Credit Management in Australia - May 2019

Volume 26, No 4 May 2019

The Publication for Credit and Financial Professionals

IN AUSTRALIA

As the Australian economy enters a period of increased risk be prepared l Update your skills on Balance Sheet review l Understand how changes to financial reporting thresholds will impact your business l Why tightening credit will impact SME’s first and how to help l Consumers are decreasing their reliance on credit cards

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Volume 26, Number 4 – May 2019 Message From the President

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AICM working for you

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48 NSW: Daniel Turk of TurksLegal at the Insolvency & Litigation half day seminar.

Legislative Update

10

Financial reporting thresholds to increase from 1 July 2019; but what does it mean for you?

By Andrew Spring

Credit Management To trust, or not to trust? Proper due diligence is the answer

12

By Patrick Coghlan

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SMEs willing to pay more to avoid property security

By Peter Langham

51 Qld: Michael McCann – Grant Thornton.

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Is our credit card love affair on the rocks?

By Abdallah El-Haddad

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The new Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019

By Roger Mendelson

Insolvency

24

Find the gaps

By Kirk Cheesman

54 SA: Division President Nick Cooper (L) and Division Director Gail Crowder (R) present a proud Kaden Davies of Samuel Smith & Son (Centre) with his 15 years membership pin.

Electronic Signatures

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eContracts forproperty transactions

By Claire Martin

Leadership and High Performance

30

Claim back your life!

By Charlotte Thaarup

56 Vic/Tas: Golf Day: Winners.

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12

15

Andrew Spring

Patrick Coghlan

Peter Langham

20 Abdallah El-Haddad

60 22

24

Roger Mendelson

Kirk Cheesman

25 Claire Martin

30 Charlotte Thaarup

WA/NT: Barefoot bowls winners: Martin Bigg (Capricorn Society), Alex Cimetta (SV Partners), Rowan McClarty (Automotive Holdings Group) and Malcolm Field (SV Partners).

ISSN 2207-6549

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DIRECTORS Trevor Goodwin LICM CCE – Australian President Julie McNamara MICM CCE – Queensland and Australian VP Lou Caldararo LICM CCE – Victoria/Tasmania Rowan McClarty MICM CCE – Western Australia/Northern Territory Gail Crowder MICM – South Australia Peter Morgan MICM CCE – New South Wales CHIEF EXECUTIVE OFFICER Nick Pilavidis MICM CCE Level 3, Suite 303, 1-9 Chandos Street, St Leonards NSW 2065 PO Box 64, St Leonards NSW 1590 Tel: (02) 8317 5085, Fax: (02) 9906 5686 Email: nick@aicm.com.au

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Damien Allison

Amaran Navaratnam

37 Frank Gambera

Data and technology SMS is no longer an optional extra for collections

Peer to peer lending platforms – disrupting Asia’s banking corporations

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By Amaran Navaratnam MICM CCE

PPSA Security agreements and the PPSA

PUBLISHER

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By Damien Allison

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By Frank Gambera

Nick Pilavidis | Email: nick@aicm.com.au CONTRIBUTING EDITORS NSW – Sev Indrele MICM CCE Qld – Carly Rae MICM SA – Lisa Anderson MICM CCE WA/NT – Rowan McClarty MICM CCE Vic/Tas – Donna Smith MICM CCE EDITOR/ADVERTISING Andrew Le Marchant LICM CCE Phone Direct 02 8317 5052 or Mob 0418 250 504 Email: andrew@aicm.com.au

Masterclass What the credit professional needs to know about Balance Sheets

Training Recent graduates Training calendar

Around the States

New Members

Credit Marketplace

64

New South Wales

Anthea Vandertouw | Ferncliff Productions Tel: 0408 290 440 | Email: ferncliff1@bigpond.com

Queensland

THE EDITOR reserves the right to alter or omit any article or advertisement submitted and requires idemnity from the advertisers and contributors against damages or liabilities that may arise from material published. CREDIT MANAGEMENT IN AUSTRALIA is published by the Australian Institute of Credit Management, Level 3, Suite 303, 1-9 Chandos Street, St Leonards NSW 2065. The views expressed in CREDIT MANAGEMENT IN AUSTRALIA are not necessarily those of Australian Institute of Credit Management, which does not expect or invite any person to act or rely on any statement, opinion or advice contained herein (whether in the form of an advertisement or editorial) and neither the Institute or any of its employees, agents or contributors shall be liable for any opinion contained herein. © The Australian Institute of Credit Management, 2019.

Victoria/Tasmania

Click Here EDITORIAL CONTRIBUTIONS SHOULD BE SENT TO: The Editor, Level 3, Suite 303, 1-9 Chandos Street, St Leonards NSW 2065 or email: aicm@aicm.com.au CREDIT MANAGEMENT IN AUSTRALIA • May 2019

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aicm

From the President

Trevor Goodwin LICM CCE National President

I

s it a sign of the times or is life just rushing by. Here we are in May with the end of the financial year just around the corner and our AICM activity in full swing.

In particular your Institute has numerous events occurring over the next two months.

The Insolvency roadshow is currently ongoing and there have been fantastic numbers attending so far in NSW and Queensland with great feedback from attendees. For members in SA, WA and Victoria please get yourself and your colleagues along to this quality event to expand your training and education from expert presenters and panellists.

Talking of training, if there are any funds left in your training budget before the end of this financial year then enrol yourself or your team in a course. I also encourage you to start thinking of your training needs for the 2019/20 financial year and discuss with your manager to ensure your company’s training budget will enable you attend appropriate training courses for your education and the benefit of your organisation. To also assist with your training needs we are in the process of implementing a new Webinar program.

As discussed the 2018/19 financial year is coming to a close quickly and it is now an ideal time to commence thinking of your AICM membership and where you have the opportunity working with your employer to ensure your membership is paid on time. Group membership has been very advantageous for organisations with a number of AICM members as it has considerable cost saving benefits.

May also sees the federal election being held and I would expect whichever party wins will see a number of policy and legislation changes that will impact on credit professionals. AICM will be at the forefront with submissions and senate hearings to ensure our members’ views are heard.

Furthermore we will ensure we hold high quality structured training seminars and workshops to educate on any new legislation

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CREDIT MANAGEMENT IN AUSTRALIA • May 2019

that impacts the credit and finance professions.

Also fast approaching is the annual National Conference on the Gold Coast.

I encourage you to book and pay for the conference this financial year to get it in your company’s training budget or your tax return. We have an excellent program for the conference with knowledgeable and highly skilled presenters.

At the National Conference the Young Credit Professional and Credit Team of the Year is announced, along with the presentation of certificates to our latest Certified Credit Executives and the announcement of the CCE Dux. It is now time for YCP and Credit Team of the Year nominations and I look forward to seeing a high number of quality entrants for these awards. YCP nominations close May 31 and Credit Team of the Year nominations close July 31.

In June the Women in Credit luncheons will be held and these continue to grow in numbers and prestige, becoming important dates on the calendar.

On behalf of the Board of Directors I advise we have recently re-written the By-Laws which will be implemented from 1 July following on from the re-write of the constitution in 2018. We are also updating the Institute’s policy documents and introducing position descriptions for the Directors and Divisional Councillors.

State Divisions AGM’s will be held in July and I encourage members to nominate to fill vacancies on local Division Councils and help in maintaining the Institute at the forefront.

If you are keen to get involved in local division events and functions please contact National Office or your State President. It is not only personally rewarding but beneficial to your career development and professional growth, and an opportunity to make new friendships with similarly minded credit professionals.

– Trevor Goodwin LICM CCE National President

AICM Activity

AICM working for you AICM continues its work with government, key industry stakeholders and aligned organisations in making submissions to ensure credit professionals and our industry have the opportunity to contribute to Australia’s growth and changing landscape.

AICM’s membership of the Australian Chamber of Commerce and Industry (“ACCI”) supports this objective and our interaction with both sides of government demonstrates our willingness to be part of change and ensure major parties are informed about how they will impact credit professionals.

AICM is engaged and ready to work with the 46th parliament and the AICM has established the connections and relevance with all sides of politics to be able to continue this work with the new government.

Through the AICMs representative work and membership of ACCI members of the AICM are better informed about changes impacting their roles.

Our message has been and remains clear: —— the credit our members manage drives economic activity, specifically trade credit supports businesses of all sizes to fund their operations and grow.

—— improving payment times is fundamental to a strong and resilient economy.

—— better access to data is needed to ensure fully informed credit decisions.

—— strong enforcement action must be taken in all instances of insolvent trading and Phoenix activity especially were creditors have been impacted.

—— current unfair preference laws are unfair to arms length creditors.

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CREDIT MANAGEMENT IN AUSTRALIA • May 2019

AICM Activity

May 2019 • CREDIT MANAGEMENT IN AUSTRALIA

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Legislative update

Financial reporting thresholds to increase from 1 July 2019;

but what does it mean for you?

By Andrew Spring*

Andrew Spring

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On 5 April 2019, Treasurer Josh Frydenberg approved the proposed amendments to the Corporations Regulations 2001 that will increase the financial reporting thresholds that categorise a proprietary company as “large”. The changes will be effective from 1 July 2019 and are outlined in detail below.

The government and some commentators claim that the threshold increase will provide relief to many proprietary companies from “red tape”, with the compliance burden estimated at saving those entities concerned approximately $300M over three years. However, when seeking consultation from the public, a number of submissions, including the combined submission of the Australian Finance Industry Association, the Australian Institute of Credit Management and the Australian Restructuring, Insolvency & Turnaround Association (“the Associations”), considered the impact

of the reduced availability of financial statements for those companies as counterproductive. In this article we will identify the changes and consider some of the arguments proffered by the Associations and others.

What is changing?

From 1 July 2019, the Corporations Amendment (Proprietary Company Thresholds) Regulations 2019 (Cth) will increase the “large” proprietary company thresholds referred to in the act as shown in the table below.

Why? – from the government The threshold increases will: 1. Appropriately represent the level at which a company becomes economically significant; 2. Reduce the regulatory cost on approximately 2,200 businesses by approximately $81 million p.a.; and 3. Reflect economic growth since the thresholds were last reviewed in 2007.

Current

New (post 1/7/19)

Consolidated revenue for the financial year of the company and entities it controls*

$25 million

$50 million

Value of consolidated gross assets at the end of the financial year of the company and the entities it controls*

$12.5 million

$25 million

Employees of the company and entities it controls^

50 employees

100 employees

*Control is determined based on the accounting standards ^Full time equivalent employees

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

Legislative update

What does it mean – practically?

Put simply: an estimated 2,200 less businesses financial statements (audited) will be publically available from 1 July 2019.

Historically, the regulatory requirement for the preparation of accurate financial statements available to stakeholders was a tradeoff for the benefit of limited liability to shareholders by incorporation.

Reporting thresholds have been implemented to limit the financial burden on smaller companies lowering the barrier to entry for small and medium enterprise. In the United Kingdom, rather than a threshold per se, there is a “carve out” from the requirements for ALL companies filing their accounts at Companies House (ASIC equivalent). A distinction, perhaps lost in the announcement

by Treasury, that the preparation of financial statements are an essential element to undertaking a business.

The impacts of the increased thresholds will be less financial data readily available for review of a company’s financial performance, by credit professionals seeking to maintain or increase levels of credit accommodation to the business, unless an approach is made to the company directly for the financial reports. Credit professionals, will need to consider relevant adjustments to their internal credit approval systems to factor in the reduction of publically available financial information.

A review of some submissions In submissions to Treasury by the Associations the following specific reasons were identified in support of their strong recommendation against the increases: zz Reducing transparency of these businesses; Inability to easily access relevant information is one of the barriers to small business access to credit. zz Reduced access to credit; Automated due diligence will be impacted due to a lack of available

public information. zz Absence of information leads to a negative bias; Audited financial reports provide a reliable source of information. zz The population of entities impacted is much greater than the 2,200 stated in the joint media release; Equifax estimates the number of entities effected to be 3,500; illion 4,600. zz Less oversight of business and accounting practices; The audit process provides a strong motivation to comply with accounting standards. zz Increasing incidence of insolvency and insolvent trading; An audit process can identify early warning signs that may stimulate corrective actions earlier. zz Contrary to other jurisdictions; The United Kingdom exemption limits, reviewed in 2018, are below the current thresholds. zz Contrary to the open banking and mandatory credit reporting initiatives; Objectives aimed at increasing data to fuel credit assessments. zz Current thresholds are an appropriate definition of an economically significant entity; zz $300 million cost savings unlikely to be realised; and Greater costs associated with a reduced access to credit. zz Restrictions of Fintech innovation.

An impediment to information will stifle development of further automation from Fintech innovators.

In an interview with the Australian Financial Review, Nick Pilavidis, CEO of the Australian Institute of Credit Management, warned against reducing the information available to

trading partners and financiers, as it may make it harder for businesses to access credit.

In submissions from illion, a statistical analysis supported the Associations submissions, citing: zz 3% of companies effected by the increase entered some form of insolvency procedure during the prior 6 years. As such a real insolvency risk exists; zz $1 billion of liabilities for these companies was trade credit outside of terms; zz Total liabilities for these companies was circa $273 billion, which makes them economically significant; and zz In the preceding 12 months, 35,000 credit enquires were made in respect of these companies.

In addition the Institute of Public Accountants, also expressed concerns about the value of the relief to these companies, stating: “For clarity, financial statements will still need to be prepared for management, shareholders, financiers, and for taxation purposes. Accordingly, the costs savings from financial reporting are likely to be marginal, with the majority of savings coming from the dispensing of the audit requirement …”

And then following with: “…this is likely to increase business risks as an audit is more than a mere compliance exercise of opining on compliance with accounting standards. Directors may not fully appreciate their increased risk exposures.” *Andrew Spring Partner Jirsch Sutherland Ph: 1300 265 753

“The impacts of the increased thresholds will be less financial data readily available for review of a company’s financial performance...”

May 2019 • CREDIT MANAGEMENT IN AUSTRALIA

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Credit Management

To trust, or not to trust?

Proper due diligence is the answer

By Patrick Coghlan*

Patrick Coghlan

12

Dealing with a trust can be complicated and for some, it can be like opening a can of worms.

However, if you play your cards right by performing proper due diligence, then you’ll have nothing to worry about. Like trust, ‘trusts’ just require a little work to understand the relationship.

In order to perform due diligence on a trust, it is important to first understand what they are. The ATO defines a trust as an obligation imposed on a person or other entity to hold property for the benefit of beneficiaries. While in legal terms, a trust is a relationship not a legal entity, trusts are treated as taxpayer entities for the purpose of tax administration.

A trustee is responsible for managing the trust’s tax affairs, including registering the trust in the tax system, lodging trust tax returns and paying tax liabilities. Trustees

can’t use the ‘Trust property’ for themselves, they are only allowed to conduct activity that is in the interest of the beneficiaries. The trustee can be an individual, individuals or a company.

People may set up a trust for many reasons such as asset protection, tax reduction and intergenerational transfer of wealth in a family. The benefit is that you can control, but own, trust assets.

Once a trust is formed, the trustee becomes the legal owner of the assets on behalf of the beneficiaries.

A trust deed will include provisions for the trustee to distribute income to the beneficiaries at their discretion.

Assets become out of reach of creditors if the beneficiary faces financial difficulty.

Let’s take a look at the various types of trusts to further understand why they may be a good option for some people.

The issue with trusts is that they can be complicated to understand and time consuming to look into. Some trusts are aware of this and take advantage.

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

Credit Management

Discretionary family Trusts – These trusts are established to manage, protect and pass on family assets including shares, personal property and the family business from one generation to another.

Testamentary Trust – This trust is established according to will instructions.

Special disability Trust – This trust is established to help family/caregivers provide future care of disabled family members.

Family Lineage Trust – Designed to keep money and assets in the family, these trusts protect inheritance.

Spendthrift Trust – This is a property control trust that limits an

irresponsible beneficiary’s access to trust capital an income.

Unit Trust – A trust that divides the beneficial ownership of the trust property into two units.

Business Trust – These trusts essentially manage and protect a business from loss of assets due to lawsuits and liquidation.

When do trusts become complicated?

While it’s hopeful to believe that people are doing the right thing, it is vital to perform due diligence on a trust as you would for the rest of your customers. The issue with trusts is that they can be complicated to understand and time consuming to look into. Some trusts are aware of this and take advantage. However,

when you consider what they may be hiding, it makes sense to know who you are dealing with. What can trusts hide?

1. Ultimate beneficiaries 2. Trustee details 3. Assets and incomes It’s common to see companies using trusts as a way to run their business. While it is possible to open an account for your customer if the credit application has been filled out in the name of a trust, there are a few common mistakes that businesses make when taking on a trust as a customer. zz Not asking for a trust deed. zz Only running a credit check or monitoring the trust or trustee, not both. zz Incorrect guarantees sought. ➤

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Credit Management

As any property being held in the name of the trust is for the benefit of the beneficiaries, the property is not available to other creditors. From a credit perspective, this can cause issues. If the credit is to be extended based on what appears to be available assets, then it doesn’t make sense to open an account unless there is access to those assets.

However, business is business and if credit is to be extended to trusts, then there are important steps to performing proper due diligence.

First and foremost, ask for a trust deed. You are allowed to ask for this legal document. If the trust does not provide one, this is a red flag. All of the information that you need for due diligence will be on that trust deed.

If it is not provided or if the trust initiates a hard time handing one over, it is demonstrating that they have something to hide and are failing to be transparent. Therefore, it is worth questioning if you really want to do business with this trust.

In addition to requesting the trust deed, a basic trust checklist includes: √ Determine if the trustee is an 14

When it comes to PPSR matters, it is important to understand that trusts are different to other entities when registering a PMSI.

√ √ √ √

√

√

individual or company. If they are a company, ensure you have the correct ACN and enter into a credit agreement with this entity.

Always check the name and details of the trustee Monitor and perform a credit check on the trust AND the trustee If the trustee is a company, consider a PPSR registration Get a personal guarantee from the ultimate beneficiaries or directors guarantees from the directors of the corporate trustee If the trustee is an individual, consider a PPSR registration and request a personal guarantee Identify the ultimate beneficial owner (CreditorWatch UBO reports can assist)

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

When it comes to PPSR matters, it is important to understand that trusts are different to other entities when registering a PMSI. Get specialised advice as to what entity you should be registering against.

Doing business with trusts is like trading with any other entity and due diligence is essential. However, it just takes a little more time and digging.

Arming yourself with information about trusts and trustees is a great start. Staying aware of red flags and obtaining essential information will go a long way to protect your business and develop confidence in trading with a trust. *Patrick Coghlan MICM Managing Director, Creditorwatch Ph: 1300 50 13 12 www.creditorwatch.com.au

Credit Management

SMEs willing to pay more to avoid property security What the latest Scottish Pacific SME Growth Index results reveal for credit managers

By Peter Langham*

Peter Langham

In the current credit environment the sentiment of Australian business owners when it comes to securing funding, as revealed in our latest SME Growth Index, really stands out.

Nine out of 10 SMEs would ‘definitely’ or ‘probably’ accept a higher interest rate if it meant they were not required to provide real estate security.

The number of SMEs who would ‘definitely’ be prepared to pay more to avoid providing real estate security has more than doubled in the past few years, rising from 29.5% to 65%.

Only 2.5% of business owners would prefer to provide real estate security rather than pay a higher rate over the life of their loan.

The message around propertysecured lending is loud and clear: eight out of 10 business owners say they resent providing property as a security against new loans or as part of loan serviceability assessments.

Twice a year, independent research is undertaken by leading business banking market research firm East & Partners, on behalf of Scottish Pacific. The March 2019 round surveyed and interviewed the

owners, CEOs or senior financial staff of 1257 SMEs across a range of industries and all states, with annual revenues of $A1-20 million (percentages in this article, apart from revenue growth statistics, are rounded to the nearest half percent).

Impact of property market Current property market conditions are clearly having an impact on business owners. Almost half the SMEs (44.5%) say property market conditions are already making it harder for them to access business funding, likely due to softening house prices in major markets.

A further 35% haven’t yet felt the impact, but fully expect the housing price correction and broader property market conditions including slowing loan approvals will have a significant impact on their borrowing capacity.

When property market impact was last assessed in September 2017, three out of four SMEs said property prices were having no direct impact on their businesses. This round, only one in five SMEs said they had not yet seen a direct impact. ➤

May 2019 • CREDIT MANAGEMENT IN AUSTRALIA

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Credit Management

“Property prices are having more impact on SMEs in Victoria and NSW ... with Queensland small businesses the most protected from impact.”

This minority of non-affected SMEs perhaps reflects how broad the base of Australia’s small business sector is, with more than two million enterprises across a wide range of industries and regional markets.

Property prices are having more impact on SMEs in Victoria and NSW (affecting 48% and 46% respectively), with Queensland small businesses (39%) the most protected from impact.

Declining or no-change SMEs are being hit harder by property market movements, with 54% of non-growth SMEs already impacted (compared to 36% of growth SMEs). For these nongrowth SMEs, finances are already stretched thin and they are feeling “when it rains it pours”. These are the businesses that currently need the most support to get through tough market conditions.

Opportunities for non-property secured business lending More than 91% of SMEs would be prepared to pay a higher rate to obtain finance if they didn’t have to provide real estate security.

This overwhelming sentiment is voiced at a time when a sharp correction in residential property prices is affecting capital cities, coupled with falling building approval data and predictions by analysts such as Core Logic and UBS of tough market conditions still to come.

Of the nine out of 10 business owners who say they would be willing to pay a higher rate for finance if they could avoid using property as security, almost two-thirds (65%) indicated they ‘definitely’ would be willing, and more than a quarter (26%) said ‘probably’.

Fewer than 1% of SMEs ‘definitely’ would not consider higher rates in place of borrowing against the family home, and just over 1.5% said it would be ‘unlikely’.

Alongside this finding, for the first time SMEs are about as likely to turn

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CREDIT MANAGEMENT IN AUSTRALIA • May 2019

Credit Management

to an alternative lender as they are to ask their main bank to fund growth.

Traditionally ‘rusted on’ to the banks, business owners are becoming increasingly open to non-bank alternatives to fund operational and strategic growth needs.

East & Partners predicts that, if current trends continue, by the second half of 2020 alternative lenders will overtake primary relationship banks as the key funders of new SME business investment in Australia.

According to the Productivity Commission’s draft report into Australian financial system competition, a third to a half of Australian SME loan value is reliant on property security. For the major banks, 35% of their small business lending (by loan value) is secured by real estate. For banks outside the majors this figure is higher, at almost 47%.

Given this data, and the Growth Index’s clear findings about SMEs’ unhappiness about using property security, it could be that many business owners are unaware they can use balance sheet assets instead of property – assets including equipment and invoices issued.

Property security one of top two SME frustrations Annoyance about having to provide property as security was clear amongst SMEs – this was the second most common funding frustration (nominated by more than 78%), behind only loan conditions (just over 80%). To this environment, add likely changes implemented due to the Royal Commission, and the impact of more stringent credit checks. SMEs looking to fund growth will have to factor in potential roadblocks around finance availability and using property as security.

The added impact of home borrowers potentially being charged fees to use a mortgage broker (replacing the current model where brokers receive their fees from the ➤

“The added impact of home borrowers potentially being charged fees to use a mortgage broker ... could also result in a major reshuffle when it comes to how small business owners manage their business growth.”

May 2019 • CREDIT MANAGEMENT IN AUSTRALIA

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Credit Management

“More stringent lending conditions, along with a cooling property market, will impact on SME owners who need to use their home as security against their business borrowing.” banks) could also result in a major reshuffle when it comes to how small business owners manage their business growth.

Australian Bureau of Statistics data shows a more than 6% drop in home loans in December 2018, with a fall of about 20% for 2018 (the worst annual fall since the Global Financial Crisis).

While property prices and some market conditions are cyclical, it’s important to note Australia’s longterm downtrend in the rate of home ownership.

A not-too-distant future where there may be more entrepreneurs renting than buying means that increasingly business owners will have to consider business borrowing secured against assets other than property.

More stringent lending conditions, along with a cooling property market, will impact on SME owners who need to use their home as security against their business borrowing.

For any business owner who feels compelled to rely on providing property as security for their business loans, the credit squeeze may well be on.

SME revenue growth on the rise In positive signs for Australia’s economy, a rising number of SMEs are predicting revenue growth.

More than 53% say they’ll grow in the first half of 2019, up from 51% six months ago. This is the most positive result recorded in the SME Growth Index since the first half of 2016.

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Growth businesses are forecasting an average 4.9% revenue rise (up from 4.5%). Only one in four SMEs expect revenues to remain flat.

Within this promising bounce back, business owners are identifying as being in growth phase more than any other category – over 38% say they are growing, 30% are stable, 12% are consolidating, 11% are start-ups and 8.5% are contracting.

Some results run contrary to these positive sentiments: zz One in five SMEs expect revenues to contract this year, by an average of 5.5%. However, the maximum revenue drop this round (12.2%) is lower than the most negative result in the previous round (13.7%). zz One in ten SMEs have no plans to invest in their business in the first half of 2019. zz The average SME respondent’s full-time employee headcount continues to downtrend, falling from 71 in the last round to 69 now – it was 88 in the first round in September 2014.

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

zz Among the 791 SMEs planning to invest in business growth in the first six months of 2019, one in 10 (11%) have no concrete strategy in place as to how they’ll execute their plans.

Despite these observations, the data shows that levels of SME resilience and positivity are the highest they have been in the past six rounds of the Index.

When growth and non-growth SMEs are combined, total average revenue projections have more than doubled year-on-year since 2016 – from 0.7% to the current 1.8%.

However, considerable headroom remains to reach the record high allSME growth forecast of 4.9% notched in the first Index in 2014.

Without a major external economic shock, East & Partners expects a greater number of SMEs will transition towards a stable or positive growth phase.

This trend is confirmed by the steep decline in the proportion of SMEs who view themselves in outright

Credit Management

contraction mode, from more than 12% a year ago to 8.5% now – a record jump in the proportion of SMEs moving up from a ‘contracting’ phase into ‘stable’ territory.

According to East & Partners, there is a sense that the SME sector’s most vulnerable enterprises, firmly entrenched in the negative growth cohort, have ‘turned a corner’. For these SMEs at the bottom of the growth spectrum, business is not as hard as it has been.

Growth brings cash flow issues How are business owners coping with this growth?

Working capital strategies mainly revolve around credit card debt, cash flow forecasting, early supplier discounts, use of trade and invoice finance and ATO tax debt amnesty.

The pressures of growth can be seen, with a rise in those using personal finances such as credit card to boost their business cashflow (69%, up from just over 66.5% in March 2018 when this question was last asked).

Almost half (47%) are using working capital finance to improve

cash flow, with invoice finance used by 11% (up from 7.5%), and 36% utilising trade and import finance.

There has been a jump in those trying to ease cash flow issues by offering early payment discounts (56%, up from just over 50%).

Almost one in five SMEs are making arrangements with the ATO, up from 16%.

Taking out or increasing an overdraft (13%), using an online funding service (7%) and running credit checks (9%) are around the same level as in early 2018. Debt collection use is slightly down (just over 4%).

Businesses are also spending more time chasing invoices (a cash flow strategy named by 14.5%, up from just over 12%).

One in 10 are reducing their overall sales to ease cash flow pressures.

Almost one in three SMEs do not even run cash flow forecasting to help manage their working capital.

Overall, it appears that a high number of SMEs continue to rely on credit cards, rely on the ATO as a ‘lender of last resort’ or use disruptive

customer-based solutions for managing working capital constraints – as opposed to ‘right sizing’ their business funding solution to cater for future growth.

This is in a post-Royal Commission environment in which, according to our research, 22% of business owners were finding it harder to access funding due to the Royal Commission, and 34% expect to find things harder this year.

Finding the right funding solution for each business is becoming an increasingly important task for business owners and their key advisers.

*Peter Langham Chief Executive Officer Email: langhamp@scottishpacific.com Ph: 1300 207 166 Scottish Pacific is Australasia’s largest specialist working capital provider, helping thousands of business owners with the working capital they need to succeed.

Scottish Pacific prepared this article from excerpts of their twice a year SME Growth Index research. To download the latest Index or request previous Index research please visit www.scottishpacific.com/news/research

“... there is a sense that the SME sector’s most vulnerable enterprises, firmly entrenched in the negative growth cohort, have ‘turned a corner’.

For these SMEs at the bottom of the growth spectrum, business is not as hard as it has been.”

May 2019 • CREDIT MANAGEMENT IN AUSTRALIA

19

Credit Management

Is our credit card love affair on the rocks?

By Abdallah El-Haddad*

For many years, economists and business leaders have been concerned about the notion of peak oil, and the potential impact that running out of relatively cheap fuel could have on Australia’s economy.

While peak oil has yet to occur, illion’s inaugural Credit Card Nation 2019 survey has uncovered a startling fact – that we have now reached peak card, as credit card usage in Australia declines at an accelerating pace.

Have we passed peak card?

Abdallah El-Haddad

This decline is so significant that many millennials do not have a credit card at all as banks are often reluctant to provide credit to what they perceive to be a more risky demographic group. In turn, young Australians are increasingly accessing innovative Buy Now, Pay Later (BNPL) schemes that better suit their desire for a frictionless customer experience.

“...we have now reached peak card, as credit card usage in Australia declines at an accelerating pace.”

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CREDIT MANAGEMENT IN AUSTRALIA • May 2019

The dynamic gives rise to a couple of questions: firstly, has the credit card outlived its usefulness and, secondly, are there now preferred alternatives in the marketplace that will potentially render the credit card obsolete in the future? If this is the case, what are the ramifications for the credit and retail sectors as well as for consumers?

Consider too the significant advantages for the ‘good’ consumer from choosing BNPL schemes that have no service or transaction fee applied to their use of this credit. This may go part of the way to explaining the loss of interest in credit cards.

The findings in illion’s Credit Card Nation report also raise questions for retailers who fail to embrace BNPL accounts, as they potentially risk losing market share as shoppers switch to firms with such facilities.

Given its already apparent popularity, the regulatory framework surrounding BNPL is likely to evolve

Credit Management

substantially as the sector continues to expand. The framework governing their usage will need to ensure that consumers are educated as to their responsibilities for servicing these facilities, and are fully aware of their obligations and rights when undertaking such transactions.

The long awaited advent of Comprehensive Credit Reporting (CCR) has allowed illion to develop these insights for the first time. The Credit Card Nation report is the first in a series of thought pieces and analytic studies on the Australian market.

The past and present Credit cards were introduced into mainstream Australia in 1974, when the major financial institutions combined to offer Bankcard to consumers for the first time.

Today, the Reserve Bank of Australia estimates 14.8 million consumer and 0.8 million business credit cards exist in Australia, offered by a range of financial institutions.

Collectively, Australians made 2.9 billion credit and debit card transactions last year, worth $327 billion, up from 1.4 billion transactions, worth $207 billion, a decade earlier.

In 2018, the average credit card transaction was worth $148, compared to $113 in 2008 as Australia was about to be hit by the Global Financial Crisis.

Australia’s total credit card limit is now worth a collective $152 billion, while the average individual consumer limit is $9,500.

Credit cards are more popular with men than women.

While men represent about 49 per cent of the adult population, they hold 56 per cent of all credit cards, and represent 59 per cent of those who are two months or more behind on their repayments.

This suggests that women are more conservative about taking on credit card debt than men, and when they do, are more scrupulous about paying it off to avoid defaulting on their obligations.

On a generational basis, millennials

under the age of 30 are twice as likely as their parents to fall more than two months behind in their credit card payments, suggesting they have greater difficulty balancing spending and debt, regardless of their credit limit.

Millennials now hold significantly less than one credit card per person.

This is both an outcome of the difficulty of obtaining credit, as well as the rise of BNPL products that are available.

Consumers who have credit cards with two or more banks are twice as likely to default on their repayments as those with the same number of cards from a single bank, or a lower number of cards in total.

The changing face of our spending patterns is reinforced by the plunging use of cash advances on our credit cards, which has fallen by 35 per cent since 2008.

A decade ago, Australians used their credit cards for cash 35 million times, withdrawing $13 billion from ATMs or via EFTPOS. By last year, we were withdrawing cash on our credit cards fewer than 23 million times, for a total of only $9 billion.

The future The introduction of Buy Now, Pay Later (BNPL) products in 2015 is now providing a viable alternative to credit cards, with 3.5 million BNPL accounts opened in the last four years alone.

BNPL is a new form of lay-by, where customers pay off a purchase in instalments after receiving their goods.

The consumer pays zero interest, but must pay the item off entirely in a set period, typically about two months.

These products are particularly popular with younger Australians under the age of 30, who control a staggering 53 per cent of the entire BNPL market, and women, who represent 67 per cent of all users.

BNPL has grown to be one sixth the size of the entire 45-yearold credit card market, a trend that is likely to accelerate as younger

Australians enter adulthood, and those at the other end of the age spectrum reduce their consumption as they move into retirement.

This suggests that Australia has passed the peak number of credit cards.

Credit Card Nation 2019 – conclusions —— Credit cards provide a valuable way for consumers to manage their cash-flow and lifestyle.

—— However, with evolving forms of repayments offering consumers more choice in an increasingly fragmented and competitive credit system, Australia is at the tipping point of its credit card cycle.

—— As the market moves towards BNPL schemes, women will take on an increasingly powerful and assertive role in the national economy as they control two-thirds of these accounts.

—— Millennials currently represent only 10 per cent of the credit card market, but control 53 per cent of the growing BNPL system.

—— Therefore, retailers will need to respond to shifts in how consumers want to purchase and pay off their goods and services over coming years, particularly as younger Australians enter adulthood and constitute a growing and more influential proportion of the spending population.

—— However, younger consumers will also need to become better educated about balancing their finances as they currently constitute a much higher proportion of bad debtors than their parents’ generation, irrespective of their credit limit.

—— An important component of assessing the true risk of any individual to pay off their debts will be the increased use of Comprehensive Credit Reporting (CCR) by lenders.

*Abdallah El-Haddad National Account Director illion Ph: 0413 976 773 Email: Abdallah.Elhaddad@illion.com.au www.illion.com.au

May 2019 • CREDIT MANAGEMENT IN AUSTRALIA

21

Credit Management

The new Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 What it means for Credit Managers and how you can tackle Phoenixing activity.

By Roger Mendelson* It is likely that when Parliament resumes the new Anti-Phoenixing Bill (Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019) will pass into law, as it has bipartisan support.

We were invited by both the House of Representatives and the Senate to comment on and make submissions on the Bill, so have a detailed knowledge of it.

In brief summary, the Bill is a disappointment as it goes nowhere near enough in stamping out the scourge of Phoenixing activity.

Roger Mendelson

22

The Bill is focused basically at high-level, criminal phoenixing activity.

By far the bigger problem for credit managers is the problems caused by “incidental phoenixing”.

