At LCollect we believe that knowledge is power. Every month our debt collection blog gives you practical tips, stories and news from around Australia and the world.
You may recall in our November 2016 edition of Debt Collection news that there were moves within the Government to crack down on late paying large corporations and Government departments.
It appears that this issue has been raised again with the Small Business Ombudsman, Kate Carnell, telling Fairfax Media that she was again conducting a review of payment times and the impact that this has on cash-flow on small businesses in Australia.
This again follows the Ombudsmans review into payment times last year, which we covered in Australian SMEs Owed More Than $10,000, which identified Australian payment times as the worst in the world with invoices paid, on average, 26.4 days past due. In a statement to the media Ms Carnell said, "It is big businesses using small business as a cheap bank," Ms Carnell said. "It really does slow down the economy. Poor cash flow is the primary reason for insolvency in Australia.”
The recent move by the Ombudsman appears to have been prompted by Small Business Minister, Michaelia Cash, who requested in writing advice from the Ombudsman for advice as to the impact payment practices have on small business. Ms Cash said, "I am still getting reports of payment terms of 60, 90 or 120 days or alternatively loans for extended payment terms. I find that very troubling particularly when cash flow is king for small businesses. It continues to be an issue and we will tackle it."
Following last years inquiry the Business Council of Australia launched a voluntary code to ensure that small businesses were paid within 30 days of an invoice being issued. With, however only 47 of 139 members, subscribing to the Code there is now some consideration being given to passing legislation in which to compel payment to ensure small businesses continue to survive.
A short survey is available online for small businesses to complete about the payment times they encounter.
The Australian Financial Complaints Authority (AFCA) has announced on their website that a new small business Lead Ombudsman will be appointed to resolve financial disputes that small businesses have with their financial service providers (FSPs).
Under AFCA the small business is now defined as an organisation with less than 100 employees and can consider complaints from small businesses with their FSP up to the value of $5 million. AFCA also announced an increase in the available compensation to small businesses from $323,500 to $1 million.
In a statement to the media AFCA Chief Ombudsman and CEO David Locke, said, "With the arrival of AFCA, and the increase in monetary limits, many small business complaints will now be covered by an external dispute resolution scheme for the very first time. This will be a big help and provides small businesses with a fair, free and independent way of resolving their disputes."
The Australian Small Business and Family Enterprises Ombudsman (ASBFEO) has applauded the decision with Kate Carnell saying, "We welcome the announcement of a dedicated small business lead ombudsman,” Ms Carnell said. “We envisage a small business expert will be appointed, which will significantly improve small businesses’ access to justice and save them time and money."
The announcement comes on top of AFCA releasing information that in their 1st week of operation that they received 2,500 calls with a subsequent 1,500 complaints being made.
Did you know that you can instruct us via our online portal for new, current but also archived debts?
We sometimes see new debts opened online where an existing account already exists. This leads to duplicate files being opened and while this does not cause us any problems we find that by maintaining only 1 file for each account type, whether this be a personal loan, overdraft, overdrawn savings account, that it allows you to find the updated information you need for reporting quickly and easily and provides a full debt history.
This month we've created an instructional video, which you can download, which shows how you can quickly and easily locate your previously closed accounts and instruct us to re-open them. Alternatively if you need any additional assistance please contact us.
If you liked this video and would like to see more please let us know.
Note: Please note that the video is is approximately 60mb in size and in Windows Media Video File format (.wmv). Please make enquiries with your internal IT department prior to downloading to ensure that by downloading this video you are not breaching any of your businesses policies.
We saw last month that Personal Insolvencies Fall in September Quarter 2018 however how does this breakdown across a suburb by suburb basis across Australia?
This month we look at the top 5 regions with the highest number of bankruptcies.
New South Wales
Across greater New South Wales we saw 1,371 people entering into bankruptcy however this is a reduction of 5.1% compared to the previous quarterly statistics.
|Mount Druitt||Greater Sydney
|Newcastle||Rest of New South Wales||58|
|East Lake Macquarie||Rest of New South Wales||37|
|Casey - South||Greater Melbourne||73|
|Geelong||Rest of Victoria||51|
|Ballarat||Rest of Victoria||36|
|Browns Plains||Greater Brisbane||71|
|North Lakes||Greater Brisbane
|Springfield / Redbank||Greater Brisbane||62|
|Townsville||Rest of Queensland||115|
|Ormeau / Oxenford||Rest of Queensland||106|
|Limestone Coast||Rest of South Australia||22|
|Murray & Mallee||Rest of South Australia||15|
|Bunbury||Rest of Western Australia||44|
|Wheat Belt North||Rest of Western Australia||21|
|Hobart North West||Greater Hobart||23|
|Launceston||Rest of Tasmania||22|
|Devenport||Rest of Tasmania||16|
|North East||Rest of Tasmania||12|
|Darwin Suburbs||Greater Darwin||14|
|Darwin City||Greater Darwin||13|
|Alice Springs||Rest of Northern Territory||13|
It's a question that we come across on a regular basis from our commercial clients and one that is more common than you may think.
