Many of the government stimulus packages such as JobKeeper are due to end on 28th of March 2021, however it is impossible to project if they will be extending and for how long. If they do end in March as planned, businesses will immediately be required to pay employee salaries, suppliers, overhead costs, etc. without assistance.

Most companies are trading on the brink of insolvency without a turnaround plan. Zombie companies that have been artificially propped up by stimulus packages will submerge.

If your customers enter administration with your stock on hand, you would likely lose your goods and/or payment without the PPSR in place as a supplier or creditor.

It is crucial for any businesses supplying goods such as manufacturers, wholesalers, and companies providing finance to other companies to register on the PPSR. In addition, with the expected growth of insolvencies in the mid-year and beyond, the PPSR is an important way to secure your business from the flow-on effects of your customers’ defaults.

Is it the right time to register now?

As of January 1st 2021, statutory demands have retrogated to pre-COVID positions, ceasing the relief that commenced on March 25th 2020. The only exceptions are companies that have declared their eligibility for temporary restructuring relief.

What does it mean?

  • The statutory minimum has changed from AU$20,000 back to AU$2,000; and
  • The statutory period to respond to the demand has changed from six months back to 21 days after the date of service of the statutory demand.

Therefore, if a customer has an outstanding debt of at least AU$2,000, suppliers can issue a statutory demand and consider commencing winding-up proceedings if there is no payment received for the debt within 21 days. This means more and more companies will be entering administration this 2021 — your customers are included.

Understanding what you should do and learning how to do it are two sides of the same PPSA coin.

Know the warning signs that your customers may be in financial distress

Begin by tracking for red flags that businesses are at risk of falling over once government stimulus ends. For example, your customers might be in these behaviours below:

  • Slow down their payment habits — e.g. they’re requesting to extend and reduce the quantity and/or frequency of their transactions.
  • Act evasive when you try to contact them.
  • Take up accounts with your competitors — you can tell this is happening if you start getting trade reference calls from their potential suppliers.
Unsure if it’s worth the extra cost to register on the PPSR?

The economy in the next 12–18 months will continue to be fluctuating as the government assistance tapers off. The key to survival in this volatile climate is to have as much protection in place as possible.

By any chance, if one of your huge clients falls over, the PPSR will help you recover your stock and pay itself back. A cost versus benefit analysis will prove that registering on the PPSR could be the key to saving your company.

Register on the PPSR now and start protecting your security interests.

Paul Mead, senior PPSR consultant at CreditorWatch