This is the term we used to describe small scale activity, which is usually an outcome of undercapitalised businesses, lack of a workable business plan, lack of business experience and businesses which are undercapitalised.

What the new Act will achieve zz Dispositions of company property where the intent is to weaken the company in the event of liquidation will be more easily attacked by a liquidator. The relation back period has been increased to 12 months prior to the appointment of external administrators. zz Accountants and lawyers will be less likely to provide advice and to facilitate the transfer of assets, because they will be exposed to criminal charges, penalties and claims for compensation. zz Directors will not be able to resign where no other director has been appointed. zz It will be more difficult for directors to resign from insolvent companies. zz The ATO benefits because Director Penalty Notices (DPN) will include GST and GST estimates.

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

Who will benefit?

The provisions are really aimed at shonky activity by directors and their advisors, so it is likely that they will be more inclined to cease trading and put a tottering company into liquidation, rather than taking action to essentially defraud creditors.

Incidental phoenixing Most credit managers experience “incidental phoenixing” rather than criminal phoenixing activity.

It is not uncommon to do a company search on a director and find that he has been a director of five, six, or even eight or nine companies which have basically failed and ceased trading.

The new act will do nothing to help creditors faced with that situation.

Advice for credit managers As the situation is essentially unchanged, the best form of reducing and even avoiding losses from incidental phoenixing are the age old techniques. zz Before advancing credit, obtain a completed Credit Application Form. The Form should include the names of three suppliers and contact should be made with at least one of those suppliers. zz Ensure that you have trading terms which have been prepared by a lawyer and which incorporate a

penalty clause, providing that in the event of default, the customer will be liable for all legal and debt collection costs incurred by the creditor. zz Do a full credit search on the customer and check the status of other companies of which the directors have been directors of. If there are companies which have been liquidated or deregistered by ASIC, warning bells should ring. zz Your default position should always be to obtain guarantees from the directors. zz If you have concerns, be prepared to lose the business and, insist on a substantial deposit and a payment program which will ensure that the ultimate exposure at any time is low.

While the above points may seem obvious to any professional credit manager, our experience is that the step which is usually missed out is doing a search of all companies of which the directors of the applicant company have been a director of. This process will increase the approval time and also approval cost but it will also raise alarm bells and lead to good quality credit decisions.

The reality is that if a director has been involved in companies which have failed to pay their creditors, there is a high risk of this reoccurring. It then becomes a particularly difficult issue to recover monies from companies which are usually little more than a shell.

See you at AICM’s

What could have been done In our submission, we proposed that ASIC set up a Statutory Demand Register. At present, each creditor has and is acting in a silo. If it was aware that Statutory Demands had been served on the potential creditor, this would ring alarm bells.

We then proposed that any company which had appeared on the Statutory Demand Register should also be required to complete a Solvency Statement within 14 days of being requested by a potential creditor. The Statement would be signed by all directors and would state that at the time of the Statement, the company is solvent (defined as being able to pay its debts as and when they fall due).

Amongst other recommendations, we suggested that ASIC adopt the New Zealand process, whereby it is simple and cheap and immediate to search company information which leads to a relatively informed decision about the credit worthiness of the company, before advancing credit.

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

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Insolvency

Find the gaps

By Kirk Cheesman*

Kirk Cheesman

24

Thousands of Australian businesses use trade credit insurance in Australia and New Zealand. One of the critical elements required under a trade credit insurance policy is to have your customers ‘endorsed’ by your insurer at the level of trade you require.

At times, due to many factors, a single insurer may not be able to meet the level of requirement for the full credit limit requested. This leaves a business exposed or unable to close an important sale due to credit level requirements.

So what options are available to an insured to close the gap?

The most common approach is for an insured to trade over and above the credit limit insured. Not the perfect solution, but, at the same time allows the bulk of the trade to be covered or in the event of an insolvency, still have the majority of their debt covered.

Alternatively, some insurers offer caps or additional cover via an alternative product at an additional cost.

Now for the first time in Australia, there is a new offer for consideration.

Top-Up cover. Underwritten by Lloyds syndicate, Equinox, the aim is to close the gap between the insured cover and the outstanding exposure.

So how does it work?

By providing a spread of your

aged trial balance and credit limits required, we identify the gaps and exposure you may wish to consider TopUp cover for. In consultation with your primary insurer, NCI first endeavours to seek the higher cover with the primary. However, if this cannot be met, an alternative Top-Up cover indication can be provided.

Businesses in Europe have been using TopUp cover for many years.

Quite often these types of initiatives and solutions take some time to come into the Asia Pacific market. However, now with the ability to top up your primary cover, the solution now exists in local markets for insureds to consider.

In NCI’s latest customer survey, there were two areas highlighted for upcoming challenges in 2019. The first issue was getting paid on time, the second was finding cover to meet their needs. We are hoping the Top-Up cover can support clients in reducing the cover challenge.

So, if you hold a trade credit insurance policy and have underinsured limits, perhaps a Top-Up solution can assist you in closing the gaps on your cover requirements.

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

“At times, due to many factors, a single insurer may not be able to meet the level of requirement for the full credit limit requested. This leaves a business exposed or unable to close an important sale due to credit level requirements.”

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

Electronic Contracts

eContracts for property transactions

Electronic contracts

By Claire Martin*

Australian commerce is becoming increasingly electronic and credit managers need to be mindful and supportive of their business and the need to interact with their clients.

Forms of electronic contracts have been operating in Australia since before Federation. The first working electrostatic telegraph was built by the English inventor Francis Ronalds.

In 1816 when he laid down eight miles of wire and successfully transmitted messages. Electric telegrams were commercially available from 1837 in the UK. Between 1854 and 1869, telegram lines were opened across

“The research into validity of electronic signatures to bind parties ... has revealed there is nothing to stop the implementation of electronic signatures being used to satisfy the formalities component and bind parties to a Contract, so long as the Contract itself complies with the usual requirements.”

Australia. International trade was conducted by telegrams and since 1872 when Australia was connected to Java from Darwin, international trade was able to be contracted via electronic means.

Claire Martin

contrasts to the postal rule and explored the specific words required at the stages of offer and acceptance or rejection of offer or revoking of offer.

2. 1893 – Harvey v Facey 2 – contract for sale of land. The Privy Council found that telegrams were capable of forming a valid, legal, binding contract. However, on the facts of this particular case, the Privy Council held that the agreement was not binding, because in its view the terms of the telegrams were not sufficient to prove that the vendor had made an offer capable of forming the basis of a contract.

3. The research into validity of electronic signatures to bind parties, complying with formalities and addressing provisions of the Real Property Act 1900 (NSW), Conveyancing Act 1919 (NSW), Duties Act 1997, Electronic Transactions Act 1999 as well as provisions of other State and Federal statute has revealed there is nothing to stop the implementation of electronic signatures being used to satisfy the formalities component and bind parties to a Contract, so long as the Contract itself complies with the usual requirements.

Relevant cases to peruse include:

Binding contracts in general

To understand electronic case law and their enforcement relies I find the 3 following precedents very helpful: 1. 1880 – Stevenson v McLean 1 – UK case – contract for sale of goods case concerning the rules on communication of acceptance by telegraph. Its approach

The essential elements of a binding Contract are: zz Agreement – Offer & Acceptance zz Consideration zz Intention zz Capacity zz Formalities zz Certainty ➤

May 2019 • CREDIT MANAGEMENT IN AUSTRALIA

25

Electronic Signatures

Legislative Electronic Transactions Acts, based on the MLEC, were enacted in Australia in 1999 – 2003, and later amended to incorporate substantive provisions of the Convention on the Use of Electronic Communications in International Contracts (CUECIC). Section 8 of the Electronic Transactions Act 1999 (Cth) essentially reproduces s.5 of the MLEC. Section 9 provides that where a law of the Commonwealth requires a person to give information in writing, information given by means of an electronic communication will satisfy the requirement. Arguably, this is a narrower enabling of electronic communications than s.6 of the MLEC, referring only to information required, such as certificates of title, and not to contracts for the sale of the land which are inter partes and not required by legislation.

Validity The two key legal factors in determining if a contract for sale is binding, are set out in section 54A of the Conveyancing Act 1919 in NSW and are: 1. that it is in writing; and 2. the contract is signed by the party to be charged (or their authorised representative).

With the ETAs and recent amendments to the Conveyancing Legislation of NSW, contracts for the sale of land are now expressly valid and binding if created and signed electronically.

Elements of a signature Signatures are an “authentic”, “act” made with “intention”. For a signature

to be valid, it must have been made by the person purporting to have made the gesture, whether it be a mark with a pen on some paper or clicking with a mouse on a computer, with the intention to actually be signing.

Very rarely would two signatures be precisely identical. Wet ink signatures because of physical differences and eSignatures in the variance of the metadata.

The wonderful thing with technology is the evidence behind an eSignature is that they are more robust than a scribble on a piece of paper. The metadata encrypted in an eSigned eDocument provides a superior level of data behind the signature including: zz Time and date zz Location of signing zz IP address and device particulars zz Security measures The use of eSignatures in accordance with the Electronic Transactions Acts do not change the law regarding execution of documents, they provide an evidentiary trail that enables any later repudiation to be rebuffed. eSignatures authenticate and securely encrypts the signed document and has extensive features to prevent tampering or amending so the document does not become compromised. When we upload a document and the e-signature is attached to it, DocuSign’s firewallprotected server, encrypts it and then “hashes” it — essentially creating a mathematical algorithm of the file that can be examined to determine if it’s been tampered with. The metadata can also indicate the time and place the document was signed.

Electronic Signatures vs Digital Signatures An electronic signature (eSignature) is a visible representation of a person’s name or mark, placed by a person on an electronic document or in a form of electronic communication, by electronic or electronic and mechanical means, as a method to identify the person and indicate that they have put their eSignature on the document or communication.

An electronic signature is different in this sense from a digital signature.

A digital signature is concerned with cryptographic authentication technology rather than a person signalling their assent to a document by marking it.

Types of electronic signatures include a person typing their name in an email or word document (although this will not be accepted in all jurisdictions), pasting a digitised image of their physical hand-written signature, selecting an option in eSigning software such as “I Agree” or “Buy Now” buttons, signing a soft copy of a document with a stylus or finger on a touchscreen, or using another form of biometric identification.

In the judgment of Justice Harrison in Stuart v Hishon3: “Mr Stuart typed his name on the foot of the email.

He signed it by doing so. It would be an almost lethal assault on common sense to take any other view.”

Digital signatures are more advanced and secure types of enabling an electronic document be executed or signed. They can be used to comply with the most demanding legal and regulatory requirements because they provide

“Signatures are an “authentic”, “act” made with “intention”. For a signature to be valid, it must have been made by the person purporting to have made the gesture, whether it be a mark with a pen on some paper or clicking with a mouse on a computer, with the intention to actually be signing.”

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CREDIT MANAGEMENT IN AUSTRALIA • May 2019

Electronic Signatures

the highest levels of assurance about each signer’s identity and the authenticity of the documents they sign.

Digital signatures use a certificate-based digital ID issued by an accredited Certificate Authority (CA) or Trust Service Provider (TSP). When a party digitally signs a document, their identity is uniquely linked to that party using a variety of metadata, the signature is bound to the document with encryption, and everything can be verified using underlying technology known as Public Key Infrastructure (PKI).

An emerging approach for PKI is to use the blockchain technology commonly associated with modern cryptocurrency. Since blockchain technology aims to provide a distributed and unalterable ledger

of information, it has qualities considered highly suitable for the storage and management of public keys.

Following the Masterchef/PEXA incident, there are requirements for multi-factor authentication methods when a practitioner applies their digital certificate on land titles registry documents of authorises a financial settlement.

Conveyancing Legislation Amendment Act 2018 No 75 In support of the industry’s transition to paperless conveyancing, clarity has been codified for NSW land transactions which can now expressly be conducted electronically.

New provisions in the Conveyancing Act 1919 make it clear that land transaction documents will be valid and enforceable when they are:

- contained in an electronic data file form; and - electronically signed and witnessed.

These new provisions now apply to all contracts and deeds relating to land under the Real Property Act 1900 (NSW).

Towards the end of November 2018 certain legislations were amended by the Conveyancing Legislation Amendment Act 2018 no. 75. This was to make expressly clear to anyone Transacting in the property space in NSW could use and rely on electronic contracts as being valid.

The NSW Minister for Finance, Services and Property Victor Dominello noted that “by introducing e-signatures we are giving buyers more time to read documents, ➤

May 2019 • CREDIT MANAGEMENT IN AUSTRALIA

27

Electronic Signatures

providing greater security and reducing the time needed to settle a property transaction”.

Following an announcement in July 2016; the Government introduced plans to transition to electronic conveyancing known as “eConveyancing” Although the Electronic Transactions Act 2000 permits requirements for writing and signing to be satisfied electronically, it was observed in the second reading speech that “there is a general reluctance in the conveyancing industry to use electronic land contracts because of concerns about the validity of electronic agreements.”

To address these concerns the Amendments of the Conveyancing Legislation included: zz clear confirmation that reference to a contract includes an electronic data file containing a contract in electronic form; zz that a disclosure document, required to be provided by the vendor can be given electronically; zz any requirement for an instrument to be in writing is taken to be met if the information is given by means of electronic communication; zz that a Deed may be created in electronic form and electronically signed and attested; zz a contract to sell or dispose of land is not invalidated or rendered unenforceable only because it has been created in electronic form and electronically signed or attested;

zz service can be effected by email; zz any document that supports the electronic lodgement of a dealing, memorandum, caveat or priority notice is not invalidated only because it has been executed electronically; zz certain statements, caveats, notices, applications and other information may be verified in the manner approved by the RegistrarGeneral, as an alternative to providing a statutory declaration; and zz a client authorisation produced in electronic form may also be electronically signed.

Many of these proposals are already allowed for in various Electronic Transactions Acts across the nations various jurisdictions.

Minimisation of human error Several eContract platforms connect to your client management system and minimise the re-keying of data.

By using information directly from the eContracts, practitioners can pre-populate. eContracts are a real game changer for the profession, not only will practitioners save time and increase efficiency, it is also a service that the client can easily appreciate the value of in the most important ways to them – time and convenience.

It will also allow practitioners to name a fixed price for the job and to be very confident that the price will match the work required.

Another cost benefit is that most eContract costs are a disbursement rather than a time cost, increasing

“It is widely believed that section 127 of the Corporations Act requires physical signatures on a physical document to trigger the benefit of the statutory assumptions relating to due execution.”

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CREDIT MANAGEMENT IN AUSTRALIA • May 2019

both value for money and profit and improving the disbursement recovery rate.

Is there anything special to be done where the party is a company or the signatory is acting under a Power of Attorney?

It is widely believed that section 127 of the Corporations Act requires physical signatures on a physical document to trigger the benefit of the statutory assumptions relating to due execution.

Many argue that a “document”, for the purposes of section 127, should be read down to mean a physical paper document because section 127(2) requires the use of a physical seal and section 127(3) refers to execution of deeds which are traditionally required to be printed on paper, parchment or vellum.

They also point out that the Corporations Act is expressly excluded from the “no invalidity” and signature provisions of the Commonwealth Electronic Transactions Act. Other lawyers hold a contrary view. They argue that, while section 127(2) may require the use of a physical seal, there is no reason to read down the broad statutory definition of “document” that would otherwise apply under section 25 of the Acts Interpretation Act 1901, which is broad enough to include electronic documents, at least for the purposes of sections 127(1) and 127(3).

When it comes to a company signing a deed under section 127(3), these lawyers may argue that printing the signed electronic document satisfies requirement for paper, parchment or vellum.

They also point out exclusion of the Corporations Act from the Commonwealth Electronic Transaction Act doesn’t mean that electronic signature is prohibited.

Pursuant to s 127 Corporations Act 2001 (Cth), a corporation can

Electronic Signatures

sign by any method, with certain presumptions of authority pursuant to s 129. Therefore, if a document is electronically signed by the corporation, then there would need to be some evidence that the company has authorised the method. Ostensible authority may be relied upon if there is sufficient evidence.

The ubiquity of electronic signatures is now such that the recent decision of the Court of Appeal of New South Wales in Williams Group Australia Pty Ltd v Crocker 4 turned not on the validity of the electronic signature, but on the question of ostensible authority to sign.

In the absence of clear legal authority, a practical approach for companies that wish to sign electronically is to articulate early the better view that documents can be signed electronically under the section 127 of the Corporations

“The ubiquity of electronic signatures is now such that the recent decision of the Court of Appeal of New South Wales in Williams Group Australia Pty Ltd v Crocker 4 turned not on the validity of the electronic signature, but on the question of ostensible authority to sign.”

Act, to print out the electronic document once signed to satisfy any need for a physical instrument and to be prepared to provide evidence of due authorisation in case the counterparty requires further comfort that the company has properly authorised execution of the document.

One way around relying on s127 is to have a Power of Attorney appointed by the company and include a copy of that document in the contract.

*Claire Martin Senior Associate KREISSON Ph: 61 2 8239 6511 Email: claire.martin@kreisson.com.au

FOOTNOTES: 1 (1880) 5 QBD 346 2 (1893) AC 552 3 [2013] NSWSC 766 4 [2016] NSWCA 265

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29

Leadership and High Performance

Claim back your life!

By Charlotte Thaarup*

Charlotte Thaarup

30

You have set the alarm for 5am; you really must get into the office early to get a few things done before the others arrive. You arrived home late last night, and then had a glass, or two or three. At five the alarm rings.

On some days you get up, but on other days you’re just too tired. If only you could wake up with a coffee in your hand!

If this is a bit like you, you are not alone! Coffee is the second largest global commodity, propping up our energy levels and camouflaging our tiredness.

Work pressure is only one of your potential “stressors”. Others are information overload, job uncertainty, social media, a highly reactive 24 hour input cycle, and too much coffee! To top it off, we humans tend to be masters of generating the stress internally by fuelling thoughts of worst-case scenarios, selfdeprecation and placing the most negative experiences we have had on continuous replay.

The feeling is, “Once I get it all done, then I can relax. I just need to complete this and that, and then...”

To try to get it all done we walk a little faster; we multi-task; we get up early, sacrificing a little sleep; we don’t exercise as much as we would like; and we use coffee as our constant source of energy. Then we don’t sleep well, we feel overwhelmed, we can’t think clearly. We feel torn between

home and work: at work we feel bad for the family, and when we are with them we can’t wait for them to fall asleep so we can get more work done.

We easily internalise and personalise stress to “I am not keeping up” and, even worse, “I am not good enough”. Our body systems are not designed for one big stream of high intensity work tasks and our attention is not designed for constant bombardment. It is not you: this is a cultural and societal problem and your reaction to this is natural, normal.

Constant stress does, however, not serve you. It is hard on your body, on your mental and emotional wellbeing, on your relationships and even on your performance.

Much of the focus in corporate training and coaching is on ways to be more productive, more efficient – to get more done. The truth is you will never get it all done, you are most likely already at capacity and there is no magic trick that will give you more time. Are there ways to work more efficiently? “Yes”, and there are ways to manage our attention, but all this will only get you so far. Also, might some of those not-so-efficient moments have been when you had a laugh or experienced connection?

Not feeling connected contributes further to stress levels and low mood.

With high stress and little connection we reach for the antidepressants

Much of the focus in corporate training and coaching is on ways to be more productive, more efficient – to get more done.

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

Leadership and High Performance

when really our reaction to a crazy world is our systems saying: “This doesn’t work for me”. Don’t suppress a natural reaction to a sick system with antidepressants; instead, make some changes.

So what to do?

A good place to start is to reclaim your relaxed body state (the parasympathetic) throughout the day by simply taking ‘Five Magic Breaths’.

You do that by focusing on the breath, then counting on the in breath and then counting twice as far on the out breath.

Start practicing mindfulness.

Just ten minutes a day will make a substantial difference both immediately and over time. You can start with the ABCD mindfulness practice on our website: www. themindfulnesclinic.com.au.

Mindfulness is not a performance

tool, it is a life quality and truthfinding practice. Mindfulness does increase our capacity, but more importantly, it makes it unacceptable to live in ‘everlasting go, go, go’ and ‘anxiety’. The practice of mindfulness will enable you to see the delusional treadmill that you are on and want better for yourself. After many years of mindfulness practice, I am no doubt more productive than ever, I also have more complete time off, and I don’t allow myself to do rush, drama nor stress. Life is too short for low quality time like that.

Here are the basics in claiming your life back! zz Get enough sleep – if your work life is regularly affecting the time you have to sleep, something needs to change. zz Move – exercise a minimum of 30 minutes a day.

zz Connect, relax, have ‘doing nothing time’ with no tasks other than perhaps a little gardening, reading, enjoying the sun or a long bath. zz Check in. Life is not a race. It exists in the NOW and that is now, right now. This moment matters. What is the quality of this moment for you? Are you making it a means to the next? Can you sense the body, the breath right now? zz Remember that out there is a rainforest, beaches, galleries, music, art, sport teams, books; life has a lot to offer and we forget that when all we can think about is finishing the next task.

*Charlotte Thaarup Principal Consultant B. Teach, DipFDR (Vic), DipMeditation, DipEd (London University) MBSR, MBEAT, CBMT. Ph: 0432 724 764 Email: charlotte@themindfulnessclinic.com.au www.themindfulnessclinic.com.au

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Data and Technology

SMS is no longer an optional extra for collections

By Damien Allison*

“SMS is blowing up in Australia right now!”

So exclaimed our Head Analyst as he finished collating data for our 2018 annual review. The one particular stat which inspired a phrase now immortalised as a slogan on our office wall was this More than 250 million commercial SMS were sent in Australia within the month of November, 2018.

That figure alone should eliminate any lingering doubt as to SMS being one of Australia’s most prevalent communication channels. The debate about SMS being a legitimate mode of formal and business communication must now be considered well and truly closed.

What do they want?

Damien Allison

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The demand for SMS is consumerdriven. Marketers are already listening to the collective voice of the people and so too are many of the most successful collections companies. And this is what they’re saying Last year, a study of 3,200 young adults from the US, Europe, Japan and Australia revealed 70% of Australians in the Millennial and Gen Z age groups (18-34 year olds) would rather communicate through text than by voice. Ask anyone you know in that age range if they answer calls to their mobile phone from an unrecognised number and see what they say. “Not a chance!” is the answer I got when I asked a friend recently.

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

SMS vs email vs a phone call The stats in our infographic support this trend, as well as the fact perceptions toward the more traditional communication channels have shifted. Email is now considered formal and for business communique, with many messages ignored and left unopened (how often do you check the “social” and “promotions” tabs in your Gmail account?). At the other end of the scale, a phone call is seen as strictly a last resort or for emergencies. An SMS, however, is more direct than an email, but far less intrusive than a phone call.

This is why virtually every SMS will be opened and read, almost half of them will receive a response within just 90 seconds and about 1 in 5 people will click on the link provided in your message. Meaning SMS is a most appropriate mode of communication for collections.

Here’s a great example. What’s the quickest way you will discover your point of contact has left the company? Emails may not be forwarded and phone calls may go unanswered, but you’ll get a message straight back from whoever is currently using that mobile phone.

Integrating SMS Now we have established just how imperative SMS really is, the next question to tackle is how to utilise it in the most productive manner?

As SMS service providers offer differing functionalities, selecting the

Data and Technology

correct gateway through which to broadcast your campaigns is essential.

You want to be able to pace your campaigns to ensure they return the optimum results. If you have a list of 1,000 numbers, for example, and the call to action in your message is for them to phone in, have you enough agents to handle the calls? If not, you run the risk of a slovenly hang up rate and the additional ire of those kept on extended hold.

portions. Take things like call centre staffing levels, lunch breaks, shift changes and projected response rates into account then segment your list and split each one by broadcasting in intervals over a period of time. This allows you to schedule a single campaign that broadcasts in multiple segments, at specific times, across days or even a week, depending on how many cases you have.

Setting the pace

Staying ahead of the game

Pacing your campaign means breaking it down into manageable

The most important thing to recognise regarding modes

of communication is not that preferences are changing, it’s that they have changed. The younger generations especially want SMS, but the manner in which you integrate it is really up to you. The key is to partner with a collaborative service provider.

*Damien Allison Customer Experience Professional Ph: 1300-208-593 Email: damien@smsfusion.com.au smsfusion.com.au

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Data and Technology

Peer to peer lending platforms - disrupting Asia’s banking corporations

By Amaran Navaratnam MICM CCE*

Amaran Navaratnam MICM CCE

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We are in the era of where Finance and technology, the two biggest industries in the world, have joined forces and revolutionised the way consumers are handling money. The commonly referred term we use is Fintech. The combination of the two is not only exciting for those industries, but it’s appealing for those who stand to make money from it.

One of many Fintech success stories is the Peer to Peer (P2P) platform, P2P platform I find is similar to the Airbnb & Grab business model, instead of introducing property owners to short term lease’s, or, drivers to people wanting a lift from A to B, the P2P platform introduces SME entrepreneurs to investors seeking a higher Return on Investment (ROI) for short term unsecured loans.

The P2P platform is enabling startups to technically “start-up” with the cashflow support it needs by providing an alternative investment and borrowing solution for both the investor and the SME.

Let’s face it, we as investors are all in it to make quick and fast cash with little investment involved. After all, that is what investment is all about!

P2P Vs. Asia’s Banking Corporations P2P platforms are the new way for us to invest and diversify our investment portfolio, with a moral satisfaction knowing that you are giving the opportunity for an entrepreneur to sell what they believe in.

The size of the Southeast Asian alternative financing market grew from US$46.65 million in 2015 to a whopping US$215.9 million the following year according to a study jointly conducted by the University of Cambridge and Monash University.

With stringent credit risk assessments in place within the Asian banking corporations SME’s are struggling to get cashflow approved.

In 2017, Singaporean banking corporations have rejected almost 70% of SME business loan applications

Let’s face it, we as investors are all in it to make quick and fast cash with little investment involved.

After all, that is what investment s all about!

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

Data and Technology

higher interest rate in comparison to a fixed deposit. P2P platform is an ideal win/win for the SME and investor!

P2P Business Model The P2P business model is starkly different from that of traditional banks and the opportunities posed

by P2P lending may have significant impact on financial institutions. The P2P business as illustrated is simple and easy to understand, making it a perfect business process model to follow.

Investor on-boarding process 1. Open an account with a P2P lender and pay some money in by debit card or direct transfer 2. Set the interest rate you’d like to receive or agree a rate that’s on offer 3. Lend an amount of money for a fixed period of time – for example, three or five years. You might have to pay a fee to lend money (i.e. 1% of the loan)

SME on-boarding process

primarily for the following reasons; less than three-year operations, no credit history, not meeting a “good set of financials” and no confidence in the business model.

In Asia, there are over 100 P2P lending platforms now in Asia.

Singapore has been earmarked for the position of Asia’s leading Peer to Peer (P2P) lending centre due to Singapore’s reputation as a major financial and technological hub of Asia with a solid start-up ecosystem.

Over the last 5 years Asia’s banking corporations are now seeing the effects of their credit risk assessment strategies in place, I agree no better way to mitigate risks than a tight credit risk assessment strategy, however, the P2P lending platforms have capitalised on the banks rejections and now attracting more of their SME customers to their platforms as well taking their traditional banking customers away from them by offering an alternative investment strategy promoting a

To apply for a loan, a potential borrower visits a P2P lending website and fills out an application.

The platform leverages online data and technology to assess risk, determine a credit rating and assign an appropriate interest rate.

Applicants may receive offers within a few minutes and can evaluate options without impacting their credit score. Once you select a loan offer, you’re required to complete an online application that gathers information about your income and employment as well any other additional documentation required for the Credit analyst teams to make the right decision.

Once an SME completes their onboarding process with the platform, a campaign will be released to investors with an agreed interest rate and the money dispersed within 24 hours. ➤

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Data and Technology

Advantages and disadvantages of P2P lending for investors Advantages zz Low Barrier of Entry: Low investment commitment (minimum investment of S$100, or less for some platforms) zz Diversification: Alternative investment products to diversify your portfolio zz Returns: Attractive returns of more than 10% usually (higher than inflation) zz Monthly Returns: Investment principal with interest earned returned to investors on a monthly basis.

Disadvantages zz High Risks: Given that the loans are for SMEs, there is a risk that investor lose their investment when the company defaults on payment zz Platform risk: If the platform (the middleman) you invest in closes down, your investments will not be managed effectively

Credit and risk management Credit Risk Modelling P2P platforms take on the responsibility to ensure that the investor is investing into an SME that has passed its credit risk assessment before the SME is campaigned to investors.

Credit Risk modelling decisioning is slowly moving away from the traditional ratios such as; Probability of Default, Loss Given Default and Exposure at Default to a broader

logistic regression, neural network, support vector, decision trees and discriminant analyst ratios in particular for SME lending.

The further we evolve with fintech and money lending platforms the stricter and detailed the mathematical algorithms need to be running in the background when assessing a company’s risk appetite and exposure for the lender and the borrower.

In addition, survival analysis is also a popular method applied in credit risk management to predict the time to default for P2P lending.

interest unless a director’s guarantee has been signed.

All P2P platforms do ensure that Director(s) guarantees are signed, however, it doesn’t harm to ask the P2P platform provider if Director Guarantees have been backed by an audited Director(s) Statement of Financial Position by an accounting professional. We all know that some Director(s) know how to “play the game” to avoid personal financial responsibility for a business if it were to close with outstanding creditors.

Risk Management Without appropriate compliance and legislations not instilled earlier in the rise of P2P lending this created a significant debt issue with a $200bn overdue payments by borrowers, creating a large issue not only for the investors of P2P but also for the government.

A growing concern of suicides in Hong Kong and other parts of Asia to which investors invested almost their life savings into P2P we mislead by fraudulent P2P lending platforms.

Asia’s Monetary authorities have now and still working on improving investment and borrowing legislations to prevent significant debt issues and to primarily weed out any fraudulent P2P lending platforms from entering into the market.

As with anything in life, before signing up to invest speak with your financial advisor first! As appealing as the high interest earnings P2P platforms provide, you want to ensure that you are investing within your means.

Like how you would invest in shares, do your research on the lending platform itself, research into what types of industries are being campaigned on the platform and diversify your investments accordingly into industries to secure a greater ROI. Research on all P2P platforms and see what suits your investment needs in terms of ROI and what reasonable interest rates you can set as an investor.

Start with a small investment, continuously monitor and invest within your means and diversify!

Debt Management P2P is an unsecured lending platform, meaning no collateral against a borrowed amount. If there is no guarantee that the money you have invested will be returned, or, the

*Amaran Navaratnam MICM, CCE AICM – Chairman Young Credit Professionals of Australia Portfolio (Vic/Tas)

Things to consider before investing

P2P platforms are the new way for us to invest and diversify our investment portfolio, with a moral satisfaction knowing that you are giving the opportunity for an entrepreneur to sell what they believe in.

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PPSA

Security agreements and the PPSA

By Frank Gambera*

Frank Gambera

Introductory comments

The issue

A recent decision by the Queensland District Court in Trenfield v HAG Import Corporation (Australia) Pty Ltd [2018] (“HAG Imports”) has surprised many commentators and left some credit managers wondering just how protected their perfected security interests are from liquidator’s clawback provisions.

Prior to the decision in this case, it had been widely viewed that the Victorian Supreme Court of Appeals decision in Elkerton (that was followed in Amerind) established a default legal position that a credit application constituted an offer that was capable of acceptance through the first supply of goods.

Furthermore, an agreement which imposed ROT terms in respect of future supplies was seen to be an agreement by which a security interest was provided for irrespective of individual dealings with orders and invoices.

On the surface, HAG Imports appeared to raise many of the same issues previously settled in Elkerton and Amerind regarding credit applications and the PPSA. There were ongoing arrangements in place between the creditor (HAG) to supply the debtor (Lineville) with goods on credit under its standard terms and conditions. However, in this case the court elected to distinguish (rather than follow) Elkerton and found that primacy must be given to the specific contractual terms of each arrangement to determine if the underlying requirements for a contract had been met.

Following on from this case, it would seem that the issue facing credit managers today is how to ensure that credit applications satisfy fundamental contract law principles such that the credit application can be characterised as an offer that expressly provides for ongoing supplies of goods (and thereby constitutes an overarching security agreement).

The cases Central Cleaning Supplies (Australia) Pty Ltd v Elkerton (“Elkerton”) In Elkerton, the parties had executed a credit application prior to the commencement of the PPSA that provided for the future supply of goods on 30 day credit terms subject the creditors standard terms and conditions.

The Court of Appeal rightly noted that the credit application was simply an application for credit on 30 day terms. The mere signing of the credit application did not create a contract because this act did not impose an obligation on the debtor to do anything. It was an offer by the debtor to be bound by the credit terms of the creditor.

For the arrangement to constitute a contract the debtors offer had to be accepted by the creditor, which the court determined occurred by way of conduct when the first delivery of equipment was made and the sending of the invoice confirmed that credit was being provided.

On this analysis, the first supply of equipment operated to establish ➤

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PPSA

a security agreement between the creditor and debtor whereby all future security interests came under the same overarching security agreement capable of perfection once registered on the PPSR. Amerind Pty Ltd (“Amerind”) In similar circumstances, Amerind followed Elkerton and found that the relevant contractual arrangement was that of an overarching security agreement created at the time of the first supply of goods.

Despite the fact the creditor sought to argue (contrary to the Elkteron finding) that there was no overarching security agreement providing for a security interest in future deliveries, but rather each supply of goods represented a new security interest requiring ongoing and consecutive registrations on the PPSR, the court disagreed and cited Elkerton with approval.

Transfield v HAG Imports (“HAG Imports”) The recent 2018 decision in HAG Imports did not follow the cases of Elkerton or Amerind and is a stark reminder that each contractual arrangement must be considered in relation to the principles of contract law and the PPSA. In HAG Imports a credit arrangement was entered into between the creditor (HAG Imports and debtor (Lineville) prior to the introduction of the PPSA for the supply of goods on credit. The application was expressed as a request for credit and one of the agreed facts was that the defendant would supply goods to the company pursuant to the standard terms and conditions.

After the commencement of the PPSA, HAG Imports terms and conditions were amended to include a ROT clause and a purchase money security interest (PMSI) was registered which stated that the registration was

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HAG Imports is an important nd curious decision because it is a reminder that not all credit arrangements meet the underlying requirements of a contract. transitional. In doing so, HAG Imports was asserting that the post PPSA terms were an amendment to the prePPSA security agreement, thereby creating a security interest in all future goods.

Following the liquidation of Lineville and during the relation back period, the liquidators sought to recover sizeable payments made to HAG Imports on the basis that they were unfair preferential payments of an unsecured debt.

In response HAG Imports sought to rely on Elkterton by arguing that the credit application constituted an offer by Lineville to acquire goods on credit that was accepted by HAG Imports after the first supply (prePSSA) and constituted an overarching supply agreement.