Interest is the price (charge) paid for the use of someone else's money. For commercial clients, it is a charge that your clients pay when they don't pay that your invoice by the due date. When they don't pay you on the due date, they are effectively borrowing money from your organisation.
While those in the finance industry often have very well worded Contracts and Terms and Conditions that allow the calculation of an annual percentage rate (APR) many small business owners struggle to understand the requirements and while they understand the practical value of incurring interest they worry about the practicalities of applying additional interest fees or charges to an outstanding account.
The short answer to this question is yes provided your terms and conditions permit it. There are however strict requirements you must meet in order for your claim for interest to be legally collectable, and we would recommend you seek legal advice to ensure your interest charges are recoverable.
A fair and reasonable rate can be difficult to determine however most businesses charge between 5% to 10% per annum. The interest charge should be at a rate that is a genuine estimate of the cost of the late payment to your business (ie your banks overdraft rate). Anything higher than this may not be enforceable.The Local Court of NSW currently prescribes a pre-Judgment interest rate of 5.50%. This rate is 4.00% above the cash rate last published by the Reserve Bank of Australia and is reviewed every 6 months. The current rates can be found at Interest Rates Applicable After 1 July 2010.
Charging interest to a debt can have pros and cons, and is ultimately a commercial decision. Where a customer knows that interest may be charged on an overdue account or invoice it is often incentive enough for them to pay on time. On the other hand you may alienate a particular customer who may take their business elsewhere. While you may offer a better product or service than your competitor, applying interest to a debt could be the very reason you lose business.In a situation like this it is often better to communicate to your customer that their payment is late and granting an extension for payment before charging interest and being flexible enough to agree to waive these charges if a customer can be retained.
With severe bushfires impacting those in the communities surrounding the Gladstone, QLD region we are granting moratoriums to those in impacted areas.Our staff have been made aware of the impact on these regions however owing to the overall size of the regions being impacted you may still be contacted. Please ensure that you communicate your situation to us if it is safe to do so. Where possible we will attempt to negotiate payment extensions or make alternate arrangements.
The Australian Financial Security Authority (AFSA) are reporting that personal insolvencies fell 9.7% in the July to September 2018 quarter.
The personal insolvency statistics for this quarter show that the number of new total personal insolvencies reduced from 8,194 to 7,400 with only NSW recording a rise of 0.4% The rise in NSW has been attributed to an increase in consumer Debt Agreement Proposals (DAPs) and Personal Insolvency Agreements (PIAs). Bankrupties were at a record quarterly low in South Australia with Tasmania also recording their lowest quarterly level of bankruptcies since 1989.
Business related personal insolvencies, where an individuals bankruptcy is directly related to his or her proprietary interest in a business, represented 17.8% of total bankruptcies filed Australia-wide with the Australian Capital Territory recording the greatest increase across all States and Territories of 8.33% over the last 12 months.
Further information about the statistics can be read online at Guide to Personal Insolvency Statistics.
Do you know when your interest on the Personal Property Securities Register (PPSR) is due to expire?
It can be one of the more challenging things that we come across in the debt collection industry. A customer has relocated several times over a number of years however the debt is believed to be secured by an asset which, if repossessed, may finalise the debt or may entice the debtor to enter into a repayment arrangement which is maintained. Upon conducting a search of the PPSR it's then found that the security interest has lapsed. You now have essentially an unsecured debt with very little or no bargaining power.
While many organations used to employ a specialists securities agents this role has gradually been phased out and is now considered a day-to-day role of administration staff who may or may not keep an accurate register and may not know or realise the implications of the interest lapsing especially where a debt has been written-off. If this sounds familiar did you know that if you have a PPSR login that you can generate a report called Registrations Due to Expire?
The report includes information such as:
The Bankruptcy Amendment (Debt Agreement Reform) Act 2018 received Royal Assent on Thursday, 27 September 2018 with a majority of the amendments commencing on Thursday, 27 June 2019.
The reforms have been passed in an attempt at tighter regulation and greater protections for people entering into Debt Agreement Proposals (DAPs). The Bill was passed in with several key amendments including: