from last year raising over $1,800.00 for Peter MacCallum Cancer Centre.

Thanks to some very generous donations the prizes were again a-plenty and of excellent quality this year. Special thanks to Lou Caldararo from Spicers (President) and Charles Timms from Tuftmaster (Vice President) for outdoing themselves again this year and organizing yet another fabulous and successful golf day. I say this every year but it does get better every year.

If you missed out this time and wish to attend the 2017 or 2018 golf days please express your interest to Charles Tims charles@tuftmaster.com.au as soon as possible as 2017 is almost sold out already, an outstanding testament to the popularity of this day.

Vic/Tas network nights that she has attended. We are hoping to encourage Ersilia to deliver more presentations in the future, so if you missed out this time we would highly recommend that you get in next time when she presents again on this topic.

– Donna Smith

The Australian Institute of Credit Management welcomes our Partners for 2016.

National Partners

Divisional Partners

– Donna Smith

March Network Event – Bankruptcy – The process explained An intimate group of members and guests attended the March Network Night where Ersilia Barbone, Lawyer with White Cleland Lawyers and Consultants delivered a fast paced and lively session on the Bankruptcy Process.

Ersilia has been practicing law for over 20 years and for many of those her focus has been Bankruptcy so she was a very fitting keynote speaker for the event. Ersilia delivered on many levels with confidence and clarity and kept all participants engaged with what can sometimes be a very dry and involved topic.

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CREDIT MANAGEMENT IN AUSTRALIA • May 2016

Professional Partners

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.

Western Australia/NT AROUND THE STATES

Barefoot Bowls evening: Team CAP. Winning team: Team CAP.

Barefoot Bowls evening: Watching the good times roll.

Barefoot Bowls evening: Getting the roll on.

2016 – Autumn in WA It’s coming into the cooler months in WA – just when things start to heat up for the WA Credit Community. Early indications suggest 2016 may be The Year of the West. I want to thank our members for coming out and supporting our events to date.

We commenced the year with our first Barefoot Bowls Evening. Teams came from all parts of Perth, appearing with naked feet to compete for our only trophy event of the year.

Hotly contested were the greens at the Leederville Sportman’s Club. Special thanks to all Councillors for getting this one off the ground and to our photographer on the day: Malcolm Field from Ferrier Hodgson who are great friends of the WA Credit Community. Our winners on the day were Team Capricorn. Talk is, they will be back to defend but want a bigger trophy!

Our Breakfast Club’s are off to a great start. It has been some time since we had our own Economic Outlook for the WA market. We were keen to have the question answered: Is the WA Economy in recession? As the rule suggests, two quarters of negative growth constitutes a recession, however, Alan Langford from Bankwest provided an incite to the market and how it is performing today and countered with sound information that suggested all is not what it seems in the WA Economy.

Barefoot Bowls evening: Watching how it’s done.

May provides our members with knowledge and information on how to get the best out of themselves and their teams. We strongly encourage all members to attend for the opportunity to potentially learn something new. The Breakfast Club for May is presented by Cynthia Thomas at Matilda Bay – Driving Culture: Getting your teams working together. We are always seeking better ways for business to work to produce better results. REGISTER NOW. May 2016 • CREDIT MANAGEMENT IN AUSTRALIA

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Western Australia/Northern Territory

WA Council Members D&B and Alinta.

Events Calendar

Breakfast Club: Flourence Matimati (new CCE) and Lisa Marr.

25th May 2016

Networking Breakfast

VENUE: MATILDA BAY RESTAURANT

June 2016

Credit Toolbox

VENUE: QBE CONFERENCE ROOM

15th July 2016

YCPA Dinner

VENUE: THE CROWN

August 2016

WINC VENUE: TBC

September 2016

Credit Toolbox VENUE: QBE CONFERENCE ROOM

October 2016

Sponsors Lunch VENUE: TBC

Breakfast Club: Guests.

By the time this e-zine reaches the masses it will be known that our long time Councillor and State Director Steve Mitchinson has resigned from council and the AICM Board. I would like to take this space to thank Steve for his support of the AICM. Without his contribution, the association would not be where it is now. His commitment to the cause has been phenomenal. Accountability and transparency are his legacy.

On a personal note, without him and his support, I doubt I would have been able to continue to take these steps as State President for West Australia. He will be missed.

– Lisa Marr MICM, WA President

November 2016

Credit Toolbox VENUE: TBC

8th December 2016

End of Year Event VENUE: TBC

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Steve Mitchinson Where do you start?

Steve first joined the WA division in July 1979 as student subscriber.

Highlight’s of Steve’s involvement most importantly include those people he met through his work with AICM and those he had the opportunity to work with on both State Council and the National board (twice)

Western Australia/NT AROUND THE STATES

Breakfast Club: Guests.

Breakfast Club: Alan Langford.

The Australian Institute of Credit Management welcomes our Partners for 2016.

National Partners

Frank Vredenbregt, Byron Savage, Lisa Marr and Jason Louis.

Steve was also the inaugural winner of the Basil Dunn award, an award named in honour of an AICM legend and the first person he met when he joined.

He joined State council in 1984 and held positions on the membership, functions, sponsorship and education portfolios.

Steve was also the Division President from 1988-1991 and was the AICM face of the privacy Act in WA In 1991 he joined the National board.

During his 6 year’s he held the membership and professional education directorates initiating CCE and was the National president from 1995- 1997.

Steve re-joined the National board in 2013 and has just announced his retirement from the board.

Other highlights over his tenure were: zz Made a life member in 2004 zz Australia’s inaugural member on the Global Credit Management Forum zz Developing the application with Loretta Winstanley to secure funding to develop the National competency base training framework zz Presiding over the strongest period of membership and financial growth in AICM’s history zz Representing the AICM in the initial Privacy Act debate in the early 90’s.

Divisional Partners

Official Division Supporting Sponsors

Our National and Divisional Partners support and work with the AICM to promote the Institute’s activities, represent the Credit Industry and develop the careers of all Credit Professionals.

As these organisations support your Institute and your Industry please consider them when you require assistance.

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New Members NEW MEMBERS The Institute welcomes the following credit professionals who were recently admitted to membership in April 2016.

NEW SOUTH WALES

VICTORIA/TASMANIA

Catherine Williams

Alliance Distribution Services

Kurt Harrop

Pepkor South East Asia

Christina Lecuna

Pfizer Australia

Peter Sikand

Marshall Power Australia

Wojtek Randla

Baycorp

Kimberly Rapson

DKSH Australia Pty Ltd

CORPORATE Insurance and Care NSW (icare) Collections Branch

QUEENSLAND Kirsty Jorgensen

Stoddart Group

Shanel Lambert

Silver Chef / GoGetta

Charlene Evans

Coffey Pty Ltd

SOUTH AUSTRALIA Rob Maslin

Elders

Michelle Moore

Lynch Meyer Lawyers

CORPORATE Elders Rural Services Australia Limited

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WESTERN AUSTRALIA Brad Green

Aus Fleet Solutions

Damien Barr

Austral Mercantile Collections

NEW ZEALAND Michael Moseley

Fletcher Building Limited

Sharon Lockhart

Fletcher Building

Michael Hope

Fletcher Building

Tom Archibald

Fletcher Building

CORPORATE Fletcher Building Limited New Zealand

Want to progress your credit career? (or improve results from your credit staff)

de r a n i s n Co

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A qualification course can help you achieve your targets. Offered nation wide, you can study in your own time (24/7) with support available. RPL credits could fast-track your qualification: If you have industry experience or prior education, you may be eligible for Recognition of Prior Learning. Employer Grants: You may qualify for a training grant.

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See you at AICM’s

2016

NATIONAL Conference Venue:

Sea World 12 - 14 October 2016

Visit

aicm.com.au for details and earlybird registrations 2016 National Conference