HAG Imports then went on to argue that the security agreement provided for future security interests and since it was created prior to the introduction of the PPSA, the benefit of the transitional provisions applied.

Curiously, the Queensland District Court chose to distinguish rather than follow Elkterton and declined to accept that the credit application constituted a security agreement on two grounds. Firstly, his Honour found that the credit application didn’t constitute an offer capable of acceptance and secondly, that there was no evidence of consideration provided by the debtor.

McGill SC DCJ stated: “In my opinion, the credit application in the present case was

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

not an offer…it was a request for credit…It is simply an evidentiary document, an admission that the applicant knows of those terms and knows that those are the only terms on which the defendant will supply goods to the applicant.

I find it impossible to characterise a mere supply of goods after receipt of this document as amounting to an agreement on the part of the defendant to provide any particular credit to the applicant in the future.”

Furthermore, his Honour found that there was no formal agreement providing for ongoing supplies and declined to find that there was any evidence of consideration by the defendant HAG Imports. McGill SC DCJ stated: “Overall it appears to me that the arrangements put in place by the defendant (HAG Imports) have so carefully excluded any commitment at all by it to a person in the position of the company that I am unable to identify any consideration given for an implied promise in the credit agreement application by the company that goods to be supplied to it will be on the standard terms and conditions in force from time to time…

On that basis the situation here was factually distinct from that in Elkerton.”

PPSA

On this analysis his Honour held that each supply would be considered a separate contract rather than a transitional security agreement and therefore the security interests made after the registration commencement time would not benefit from the protection provided in the transitional provisions. This meant that each supply of goods required separate registration of a security interest following each delivery of stock.

According to his Honour HAG Imports had registered a purchase money security interest in all future goods supplied and their proceeds, the effect was that the purported registration was defective and of no effect.

As a result of this finding HAG Imports was ordered to pay the liquidators $473,291 together with interest under the unfair preference provisions of the Corporations Act 2001 because following the liquidation of Lineville the unsecured

security interests vested in the insolvent estate of Lineville pursuant to s 267 of the PPSA.

In Conclusion HAG Imports is an important and curious decision because it is a reminder that not all credit arrangements meet the underlying requirements of a contract.

Whether a security agreement creates a security interest will depend on the specific contractual terms of each arrangement.

Every credit arrangement must have an offer, acceptance and consideration for the courts to recognise a credit application as a contract as opposed to merely an announcement.

Drafters of commercial ROT arrangements will need to carefully ensure that arrangements with customers meet these requirements so that terms of credit can operate as an overarching security agreement for all future goods requiring only one

registration at or before the time of the first delivery.

The one distinct commonality between all the major decisions concerning the PPSA thus far, is that it can only be decided if a credit application creates a continuing security agreement by considering the precise nature of the documents in the context of the principals of contract law and the PPSA.

*Frank Gambera Director McMahon Fearnley Lawyers Email: fmg@mcmahonfearnley.com.au Ph: 03 9670 0966 Mobile: 0413 052 529 DISCLAIMER: All material contained in this paper is written by way of general comment. No material should be accepted as authoritative advice and any reader wishing to act upon material contained in this paper should first consult McMahon Fearnley Lawyers Pty Ltd for properly considered professional advice, which takes into account specific solutions.

See you at AICM’s 2019 N A T I O N A L

CONFERENCE

16th - 18th October 2019, Marriott Gold Coast

CLICK HERE FOR MORE DETAILS

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aicm

Masterclass

What the credit professional needs to know about Balance Sheets W

ith the current climate of tight credit lending it’s timely for a back to basics approach.

Credit professionals need to be clear and confident on how they make the decision to grant credit.

When assessing trading entities, a balance sheet is a great start your analysis of an entities creditworthiness.

Viewing our archives we have a wealth of information that’s been provided by previous contributors and in this article we put together some of the highlights on analysis for credit professionals to consider.

So, what is a balance sheet, why is it compiled and what information does it give us?

A balance sheet is merely a document telling us how much a company owes according to its books and records with the book value of its assets and its net worth at a certain date. It is compiled for the information of management from time to time as and when generated and at the end of the company’s financial year.

The value to a credit professional of such a document relating to the debtor is readily apparent and should be sought at every opportunity to support the creditworthiness decision.

A balance sheet on its own is not really worth that much, the more supporting evidence the better. Ideally it should be accompanied by at least two years of balance sheets and profit and loss. When these are read together we have a more complete picture of the company’s position at a certain date in addition to a reliable guide regarding trends and whether the company’s: —— position is improving or otherwise —— profit margin is being maintained —— sufficient capital for its requirements —— pays its creditors on time —— directors are running the business within its requirements or living beyond their means (leading to comments on both capacity and character).

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CREDIT MANAGEMENT IN AUSTRALIA • May 2019

ASSETS Depreciation Figures in a balance sheet are in accordance with a company’s books and recorded historically.

Arithmetically they’re correct but at the same time they don’t provide a true picture. In fact they seldom do.

For example two companies purchase the same truck on the same day for $50,000.

Company 1 depreciates the truck at 10% per year and Company 2 depreciates the truck at 25%. At the end of 5 years Company 1’s truck is on their books at $29,525 and Company 2’s truck has a value of $11,865.

Depreciation Cost: $50,000 Year

Truck 1

Truck 2

1

$45,000

$37,500

2

$40,500

$28,125

3

$36,450

$21,094

4

$32,805

$15,820

5

$29,525

$11,865

In this example we see how necessary it is to have additional adequate information before attempting to assess a company’s true worth.

Not only does depreciation have a large bearing on true values but so does appreciation. Let us assume our two companies each show a fixed asset of property on their balance sheet. Company 1 has a property purchased in 2000 in a capital city CBD with no revaluation while company 2 shows a company in a rural town purchased in 2018. It’s clear that company 1 has more value in its fixed asset than company 2.

Masterclass aicm

How to determine and assess the value in the asset and true worth of a company? The golden rule here is that no asset is worth more than it would fetch in a forced sale and in the current economic climate of declining fixed asset values this is paramount to keep in mind.

Fixed assets The true value of fixed assets depends upon demand, locality and suitability. Should the property consist of a modern house in a popular suburb it could well be worth a figure in excess of the value carried on the balance sheet. On the other hand an old house recently purchased may have flaws which will be costly to rectify and this may make the property difficult to dispose at the carried value.

Buildings constructed for a specific purpose should be viewed with caution as the question then arises – how much will it cost to convert them to a more standard purpose. For example a cinema may have cost a great deal to construct however once in an insolvent situation – who wants to purchase a building with such a specific purpose? What else could it be used for? In this instance it may be that the value of the fixed property is simply the value of the land less the demolition costs of the existing building.

When valuing stock, the correct ratio to use is largely a matter of personal opinion from one type of business to another but generally speaking we use the valuation of 10% on retail stock and 20% on wholesale stock.

Stock on hand In a large number of cases this item is the largest single asset and consequently it is necessary to assess its true value with accuracy. The figure reflected in the balance sheet is normally accurate and gives true value which should be at cost or saleable value whichever is lower.

The value of the stock may be different depending on whether it is sold during the course of ordinary trading or being sold on a ‘forced sale’ basis.

A great example to use is a butcher’s shop with an annual turnover of $600,000. The balance sheet shows stock on hand of $4,000 which is just two day’s supply of meat. Compare this with a jeweller whose ➤

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aicm

Masterclass turnover is also $600,000 per annum but which shows stock on hand to be $50,000. The jeweller’s stock does not turn over rapidly and on a forced sale basis would probably not fetch more than 50% of carrying book value.

While these are extreme examples we use these to give example as to the intimate knowledge required to analyse balance sheets and what the ratio of turnover/ stock should be in different industries.

There are many formulae that can be used to analyse ratios which we will deal with in a separate article.

Their purpose is to give you a quick reference point for outliers within a set of financial statements.

In this case using the stock turnover ratio will give you an idea of how long the current stock on hand will last if the company sells at its normal rate. The ideal time varies considerably from one type of business to another.

As noted above – it is all a matter of common sense – if the jeweller had sufficient stock to last two days and the butcher had almost enough meat to last a full year then neither business would survive for very long!

If the turnover/stock ratio differs widely from the normal for the particular type of business then an explanation should be sought. There may be a simple explanation with common causes especially if the company has significant borrowings being: —— Unsuitable stock —— Excessive stock with little demand —— Soiled stock —— Out of fashion or out of season stock When valuing stock, the correct ratio to use is largely a matter of personal opinion from one type of business to another but generally speaking we use the valuation of 10% on retail stock and 20% on wholesale stock. Using this ratio will give you a safe estimate of the true value of the stock on hand.

Debtors An item which is frequently one of the major assets and which merits close scrutiny is the company’s debtors.

Businesses often carry significant investments in software which can be either fully depreciated in the current year or carried and depreciated over three years.

The licencing laws for the software often come with clauses that prevent ownership passing ...

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CREDIT MANAGEMENT IN AUSTRALIA • May 2019

It’s necessary to establish the ratio of turnover/debtors.

If the payment period is short then the chances are that the company’s debtors are reasonably sound and, just as important, it is an indication that control is being exercised in the company’s affairs. This figure should also be examined in light of bad debts written off, bad debts recovered and the provision for possible future bad debts.

Where, say, a building company shows a substantial amount owing, but the risk is potentially not well spread, it’s a good idea to request a list of specific large debts and then assess the creditworthiness of these customers who are the basis of your lend.

Furniture and fittings Normally the annual rate of depreciation is indicated in the notes to the balance sheet. Even if the company is depreciating the assets at 20% per annum it’s unlikely that more than half, if any, of this book value will be realised in the event of a forced sale.

Tools and equipment Similar to furniture and fittings, the same lens needs to be applied to tools and equipment but it depends on the nature of the equipment. Specialised machinery that can be used for one purpose only is often very expensive and although it may be of considerable value to its owner, it may be quite unsaleable to anyone else.

An example of this is heavy brick making equipment which if purchased would involve the purchaser in heavy transportation and dismantling costs thus reducing the amount they’re prepared to pay.

Software Businesses often carry significant investments in software which can be either fully depreciated in the current year or carried and depreciated over three years. The licencing laws for the software often come with clauses that prevent ownership passing and that terminate upon an insolvent event so the value of these must be discounted significantly if viewing as a saleable asset.

Goodwill Never place any value whatsoever on this item – it would certainly have no value if the company was placed into liquidation.

Shares in subsidiary companies In normal circumstances no value should be placed on this item either. Firstly, when a company experiences difficulty one of the first things that is done is to liquidate the subsidiaries which normally fail at the same time as the parent company.

Masterclass aicm

Secondly a scrutiny of the Memorandum and Articles of Association will probably reveal that the shares are not freely transferable.

LIABILITIES

Cash on hand and banks

Payment times

The balance sheet is probably arithmetically correct and in order so to value these items in full.

The main port of call is to determine a ratio between purchases and trade creditors. This ratio tells us very clearly whether the company is a prompt payer of its suppliers (or not).

For example if the purchases for the year are $1.2m and the trade creditors are $500k then the company is paying creditors on a 150 day basis.

Work in Progress This is a term often used by contractors and manufacturers to indicate how much has been spent on a particular project which remains incomplete. Often this should not be included in the valuation of the balance sheet as: a) a half finished article is virtually worthless; and b) many contractors have used this item to falsify their accounts in order to make their financial positon look stronger than it is.

Loans to directors The appearance of this item can be an indication of either illiquidity or financial weakness unless the loan is of a very temporary nature. If the company was financially strong and in a liquid position it would be able to declare larger dividends making it unnecessary for the directors to borrow. Should the directors be known to you and further background as to their personal worth be available then this should also be taken into account.

We’ve now completed the review of the assets side of the balance sheet and we need to turn to the liabilities.

Liquidity The ability to pay on the part of a debtor is a chief concern of a credit professional. A company may well be, and often is, in a very strong financial position but still unable to meet its commitments as they fall due. Such a company is in an illiquid position – its assets may well exceed its liabilities but such a company must always invoke further investigation by the credit professional to determine what causes this state of illiquidity?

The more common causes are (not necessarily in order): a) Capital expenditure b) Poor budgeting for cash inflow c) Insufficient control of debtors accounts d) Trade investments ➤

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Masterclass e) Borrowing by directors f) Poor purchasing g) Over trading Every one of these items with the possible exception of capital expenditure is an indication that somewhere along the line management is at fault.

Illiquidity is far more serious than people imagine and at different points in the business cycle it can have serious impacts on the survival of a company. It can reduce profits as no advantage can be taken with bulk purchases or settlement discounts. Lack of liquidity results in increases in interest paid and this can be a heavy impost on an entity with little cash at the start.

Further items that suppliers may have in short supply are offered to those who can pay promptly and may not be offered to those with cashflow issues as all businesses look to convert to cash in the fastest manner available.

A consistent increase in illiquidity must be regarded as a very clear danger signal and the strictest precautions should be taken with the customer.

Funding and bank loans In addition to the cash position you need to check the current and non current debt to determine whether the funding for the business meets the requirements for trading. The notes to the balance sheet will direct you to the borrowings and the aging and years that the debt will fall due.

Trading and profit and loss accounts These two accounts are attached to the balance sheet and provide a wealth of information if correctly interpreted.

The trading account informs us of the value of the stock at the beginning of the year, how much stock was purchased during the year, how much was realised for stock sold and how much stock remains.

Without being able to compare these two years the accounts will give us little information but should comparative figures be available we can see: a) Whether the company’s turnover is increasing or decreasing b) Whether its profitability margin is being maintained c) Whether it continues to give your company a fair share of its business. This item is a great measure because if you’re getting a generous slice of the business does it mean that your commodity is better than your competitors or that your credit terms are too lenient The profit and loss account tells the full story of the running expenses of the business

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Illiquidity is far more serious than people imagine and at different points in the business cycle it can have serious impacts on the survival of a company. It can reduce profits as no advantage can be taken with bulk purchases or settlement discounts.

Insurance A good place to start is to see if the company is insuring its assets. If the amount is too low it’s a clear indication that assets reflected in the balance sheet are not worth as much as they’re purported to be or that certain assets are not insured. Uninsured assets should never be valued as they can disappear overnight and leave company insolvent the following day.

Other items of importance are the net profit, the bad debts written off, the director’s loans and the directors entertaining, travelling etc.

Net profitability is better measured as a percentage of turnover rather than an amount expressed in dollar terms.

Bad debts written off The percentage of debtors account written off as bad is a reasonably accurate guide to the control of credit, whilst the director’s expense accounts are interesting as they often give an indication of the director’s character and their approach to the company – professionally run or an extension of themselves.

Cashflow The main questions credit professionals require and answers to are: 1. Can the debtor pay and if so can they pay when the account is due for payment.

2. Let’s assume after a review of the balance sheet we have satisfied ourselves that the entity has capacity to pay and now we need to decide whether they can pay when the debt is due for payment.

The second question depends upon the availability of cash as and when it’s required. Every company wants to have cash available when required but dislikes a cash surplus to immediate requirements being idle

Masterclass

This is most important as the question of insolvency arises when a company is unable to meet its obligations on a due date. In other words an entity may be unable to pay its debts as they fall due but may be able to pay creditors in full ultimately if forced into insolvency.

Alternatively an entity may be able to pay their accounts at a time when liabilities exceed assets.

There are many formulae for ascertaining various ratios and these are sometimes used in the assessment of a balance sheet. In the course of this review we’re not going to use ratios as these will be covered in a later article.

The study of the balance sheet must always be made bearing in mind the nature of the business and, we stress, you may not be able to find commonality in the balance sheets of businesses that operate in different fields. For example the debtors balance of a trading company will be much greater than a smaller wholesale business with a lesser turnover.

Decision making The whole object of studying balance sheets is to assist us to make decisions which will minimise the risk of loss.

Several other considerations must also be taken into account.

A key area is in company policy. The credit professional is an essential part of the management team of any company and in matters of credit they should not only adhere to but also assist in formulating company policy relating to credit. With the specialised knowledge of a credit professional in the management team, they will be able to guide colleagues in this area and influence policy and company culture.

aicm

when it could be put to profitable use. The regulation of the inward and outward flow of cash is therefore essential to any business and it’s necessary for us, from a study of a balance sheet, to be able to ascertain with fair measure the accuracy of whether the company will have cash available when required.

Whether cash will be available or not usually depends upon: a) Whether current resources are available to meet current liabilities; and b) Are current assets being converted into cash fast enough to meet requirements?

Conditions influencing a liberal credit policy While we have set up the criteria of normal conditions, experience shows that the credit manager is often faced with conditions which are not normal. The following are some of the conditions that lead to the adoption of a liberal credit policy by the credit policy: 1. Cash position is low and there are heavy liabilities falling due 2. Stock of work in progress is abnormally large 3. The market for the main product is declining 4. The product is new and you’re creating a market 5. The product is highly profitable 6. Advertising and sales support are required 7. Large plant and equipment investment is required with large and consistent output required to maintain the high breakeven costs 8. Product has only temporary popularity such as novelty (such as fidget spinners) 9. Product has consistent changes in style in design each year and carry over stock on hand will be substantially discounted 10. Technical advances and new inventions lead to product obsolescence 11. The end of the principal selling season is fast approaching and the business is not financially equipped to carry inventory 12. General business conditions are good and your supply chain will benefit from further stock adding to their strength 13. Customer is of limited resources but known to have long term profitable supply contract 14. Company is selling into a new field and needs to build up a customer base 15. When you are in a very competitive industry that makes it necessary to have a liberal credit policy to attract customers

Conditions influencing a conservative credit policy Other variations in the conditions outlined as normal might put restrictions on the credit policy of your company: 1. The financial conditions of your company may be so extended that the average credit hazard could not be assumed, necessitating selling only to the soundest customers in the market ➤

The study of the balance sheet must always be made bearing in mind the nature of the business and, we stress, you may not be able to find commonality in the balance sheets of businesses that operate in different fields.

May 2019 • CREDIT MANAGEMENT IN AUSTRALIA

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aicm

Masterclass 2. Your stock in hand might be low due to shortages of material 3. Demand for your product may be very substantial and you are unable with present production facilities to fill orders except for over a long period of time 4. In selling a product on a slender margin of profit when the earnings depend upon rapid turnover your policy might be to sell only to those accustomed to paying promptly otherwise a large credit loss where profit margin is small might completely eliminate your annual profit 5. When general economic conditions are unfavourable or liable to be affected by government measures 6. When conditions in the trade are in a very bad slump and there is an acute possibility of large credit losses 7. When you make a product directly to a customer’s specification which cannot be sold to any other users 8. When an order from a customer involved expensive designing, preparation, tooling or engineering changes before you can get into active production 9. If the product your company manufactures takes a long period to complete 10. If your company produces expensive machinery or permanent plan equipment that becomes a fixed asset your credit policy would be influenced by special circumstances A note of caution on the adoption of either a liberal or conservative policy based on the above reasons – in actuality you need to take into consideration what the long term effect of any change in your credit policy will be. For example you would hesitate to sell to a company that was in very poor financial condition, temporarily experiencing a period of prosperity.

Likewise, if demand for your product was very strong you would not necessarily eliminate an old customer whose financial condition could only be described as fair but who in your considered judgement was likely to continue to be moderately successful in their field.

Company policy will not remain static if the company is to progress. Any changes should however be gradual – violent changes will not be sympathetically received by customers. The policy should therefore be framed with the object of obtaining what’s best in the long run and what may be of immediate and temporary advantage.

Limit of credit requested Before reaching a decision on credit it is necessary to establish just how much credit is required. It is surprising how often this too is overlooked – when asked how much credit is required a customer often states a figure but omits to state this figure represents a month’s purchases.

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A note of caution on the adoption of either a liberal or conservative policy based on the above reasons – in actuality you need to take into consideration what the long term effect of any change in your credit policy will be.

If a 30 day term account is granted then the credit limit needs to be double that amount.

Terms of credit The length of time permitted for the payment of accounts is dictated by company policy and should be made absolutely clear to new customers. Once agreement regarding amount and time has been reached between seller and purchaser it’s recommended that confirmation of such agreement is sent in writing to the purchaser. This ensures there are no misunderstandings when contact is made to collect the debt.

Trade references Don’t underestimate the importance of collecting references and using your network such as trade bureaux. Failure to leverage all potential data collection points may put your firm at a disadvantage and place an unjustifiable risk.

Character Most of us would rather deal with an honest poor man rather than a dishonest wealthy one. Here the financial aspect is not the only part to be taken into consideration when making a decision. In dealing with a company ascertain who the directors are and their background.

Never be worried about asking questions and again your involvement with AICM and your bureau and your fellow members will always assist.

To conclude Assuming that your prospective customer’s position is financially sound and liquid, the character is good and they are not able but also willing to pay, and all that your customer desires is within the framework of your company policy you may cheerfully grant the credit in the knowledge that you’ve completed the appropriate assessment and documentation to ensure payment is made.

aicm Training News Recent graduates FNS51515 Diploma of Credit Management Judith Riley QLD

Statement of Attainments Raymond Miles

NSW

BSBCNV506 Establish and manage a trust account

Kristy Haycock

QLD

FNSCRD502 Manage factoring and invoice discounting arrangements

Stacey Woodward

QLD

BSBRSK501 Manage risk

Jae Harrison

QLD

FNSCRD401 Assess credit applications

Natalie Salter

QLD

FNSCRD401 Assess credit applications

Maria Borg

QLD

FNSCRD401 Assess credit applications

Elizabeth Alexander

VIC

BSBCNV506 Establish and manage a trust account

Terence Costa

NSW

NSCRD504 Manage the credit relationship

Bianca Trapp

QLD

FNSCRD401 Assess credit applications

Lisa Ramsay

QLD

FNSCRD401 Assess credit applications

Tarja Berry

NSW

FNSCRD504 Manage the credit relationship

Francis Ngare

VIC

BSBCNV506 Establish and manage a trust account

Melissa McPherson

VIC

FNSCRD505 Respond to corporate insolvency situations

2019 May to July Face to Face Training Calendar – MELBOURNE, BRISBANE, SYDNEY Melbourne:

Sydney:

21st May – Understanding Credit Risk Toolbox (Half Day Program)

15th & 16th May – Manage Factoring and Invoice Discounting Arrangements (E,D) – (2 Day Program)

22nd & 23rd May – Manage Factoring and Invoice Discounting Arrangements (E,D) – (2 Day Program) 22nd July – Understanding Personal Bankruptcy Workshop (Half Day Program)

21st May – Understanding Credit Risk Toolbox (Half Day Program) 5th June – How to Manage People Performance (E,D) – (1 Day Program) 6th June – How to Respond to Corporate Insolvency Situations (C,D) – (1 Day Program)

Brisbane: 17th May – Managing Hardship (Half Day Program) 21st May – Understanding Credit Risk Toolbox (Half Day Program) 14th June – Understanding Personal Bankruptcy Workshop (Half Day Program)

7th June – Understanding Personal Bankruptcy Workshop (Half Day Program)

12th June – How to Manage People Performance (E,D) – (1 Day Program)

Table of Explanation:

13th June – How to Respond to Corporate Insolvency Situations (C,D) – (1 Day Program)

D = Diploma 4 = Certificate IV

C = Core Unit E = Elective Unit

Important Information: You do not have to be a current AICM student undertaking a full qualification to attend any AICM face to face training. You may wish to undertake a program for your Professional Development, or enhance and update your current skills and knowledge. On the completion of the face to face training, you will be required to undertake the online assessment/s for the unit/s of competency, if you wish to receive a nationally recognised Statement of Attainment.

Please register your interest early, as there is a minimum requirement of 6 students to conduct face to face training.

To speak to AICM about these or any other learning or development, call 1300 560 996 or email andrew@aicm.com.au or debby@aicm.com.au

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AROUND THE STATES

New South Wales

From left to right Nick Pilavidis, Tim Klineberg (King & Wood Mallesons), Grant Morris (Southern Steel) and Stephen Vaughan (KPMG).

Michael Brereton of William Buck addressing the attendees.

Daniel Turk of TurksLegal in full flight doing something he does well.

Delegates at the Insolvency and Litigation Seminar (L to R): Andrew Spring (Jirsch Sutherland), Amy Meekin (Dell Financial Services), Miral Sarvaiya (Ampac), Matthew Hollands (USG Boral) and Stephanie Chisesi (Coates Hire).

Presidents report It’s hard to believe May is upon us and the EOFY is well and truly in sight. 2019 commenced with a bang with many challenges facing the credit and collections industry. With the federal election upon us, housing prices in decline, the royal banking commission fall out and flat wage growth remaining a key issues, the credit environment will continue to be as challenging as ever as we progress deeper into 2019.

The building sector seems to be most impacted with units in Sydney taking forever to move unless heavily discounted. Many of the suppliers to this sector are working closer than ever with their clients trying to help them get through this period rather than just aggressively recover via “winding up proceedings”.

As your Vice President I’m acting as President at the moment whilst Balveen Saini is on maternity leave and for the first time in a while I’ve been asked to do some of the heavy lifting. I’ll leave it to Balveen to announce the details.

The National Insolvency Seminar series kicked off in NSW in March and was a resounding success with feedback from attendees hugely complimentary and pleased at the quality of the speakers and takeaways they had from the day.

April saw AICM return to its stronghold of Parramatta where a networking event was held at the offices of Matthews Folbigg on Payment times and conditions for small business.

An excellent event and we’re really excited to support our western Sydney members.

April saw NSW welcome law firm Holman Webb as a supporting sponsor. We look forward to working with Chris Hadley and his team.

We have some exciting events approaching in the next few months. I’m sorry to the diehard golfers, but NSW is moving away from the traditional golf day this year and taking a slightly 48

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

new approach moving to “Holey Moley” which is a fun and inclusive indoor “putt putt” experience that will encourage more of the credit community to come along.

WINC continues to be a sell-out event in NSW with some fantastic speakers, sponsors and overall support. Seeing the incredible female leaders we have in the credit industry is extremely encouraging as a father of a 6 year old girl who I want to grow up believing she can be anything.

I recently attended the ANZAC day rugby league match between the Sydney Roosters and St George Dragons and decided to bring my whole family plus also invite the family of our late great President Colin Magee. Roberta (wife), Elisha (daughter) and Aaron (son) really enjoyed the game. There were only 3 things Col was more passionate about than his job as NSW AICM President and that was his family, St George and ANZAC Day. Seeing my children with Col’s children on his favourite day of the year watching his beloved Dragons was a wonderful experience and I certainly felt his presence.

The Young Credit Professional awards are also just around the corner so get your nominations in as soon as you can.

– Andrew Smith, NSW Division Vice President

Insolvency and litigation half day seminar This popular event was held on the 7 March and was a seminar full of information from experienced professionals.

Daniel Turk (Partner) at Turks Legal gave an insightful presentation on Terms & Conditions. He drew attention to

New South Wales

Stephanie Chisesi (Coates Hire) with Bonnie McMahon, Anica Cunanan and Renee Smith (all of Matthews Folbigg).

whether your T’s & C’s were up to scratch and would they support the legislative changes.

Michael Brereton (Director) William Buck – gave a great presentation to a room full of eager credit professionals on what to look for during an insolvency event and how to detect when your creditor rights are being compromised.

A panel of 3 professionals answered the hard hitting questions baffling our industry when it comes to unfair Preference Claims. The panel consisted of Grant Morris (National Credit Manager) Southern Steel Group, Tom Klineberg (Partner) King Wood Mallesons and Stephen Vaughan (Partner) KPMG. The session was chaired by Nick Pilavidis (CEO) AICM.

Upcoming May events WINC (WOMEN IN CREDIT) This ever popular event’s prime sponsor is Equifax who are strongly supported by sponsorship from Results Legal and NCI. This year’s event is being held on the 24th May at The Establishment in the city.

WINC is all about connecting professional women in the credit industry and providing an opportunity to network, share experiences and be inspired by the ladies leading today whilst supporting tomorrows up and coming industry leaders.

HOLEY MOLEY MINI GOLF

Toolbox and workshop training In addition to the well regarded Toolbox series, AICM has released a series of three Credit Workshops that are ideal for those moving up in the credit profession or those who want a refresher. These are held regularly and attendances in NSW have generally been strong. The most recent addition to this series is a workshop aptly named Understanding Corporate Insolvency. The first of these sessions was held last month at St Leonards and was facilitated by Toni Sawyer.

Time constraints in a busy work environment have seen us move away from an almost full day on the golf course and embark on an exciting new evening format known as Holey Moley which is basically Putt Putt on steroids. Come along to a fun filled night, networking with fellow credit professionals at Holey Moley Darlinghurst on the 16 May.

MEET A NSW COUNCILLOR

Treacy Sheehan MICM Payment times and conditions for small businesses seminar We were proud to return to Parramatta for a well received evening seminar held at the offices of Matthews Folbigg Lawyers on 11 April. Our first presenter Abdallah El-Haddad of illion explained comprehensive credit reporting and how the information is held within their database and shared with other data contributors plus explained their new tool Credit Simple.

Ben Holland of Australian Small Business and Family Enterprise Ombudsman presented on how small businesses are being impacted through their access to credit and what’s making their access so hard plus what’s is being done to improve their access. We really appreciate the effort that Matthews Folbigg Lawyers made to the night being such a success.

Treacy has been in recruitment for over 21 years. She is the Managing Director/Owner of Trace Personnel Pty Ltd. Treacy joined the AICM in 1999 and has been on Council since 2008.

Her portfolio over the years has included YCP, WINC, and Credit Team of the Year, events and also membership growth.

Why I volunteer on the AICM council/goals as a Councillor: From my perspective when we first started Trace Personnel it was a great way to meet and introduce the business to AICM during this time people have come and gone however strong relationships have been formed and particularly now that I’m older I like to help with the Young Credit Professional Awards and WiNC. I am especially passionate about the “newbies” entering into the industry and having the curb appeal to pursue a career in credit.

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AROUND THE STATES

Toolbox Training: From left to right – Sev Indrele (Southern Steel), Sean Collum (AICM), Grant Morris (Southern Steel), Toni Sawyer (AICM Trainer) and Mark Austria (Thrifty).

AROUND THE STATES

New South Wales Want to have a vent and try and raise the bar? Send your goat story to NSW Publications Councillor Sev Indrele at sindrele@southernsteel.com.au.

“Did You Know” The Buffalo wings which are often served at AICM functions are not from buffalo (they would be much bigger) but in fact are chicken wings. They were created 55 years ago at the Anchor Bar which is in Buffalo, NY State USA not far from Niagara Falls.

Hence the name Buffalo wings. By the way, despite it coming from the USA this is not fake news.

Darrin Mitchell (Matthews Folbigg) presents Trelene Alexandre (Dimension Data) with a lucky door prize.

Credit quotes of the month “Dogs have no money. Isn’t that amazing? They’re broke their entire lives. But they get through. You know why dogs have no money? .. No Pockets.”

– Jerry Seinfeld “Revenue is Vanity, Profit is Sanity but Cash is reality“ – anon Send your “Credit Quote” to Sev Indrele at sindrele@ southernsteel.com.au. All published Quotes will win a prize.

Nick Pilavidis (AICM), Ben Holland (ASBFEO) and Abdallah El-Haddad (illion).

The Australian Institute of Credit Management welcomes our Partners for 2019.

National Partners

A little insight from Treacy on recruitment – The hidden cost of recruitment errors and how to avoid them According to research conducted by agencies such as Chandler Macleod, the average cost of hiring people within the credit control, risk management or credit management sectors is around $8,000 per recruit. No measly sum!

Included in these costs are getting the hiring decision wrong, on boarding, exiting staff, and even productivity loss if the position is vacant.

In trying to reduce the hiring costs and make the right hiring decision, organisations should consider factors such as: career aspirations; attitude towards change and continual learning; education and credentials; skill set; work experience; and personality compatibility when hiring the right candidate.

For many organisations a human resources function to handle the recruitment process effectively may be out of the question due to the organisation’s size, or the existing human resources function may need support to increase efficiencies..”

Trusted Insights. Responsible Decisions.

Divisional Partners

CREDIT MANAGEMENT SOFTWARE

Official Division Supporting Sponsors

What really gets my goat?

Creditors who receive notification of a meeting where the only item is approval of the Administrator/Liquidator etc fees; and they sit on their hands. Too often I receive a report to creditors advising there wasn’t a quorum at the meeting and calling another meeting for the sole purpose of having fees passed.

This is an unnecessary waste of time and money and we the creditors lose out through the increase in expenses to the matter Ie less available for any distribution.

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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

Michael McCann (Grant Thornton) presenting his paper on “Why you should give a damn” at the National Insolvency Seminar.

National Insolvency Seminar Panel – Peter Mills (Thynne Macartney), Peter Schmidt (Norton Rose), Mark Harley (Boss Lawyers), Matthew Joiner (Cor Cordis) and Paul Burgess (Steelforce).

Presidents report The last few months have seen a marked increase in engagement by members and stakeholders such as our state and national partners. This has only been possible due to the superb effort of our team of amazing councillors and support from AICM head office and our interstate colleagues.

So, come along to an AICM event, have fun with some amazing people, and find out what else is happening in the world of credit.

For the “home ground” AICM National Conference, the Qld Council will be holding an event on the Wednesday night (traditional night on which various suppliers’ take some members to dinner) in place of our National Golf Day. Make sure you keep an eye on the flyers from head office, as this will be announced shortly. (Hint – it has the word “karaoke” in it).

More on the achievements by our team however: zz ½ Day Insolvency Symposium held 22 March 2019.

As you all know, AICM is conducting a national program with ARITA. One of the major themes was that creditors and insolvency appointees should (wherever possible) seek to collaborate. This can be done in many ways, whether by providing information about a director and their assets, related entities, possible phoenix activities, and providing clear and concise instructions of what a creditor requires or expects. Thank you to Mark Harley for organising this superb event and its speakers, and also to Grant Thornton for the use of their superb facilities. zz YCP Candidate evening was held on 12 April 2019. Held at the riverside Regatta Hotel, this attracted a group of possible YCP candidates. The evening not only provided information about the process, but more importantly we got to hear the inspiring personal journeys of previous state and national YCP winners. Nathan Wilkinson, Scott Reimers and Stacey Woodward gave an entertaining and inspiring panel discussion on how YCP has made a huge change to their careers and self-confidence. Everyone came away inspired. Once again, superbly MC’d by our wonderful Qld VP Decia Guttormsen.

Debbie Salter (Dynamic Commercial Collections), John Gregg (Gregg Lawyers) and Reshma Patel (Grant Thornton).

zz YNN “Trivia Night” to be held on 10 May 2019.

Unfortunately, I will not be able to attend as part of my team to defend our fourth placing at the last trivia night.

I am sure that the team will have a big challenge, especially as last year’s winners Results Legal are always in hot form.

A bigger crowd than last year means it will surely be a fixed event each year. Thank you Ashleigh Mason, Carly Rae-Orth, Stacey Woodward, Scott Reimers, and Natalia Mizerski for a cracker of an event.

So what are you waiting for – call me or any of the councillors anytime and make 2019 your chance to shine.

Thank you to again to all of our Partners for continuing their generous support of AICM Qld in what will be another successful year.

– Peter Mills Qld Division President May 2019 • CREDIT MANAGEMENT IN AUSTRALIA

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Queensland

Emily Barker (City of Gold Coast) and Maria Schandl (Stoddart Group).

Ramesh Benedict and Rick Thomas (both of Brisbane City Council).

Qld Division President Peter Mills with Anna Taylor and Alex Meyers (both of Results Legal) who presented “Are you ship shape ?” at the National Insolvency Seminar.

law, accounting and credit about unfair preference claims, legislative changes and developments about greater creditors’ rights to request information from liquidators, and safe harbour and ipso facto laws.

Interestingly, we heard from Michael McCann (Partner) of Grant Thornton encouraging members of the credit industry to actively engage in the insolvency process which in his view, delivers better results to creditors.

Peter Schmidt (Partner) of Norton Rose Fullbright shared his insightful practical legal tips for credit members to safeguard against Insolvency Practitioners that “try it on” with regards to unfair preference claims.

We also heard from Anna Taylor and Alex Meyers (Results Legal) about some important but often overlooked commercial credit terms, documentation and recent cases.

The seminar concluded with Mark Harley (Qld Law and legislation Portfolio Counsellor) chairing the informative panel of credit, legal and accounting experts, Paul Burgess (Steelforce), Matthew Joinder (Cor Cordis), Michael McCann (Grant Thornton), Peter Mills (Thynne & McCartney) discussing legislative reform with respect to unfair preference claims.

The outcomes of these discussions will form the basis for AICM’s policy position as it looks to improve outcomes for creditors.

Many attendees described the event as fun, informative and thought provoking, as well as, of course, educational and relevant.

The event is a great way for members to stay on top of legislative changes and developments in law, and of course, obtain CCE points for the year.

We are committed to making the next event even bigger and better. If you would like to share your comments about the day, please contact us on our Qld AICM Facebook page or email aicm@aicm.com.au.

New partner for Queensland \We’re thrilled to announce that TurksLegal have agreed to partner with the Queensland Division. TurksLegal are building on their strong relationships with the NSW and Vic/Tas Divisions and see a rewarding future in supporting members based in Queensland. Welcome TurksLegal and we really appreciate the support

National Insolvency seminar Thank you to all of the AICM members, guests and expert speakers that joined us for the recent half day insolvency seminar chaired by Peter Mills (Qld AICM President).

Grant Thornton’s boardroom in Brisbane was at capacity where members heard from distinguished speakers in 52

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

– Mark Harley Qld Law and Legislation Portfolio Councillor

Queensland

One of our first modules for this year’s Credit Toolbox Series. We had a really good turnout of Credit Managers within the industry who were interested to build on their knowledge and recognise the unique dynamics of Credit Management in the Building and Construction sector.

The AICM and BICB have collaborated to deliver this customised toolbox series and we are very excited to see the roll out for the remainder of these modules.

Andrew Gillespie (Zanows Concrete), Trish Lawless (Trend Windows), The short course style series is ideal Samuel Vlahos (Nexxa Portfolio Management), Rebecca Del Toro (Bunnings), for new credit professionals seeking an Lisa Douglas (Nitto Kohki), Sharon Good (Network Steel). introduction, established professionals seeking a refresher or non-credit This is your opportunity to be a part of the country’s professionals seeking to better understand credit. largest and most prestigious Youth Credit Award. State Keep an eye out on our Facebook page and Newsletters Divisional winners win travel, accommodation and registration for upcoming dates. For an overview of current training and to the 2019 AICM National Conference. And regardless scheduled Toolbox or Workshop please go to the website here of the result, the personal and professional growth by taking or contact the office on 1300 560 996 or aicm@aicm.com.au. on this challenge and journey is immeasurable for a young professional in our industry.

YNN Night April Our 2nd YNN for 2019 was held on April 12th at the Regatta Hotel. We held an informal information session on the upcoming Young Credit Professional Awards and we’re very lucky to hear from previous YCP’s on their experience through the process and what they have taken from this into their careers moving towards the future. Hosted by Stacey Woodward, we got to hear from last year’s Qld winner Scott Reimers & the 2017 National winner Nathan Wilkinson. A lot of questions were asked and answered and we are looking forward to meeting this year’s Qld finalists. Applications Close 31st May so if you are eligible or know someone who is, we encourage you to get involved.

The Australian Institute of Credit Management welcomes our Partners for 2019.

National Partners

Trusted Insights. Responsible Decisions.

Divisional Partners

Official Division Supporting Sponsors

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

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

Stacey Woodward – Qld Division Councillor with 2017 National YCP Winner Nathan Wilkinson and 2018 State YCP Winner Scott Reimers.

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AROUND THE STATES

April Toolbox Building and Construction – Collect with Confidence

AROUND THE STATES

South Australia Presidents report It has been a busy start to the year, with two Toolbox sessions, Collecting with Confidence and Understanding Credit Risk completed and our first Adelaide Fringe networking evening held in March.

Thanks to Nick Pontikinas and Alice Carter for their efforts in arranging the Fringe event and making it a success. We will continue to provide members with new and exciting networking opportunities and informative educational events.

Our next educational event is the AICM National Insolvency half-day seminar, which will be held in Adelaide on 16 May at the Mayfair Hotel. We have a range of expert speakers, which will cover topics such as: zz Are you ship shape – are your processes and documents in order for when a client enters insolvency? zz Why should you give a damn? – understand what you should do during an insolvency administration zz Unfair preferences – let make them fair!

This National seminar has already been extremely popular interstate, with participants receiving very useful and practical tips on how to prepare for, and deal with, a client’s insolvency.

I encourage all South Australian members to register for our event. At our State Council level, I am pleased to announce that Gina Thorp from Elders has joined us. Gina will no doubt provide valuable assistance, drawn from her years of experience as a Credit Manager.

Finally, congratulations to Kaden Davies of Samuel Smith & Son, who reached his 15 year milestone as an AICM member.

Kaden was recently awarded his 15 year membership pin, by myself and AICM National Board director, Gail Crowder.

– Nick Cooper, SA Division President

Thank you!

Over the past 4-5 years the AICM SA Division has held Quiz nights for our members, their families and friends.

This event has been an immensely popular with numerous games such as “Heads and Tails, “Throw the money”, “Musical chairs”, along with raffles and much more. The night allows for each team to pit their knowledge and skills against each other for the ultimate prize which includes bragging rights along with their team name etched forever on a trophy.

Would you know the answers to these Quiz questions?

1. What is the official language of Lebanon?

2. Which chemical element has the symbol Pd? 3. Who wrote ‘Peter Pan”?

4. What is the traditional gift given on a 15 year wedding anniversary?

Events such as these, allow the AICM to raise funds for future education and networking events throughout the year.

We could not achieve this without support from our generous sponsors who donate numerous raffle prizes.

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CREDIT MANAGEMENT IN AUSTRALIA • May 2019

Division President Nick Cooper (L) and Division Director Gail Crowder (R) present a proud Kaden Davies of Samuel Smith & Son (Centre) with his 15 years membership pin.

R. M. Williams has been one of our major sponsors for the SA Division Quiz night and we would like to thank Ann Walkden (from R. M. Williams) who has kindly supported this event every year it has been held with the donation of the major prize.

The R. M. Williams heritage dates back to 1932 when Reginald Murray Williams founded the company. Our story is sprawling and characterful – just like the wide, brown continent that inspired it. Reginald himself spent years inventing and perfecting new techniques that would form the basis for the entrepreneurial, driven spirit that remains at the core of the company that bears his name. www.rmwilliams.com.au

A word from the SA committee Introducing our newest council member:

Neil Fennell

– Worrells

Neil joined Worrells in Adelaide in 2014 and works in corporate recovery and bankruptcy. He is a Chartered Accountant with a background in public practice in taxation and auditing and has also performed some contract accounting roles. He is also a qualified property valuer with a Graduate Diploma in Property and is a member of the Australian Property Institute.

He has successfully completed Neil Fennell the ARITA course in 2015 with advanced standing and was made a professional member in 2017. He is also a Justice of the Peace for South Australia and is a five year member of the AICM. Neil was made responsible for running the Worrells Eyre Peninsula office in October 2016 which is based in Whyalla. Neil is involved with the Henley Football Club as was the Treasurer from 2009-2011 (nickname “Jacko”). He is also a patrolling surf life saver at the West Beach Surf Life Saving Club. Neil is a Crows supporter and likes a beer or two and can be found on most weekends around Henley Square or at the surf club.

South Australia

Are you, or do you know, a young credit professional who deserves to be recognised for outstanding work?

The YCPA program is the largest and most prestigious Youth Credit Award program in Australia and provides a great opportunity for young Credit Professionals to gain much deserved recognition for the great work they do for both themselves and their employer.

Entry Requirements – Under 30 years of age as at 30 June 2019 – Open to members and non-members – Open to any credit related professional role It’s easy to apply...

Simply submit the below to aicm@aicm.com.au to apply: – A work resume – Copies of any qualifications awards etc.

– A letter from your employer/supervisor confirming your work position.

– A link to your LinkedIn profile (optional).

Applications close 31 May 2019.

Inspirational quote “You don’t learn to walk by following rules. You learn by doing, and by falling over” – Sir Richard Branson

Did you know?

AICM Members who are eligible to take the CCE exam are members who have held the MICM level of membership for 1 year, acquired 100 CCE points and passed the CCE online examination and submitted a professional paper. To achieve the CCE status the above and a combined pass mark of 65% is required, once the member has achieved the ‘Certified Credit Executive’ (CCE) they need to continue to accumulate a further 30 points over 3 years to be re-certified as a CCE. For further information please visit the AICM website: https://aicm.com.au/training-professional-development/ certified-credit-executive/

ANSWERS TO THE QUIZ QUESTIONS 1.

2.

3.

4.

Arabic Lead A.J.M Barrie (James Matthew Barrie) Crystal.

Networking Fringe event – “Baby Wants Candy, The Completely Improvised Full Band Musical” in the Garden of Unearthly Delights.

On 14 March, the SA Division Council held a new and exciting event for members to coincide with the annual Fringe Festival in Adelaide’s East End. We thought that this was the perfect time to hold our first networking event of the year. Attendees met at the Stag Hotel to catch up with colleagues and friends and enjoy a wonderful grazing table and a glass of wine. The weather was perfect, which meant that we could wander outside to the balcony area and watch the buzz of the Fringe Festival pass us by. We then wandered to The Garden of Unearthly Delights where we enjoyed an interesting and unique improvised musical show by a group of performers from the US and UK! The night was enjoyed by all and will become an annual event on SA’s Divisional Calendar. Our next networking event will be held in early June and will celebrate this year’s YCP nominees. We hope to see you all there!

The Australian Institute of Credit Management welcomes our Partners for 2019.

National Partners

Trusted Insights. Responsible Decisions.

Divisional Partners

– Alice Carter, Functions 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.

A magical night at the Adelaide Fringe Festival.

May 2019 • CREDIT MANAGEMENT IN AUSTRALIA

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AROUND THE STATES

YCP APPLICATIONS NOW OPEN for Young Credit Professional of the Year!

AROUND THE STATES

Victoria/Tasmania

Golf Day winners.

Golf Day: Runner up.

Golf Day: Third place.

Golf Day: Lou Caldararo with the NAGA recipients Tony Logiudice, Joe Logiudice, Mac Hill (Finport) and Stuart Bear (Landmark).

Presidents report 2019 has commenced well above expectations with great numbers attending the first few network sessions events and the toolbox series. The Golf day was another great success at full capacity. The drive and the commitment by the Victorian State Councillors has built a great calendar of events for 2019.

Please check the AICM website here for up to date events.

We are proud to announce that we have record numbers for WINC this year and currently sitting at just shy of 200 attendees which took place on 10th May 2019. This year Equifax is our Premium Sponsor, Results Legal and NCI are Supporting Sponsors. These sponsors continued support of the AICM to make this event successful and bigger each year. We all cannot wait to see you all in May 2020 and do it again!

The Young Credit Professional of the Year Award (YCPA) program is the largest and most prestigious Youth Credit Award program in Australia and sponsored by illion. This provides a great opportunity for young Credit Professionals to gain recognition both for themselves and their employer. Last year I was honoured to be part of the judgeing panel and had the opportunity to meet Young Credit Professionals and to hear their experience and the difference they have made to their organisations. Applications close the 31st May 2019 and the VIC/ TAS council is more than happy to help you or a team member if you have any questions with the process.

– Sherif Hussein, Vic/Tas State President 56

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

Vic/Tas Annual Golf Day Friday 22 February 2019 AICM Vic/Tas Annual Golf Day was held on Friday 22 February 2019, another sellout event. The golfing gods were kind with the weather again this year, with a sunny day unfolding, although slightly windy, still fairly good conditions for golf.

Registrations for the Best Call 4 Ball Ambrose Competition kicked off 11:15am at Southern Golf Club in Keysborough.

A lovely Barbeque Lunch with salad was prepared and served by the club, with the Steak and Sausages kindly supplied and Sponsored by Centreway Steak House in Keilor.

The course was in great condition as usual, with the greens running a medium pace. A shot gun start had the players away at about 12:30pm, finishing around 6:30pm.

Drinks were served at the clubhouse, followed by a formal presentation dinner, where the winners for the day, and the various business card draws and other prize draw winners were announced.

Winners: Tim Delvea, Cameron Stillman, James Tobin, and Matt Caini, with a handicap of 10 and final score of 56.

Runners Up: Aaron Grigg, Gavin Bedwell, Liam Dever and Michael Mayson with a handicap of 8.25 and final score of 56.75. Third Place: Simon Strange, Paul Quill, Kris Stokes, and Scott Ferguson with a handicap of 8.75 and a final score

Victoria/Tasmania

Golf Day: Daniel Murador (Cor Cordis) – Straightest Drive.

Golf Day: Fabian Micheletto (SV Partners) – Longest Drive Men 17th.

Golf Day: Joyce Gin (Viva Energy) – Longest Drive Ladies 13th.

of 57.25. The NAGA award for our last place getters goes (No surnames provided on Scorecard): Tony L, Joe L, Mac Hill, and Stuart, with a handicap of 10 and final score of 68.

Our other winners on the day were: Straightest Drive 1st Hole: Daniel Murador (1 inch), Nearest the Pin (“NTP”) 6th Hole – Oliver Hayward 380 cm, NTP 16th Hole – Joyce Gin 350cm, Longest Drive (Men) 7th Hole – Aidan Quinn 270m, Longest Drive (Men) 17th Hole – Fabian Micheletto, Longest Drive (Ladies) 4th Hole – Chris Jennings, Longest Drive (Ladies) 13th Hole – Joyce Gin 170mh.

We must express our most sincere and gracious thanks to all of our event sponsors, without whose generosity it would not be possible to bring you such a prestigious event at such a reasonable price. Firstly a huge thank you to Cor Cordis for being our Naming Day Sponsor. And, in no other particular order thank you to our other event sponsors and prize donors: Brooke Bird, ARMA, Trade Bureaux Australia, IODM, Kemps Peterson, QBE, Mercantile CPA, Sharp & Carter, Rodwells, Doncaster Volkswagen, Rodgers Reidy, Collect AU, Ampac, Mills Oakley Lawyers, Equifax, SV Partners, Cor Codis, Foremans Business Services, Creditor Watch, SPK Glass & Aluminium. We cannot sufficiently express our gratitude for your participation in supporting our golf day, and appreciation for your continued support of the AICM Special thanks to Lou Caldararo (Landmark) and Jeff Hurst

Golf Day: Aidan Quinn (QBE) – Longest Drive Men 7th.

(Trade Bureaux Australia) for outdoing themselves again this year and organising yet another fabulous and successful golf day. If you missed out this time and wish to attend the 2020 or 2021 golf days, please express your interest to Lou Caldararo (Lou.caldararo@landmark.com.au) as soon as possible as 2020 as places are filling quickly.

May 2019 • CREDIT MANAGEMENT IN AUSTRALIA

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AROUND THE STATES

Golf Day: Chris Jennings.

AROUND THE STATES

Victoria/Tasmania

Genevieve Walker (Robert Walters), Dina Coutsodimitropoulos (IAG Insurance) Rowena Byers (Crowe Horwath), Rick Dunham (E B Mawson & Sons), Catrina Galanti (QBE), Chris Belegrinos – Presenter (Sharp & Carter), Carole McTavish (Australia Post), Beverley Hartsorn (Adecco Australia), Sherif Hussein (Interactive), Paul Canavan (Simplot), Samuel Gregory and Katya Metaxotos (both of Mercedes-Benz Financial Services), Kristen Jury and Mary Petreski (both of Asahi Beverages).

Breakfast Event – How to get the best from your staff 7 March 2019 Fifteen members and guests attended the Breakfast Event titled “How to get the best from your staff”, held at the offices of QBE. Registrations commenced at 7:45am with a light breakfast served, before an interesting and informative presentation was delivered by director of Sharp & Carter, Chris Belegrinos.

Chris talked of the challenging and rewarding industry of credit and how our teams are key in helping us deliver the best results for ourselves and the company’s we represent.

He went on to discuss and demonstrate how keeping your team engaged is a key skill for everyone to attain. Other key points that Chris covered were conducting strong “one on ones”, being brave enough to have those difficult conversations, and the pitfalls of not keeping your team engaged.

Comments from members and guests indicated that the information that Chris delivered was relevant, current and very informative.

Thank you to Chris and Sharp & Carter for donating your time and expertise in delivering the presentation, and thank you to QBE for donating the conference space and breakfast.

Without great event sponsors like you these events could not take place, and therefore we are extremely grateful.

Youth networking and YCP information session – Barefoot bowls April 9th Melbourne weather was being quite typical on the evening of April 9th with showers and a bone chilling breeze. Despite the weather, we had a good turnout at the Melbourne Bowling Club in Windsor, with our 2 teams braving the Melbourne chill to have a go at some bowls.

The evening opened with an explanation of the Young Credit Professional Award and what it means for our young 58

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

Chris Belegrinos (Sharp & Carter) presents to members and guests.

members and progressing their careers. With a swift instruction briefing on the game in a charming French accent, they were away. Everyone played with enthusiasm and quite a bit of competition for about an hour whilst enjoying a drink or two and munching on the tasty sliders and snacks supplied by the bowls club.

After the bowls, everyone mingled and continued enjoying a few drinks with a few more rounds of competition at the Pool table. The night closed at about 9pm. As no one was keeping score fun was the intended and ultimate outcome for the evening.

Special thanks for the support of our Event Sponsor: Accountability, represented by Janessa Smit who supplied the refreshments for the evening. Our events sponsors are an important part of the institute and without whose support we could not facilitate events such as this. We are extremely grateful for your support and patronage of the AICM.

Victoria/Tasmania AROUND THE STATES

Barefoot Bowls Youth Networking Night: (Back) Chris Rowlands (Collexus), Emily Manna (NCI), Sarah Ramsay Caudle (TurksLegal), Nick Penfold (NCI), Lily Cassar (NCI), Sherif Hussein (Interactive), Mac Hill (Finport Finance), Lori Popa (Commercial Credit Services). (Front) Janessa Smit (Accountability), Catrina Galanti (QBE), Marcus Browne (IODM), Alex Szechtman (NCI), Vice President Catrina Galanti with event sponsor Janessa Smit of Accountability.

Barefoot bowls – members in action.

Upcoming events Save the dates and mark your calendars for: zz Women in Credit Luncheon, 10 May 2019. zz Credit Toolbox – Understanding Credit Risk, 21 May 2019. zz Face to Face – Manage Factoring and invoice discounting arrangements, 22 May 2019. zz Insolvency Seminar, 23 May 2019. zz 1 day Face to Face – Respond to Corporate Insolvency Situations, 20 Jun 2019.

The Australian Institute of Credit Management welcomes our Partners for 2019.

National Partners

Trusted Insights. Responsible Decisions.

Barefoot Bowls Sponsor AccountAbility.

Divisional Partners

Toolbox series and other AICM training – would you like the AICM to come to you?

Does coming into the city for AICM Training Events and Network Nights place a time and financial constraint on your business? What if we could come to you? If you have a board or meeting room that could accommodate anywhere from 10-30 people, and you can involve some businesses in your local area, then we want to hear from you. Such events may be able to be delivered at reduced rates because the overheads of hiring a venue would be eliminated, however demand would be assessed. Contact the office on 1300 560 996 or via email to aicm@aicm.com.au if you would be interested in hosting a Network Night or Training Event at your business and we can get the ball rolling.

CREDIT MANAGEMENT SOFTWARE

Official Division Supporting Sponsors

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

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AROUND THE STATES

Western Australia/Northern Territory

Shane Knott handing out some tips!

Presidents report We’re well into 2019 and the season is changing and it’s getting quite a bit cooler. We take this opportunity to thank the members who attended the Barefoot Bowls early on.

In April, Troy Mulder hosted the Collect with Confidence Toolbox. Thanks to those who came along. We hope to run another toolbox later in the year.

We have been working very hard with the National Office to bring to the WA Members the first truly National Insolvency Roadshow for some time. This collaboration between the AICM and ARITA will bring together the best of the best in WA to make sure we are ship shape where client insolvency looms.

This workshop has been months in the planning and we are very excited to be a part of it.

The planning for the annual Women in Credit event is well under way. Every year this event impresses and everyone takes something very personal away – belief in themselves, and what they can do at ground level for themselves and the teams they lead. This year we have moved the event out of the city to International on the Water at Ascot. Onsite parking is available with river views, and the menu is sure to be fabulous. We look to forward to announcing our guest speaker shortly.

With June not far away, our attention turns to the Young Credit Professional Award Gala Dinner. This year we return to Crown for the festivities and cannot wait to see as many members as possible. More importantly, we need to meet the future of credit. While there will be changes to products and programs in the years to come, the face of credit will be the youth within our businesses. Looking around today, several leaders have been past YCPA finalists and /or winners. We invite all members to nominate a star in the making who offers great customer service, customer care and value in the collections side of your business. Nominations close Friday 31st May. Don’t forget to vote on the 18th May. Support your local school’s democracy sausage sizzles and cake stalls. It’s a great way to engage with your community while enjoying some tasty treats.

– Lisa Marr WA/NT Division President 60

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

The winners: Martin Bigg (Capricorn Society), Alex Cimetta (SV Partners), Rowan McClarty (Automotive Holdings Group) and Malcolm Field (SV Partners).

Barefoot bowls The WA Credit Community welcomed members and nonmembers alike to its first event of the year, Barefoot Bowls, which was held at Manning Bowling Club in South Perth.

It was a new venue for us with very impressive facilities.

Shane Knott, the current WA No 1 and Australian Premier League representative for Perth Suns, was on hand to provide some handy coaching tips and keep track of scoring.

It was a balmy Perth evening which made for pleasant conditions for the bowlers. Afterwards we enjoyed a sausage sizzle and a sundowner and an opportunity to network!

MEET A COUNCILLOR

Martin Bigg Martin currently works for Capricorn Society as Credit Services Team Leader and has been in that role for over 4 years joining in 2015. Martin holds a Diploma in Finance and Mortgage Broking, a Diploma Business and Finance and is currently

Western Australia/NT AROUND THE STATES

Getting started

Kelly Dunlop of Capricorn Society in action.

they mean for us as credit professionals as well as a panel discussion on unfair preference claims and how you can reduce your risk.

Our annual Women in Credit luncheon will be held on 14 June 2019 at the International on the Water in Ascot.

This is a great event to learn from industry leaders and network with other credit professionals. The Women in Credit initiative was established by the AICM in 2015 to provide informative and career development opportunities to women at all levels and ages.

The Australian Institute of Credit Management welcomes our Partners for 2019.

Richard Vaughan from Zipform Digital showing how its done.

studying for his Diploma of Credit Management. Prior to starting at Capricorn Society he was Credit Manager for Squire Patton Boggs for 5 years.

Martin’s portfolio on council is Social Media and has joined as he wants to become a more rounded Credit Professional through networking and sharing ideas and experiences, which will enable to help others grow, develop and encourage others to contribute to the institute and the council. Martin believes that forming a network is so important. There are so many interesting people in the industry with a wealth of experience, yet he believes everyone learns something new every day.

Outside of work Martin enjoys playing lawn bowls, actively avoiding reality TV, playing chess and blaming the umpires for every single Fremantle Dockers defeat.

Upcoming events On May 22 we will be hosting an Insolvency Seminar, which is a new event on our calendar. The half-day session will provide information on the latest legislative updates and what

National Partners

Trusted Insights. Responsible Decisions.

Divisional Partners

Official Division Supporting Sponsors

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

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

May 2019 • CREDIT MANAGEMENT IN AUSTRALIA

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AROUND THE STATES

New Members The Institute welcomes the following credit professionals who were recently admitted to membership in March and April.

New South Wales

South Australia

Samira Ahsan

Coates Hire Operations Pty Ltd

Alicia Baghurst

Pernod Ricard Winemakers Pty Ltd

Frank Barbuto

NCI

Abby Jenner

Jurlique International Pty Ltd

Charlie Broughton

San Miguel Yamamura Australasia

Anica Cunanan

Matthews Folbigg Lawyers

Liesel Deveney

Cospak Pty Ltd

Victoria/Tasmania

Diana Essa

Holman Webb Lawyers

Christopher Hadley

Holman Webb Lawyers

Kayla Ioannou

Stuart Bear

Landmark Operations Ltd

Calum Brownlie

Reece Pty Ltd

San Miguel Yamamura Australasia

Susan Chen

Southern Steel Group/Surdex Sheet & Coil Pty Ltd

Danielle Legge

San Miguel Yamamura Australasia

Vicki Clarke

NHP Electrical Engineering Products

Bryony Loosemore

TurksLegal

Gabriela Darley

Equifax

Eric Maisonhaute

Esker Australia Pty Ltd

Chirath Dissanayake

Landmark Operations Limited

John McInerney

Grant Thornton

Christopher Douglas

Australian Pharmaceutical Industries Ltd

Rebecca Renshaw

TurksLegal

Bettina Evert

Holman Webb Lawyers

Steve Rogers

Holman Webb Lawyers

Ricky Forster

Sensis Pty Ltd

Lucie Sandoe

TurksLegal

Kristie Gatti

Powercor Australia Pty Ltd

Ellen Singleton

Cosyn Software

Roula Krikellis

Adidas

Andrew Tanna

Holman Webb Lawyers

Sara McAlinden

Adidas

Paul Taylor

Pattison Hardman

Cheryl Pinto

Adidas

Sarah Waley

TurksLegal

Sarah Ramsey-Caudle

TurksLegal

Lana Walsh

Mars Australia Pty Ltd

Muhammad Rashid

W Coogan & Co Pty Ltd

Mehr Zahoor Ali

Coates Hire

Michelle Strehse

N/A

John Zrno

Vodafone Pty Ltd

Jenelle Young

Reece

Overseas

Western Australia

Bruce Cross

Debtworks (NZ) Ltd

Sandy Bowater

Landmark Operations Limited

Trevor Middleton

Cosyn Software Limited

Craig Gough

Mills Oakley

Mozima Mohammed

Fletcher Building Limited

Tamera Parker

Alinta Energy Pty Ltd

Joshua Wong

Fletcher Building Limited

Natasha Purnell

Landmark Operations Limited

Matthew Walker

Mills Oakley

Queensland Rhys Chamberlin

San Miguel Yamamura Australasia

Melissa Jarvin

TurksLegal

Scott Johnson

Landmark Operations Limited

Kaynisha Mahalingam

TurksLegal

Nivani Sandanam

University of Queensland

Chu-Hao (Tom) Tsai

Landmark Operations Limited

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CREDIT MANAGEMENT IN AUSTRALIA • May 2019

Unlock the potential in your credit career credit staff

Consider an AICM Qualification course If you aspire to achieve greater heights in your credit career or want to get the best from your credit staff, then a qualification course can help you achieve your targets. Offered nation wide, you can study in your own time (24/7), with support available.

If you have industry experience or prior education, you may be eligible for Recognition of Prior Learning (RPL) credits to fast-track your qualification. If you’re an employer, you may qualify for a training grant. Talk to AICM today to discover your course options.

Diploma of Credit Management

Certificate IV in Credit Management

Certificate III in Mercantile Agents

Key credit issues such as personal & corporate insolvency, developing credit policies & compliance.

Issues relating to credit applications & securitisation, compliance, managing bad & doubtful debt & customer service.

All aspects of enforcing payment obligations & obligations of mercantile agent & debt collection activities.

Take the first step to a better career & talk to AICM today

Call 1300 560 996 or vist aicm.com.au

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

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

COLLECTIONS

COLLECTION SYSTEMS

INFORMATION

AICM Divisional Partner

CreditorWatch Esker Australia Pty Ltd Suite 1502, Level 15, 227 Elizabeth Street, Sydney NSW 2000 Tel: 02 8596 5126 Email: info@esker.com.au Web: www.esker.com.au Cash is the heartbeat of your business, so give your AR department the tool they deserve! Esker’s AR solution help companies reduce costs for invoice delivery, accelerate their cash collection process and automate the reconciliation of payments.

Contact us to easily achieve your cash collection goals, tackle root causes of payment delays and reduce collection disputes while improving customer relationships.

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

AICM National Partner

AICM Divisional Partner

AICM Divisional Partner Trusted Insights. Responsible Decisions.

CREDIT MANAGEMENT SOFTWARE

illion

OnGuard AMPAC Debt Recovery Level 5, 35 Clarence Street Sydney NSW 2000 Tel: 1300 426 722 Email: info@4ampac.com.au Web: www.4ampac.com.au Trust AMPAC, we guarantee to give you the right advice……

AMPAC provides a complete range of debt recovery and receivables management services to big business, government and thousands of SME’s nationally, so next time you are deciding how to deal with that difficult customer, pick up the phone and call us. We are ready to help you too.

Australian Recoveries and Mercantile Agents Tel: 1300 363 394 Email: info@armagroup.com.au Web: www.armagroup.com.au ARMA is a specialist provider of contingent debt recovery solutions, outsourced accounts receivables and litigation services. ARMA was started with the aim to have fewer customers and provide better service.

We provide big agency expertise with a boutique service. The ARMA team has a wealth of experience in the debt collection industry across a diverse range of markets that was gathered from working at some of the largest collection agencies in Australia.

64

Tel: 13 23 33 Web: www.illion.com.au

Tel: 1800 123 613 Web: www.onguard.com OnGuard’s Credit management solution will help you hit your collection targets – each and every month.

By working smarter and providing better visibility, OnGuard will help you reduce your DSOs. Why not give your staff a friendly solution that will make their life so much easier.

Contact us to show you how OnGuard has made life a whole lot easier for our customers.

CONSULTANCY

Dun & Bradstreet has changed. We are now illion.

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

AICM National Partner

AICM Divisional Partner

Kemps Credit Solutions 50 Grenfell Street Adelaide 5000 Tel: 08 8418 1450 Email: gcrowder@kemps.com.au Web: www.creditsolutions.net.au/kemps Kemps Credit Solutions. A debt collection partner you can trust. Working with some of the country’s leading providers of information management and data intelligence solutions.

Since 1965 Kemps Credit Solutions has set the benchmark for providing quality collection and recovery services to South Australian businesses and government.

CREDIT MANAGEMENT IN AUSTRALIA • May 2019

Equifax Tel: 13 83 32 Web: www.equifax.com.au Equifax is a global information solutions company, providing data and insights that help organisations and individuals make more informed decisions. As a leading provider of credit information and analysis in Australia and New Zealand, Equifax serves key markets in risk management, marketing services and HR solutions.

Drawing from trusted sources to compile and process data, Equifax helps its customers see things and make connections that others can’t.

AICM MARKETPLACE

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

LEGAL

RECRUITMENT

AICM Divisional Partner

AICM Divisional Partner

Insolvency Intel Tel: 1300 265 753 Web: www.insolvencyintel.com.au Email: answers@insolvencyintel.com.au Insolvency Intel: a subscription-only provider of insolvency and turnaround services for credit managers. Backed by national firm Jirsch Sutherland, our friendly team is just a phone call or email away, providing members with practical, strategic advice about corporate and personal insolvency. Free initial consultation; networking opportunities; training and presentations; knowledge database access; regular newsletters.

Register now for a free subscription.

AICM Divisional Partner

Nova Legal

Sharp & Carter

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

Web: www.sharpandcarter.com.au

Nova Legal can assist with the recovery of problem debtors (large and small). Founding director Raffaele Di Renzo acts for creditors, debtors, directors, credit managers and insolvency practitioners in relation to solvency issues and dispute resolution.

For any assistance with Credit recruitment, please call Melbourne – Chris Belegrinos on 03 9616 2622 Email: cbelegrinos@sharpandcarter.com.au Sydney – Taha Sayed on 02 8315 8800 Email: tsayed@sharpandcarter.com.au Sharp & Carter will tailor candidate sourcing strategies to suit your company’s needs, taking into account factors such as time frame, budget, level of role and availability of candidates in the market.

We are committed to achieving a successful outcome for every assignment on which we work.

AICM Divisional Partner TECHNOLOGY

Vincents

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

Level 34 Santos Place, 32 Turbot Street Brisbane QLD 4000 Tel: 1300 VINCENTS

(07) 3228 4000 Web: www.vincents.com.au

Results Legal

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

Results Legal is a national firm with a focus on promoting and protecting the rights of trade creditors.

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

AICM Divisional Partner

AICM Divisional Partner

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

Worrells

TurksLegal

Suite 1103, Level 11, 147 Pirie Street Adelaide SA 5000 Tel: 08 8214 0500 Email: adelaide@worrells.net.au Web: www.worrells.com.au

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

Worrells is dedicated to solvency management, insolvency administration and forensic investigation. Worrells have been providing high quality corporate and personal insolvency services for over 40 years. We pride ourselves on offering reliable and practical solutions to those burdened with debt. With 24 partners and over 100 staff in 26 locations across Australia we are resourced nationally but focussed locally.

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

AICM MARKETPLACE

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

TRADE CREDIT INSURANCE National Supporting Sponsor

National Credit Insurance Brokers Tel: 1800 882 820 (freecall) Email: info@nci.com.au Web: www.nci.com.au National Credit Insurance Brokers (NCI) has established itself as the premier trade credit insurance broker in Australia, New Zealand and Singapore. Trade credit insurance is a highly specialised area of insurance and, with its 30 years of experience, National Credit Insurance Brokers has developed an unmatched depth of expertise in arranging the right protection at the best price for your particular trading needs.

May 2019 • CREDIT MANAGEMENT IN AUSTRALIA

65

The Publication for Credit and Financial Professionals

IN AUSTRALIA

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