One of my duties as Area Manager of the Illawarra, Shoalhaven and Eurobodalla areas is calling existing clients. Making sure they are OK with their debt collection requirements and to book meetings to re-educate them on ways to further protect their businesses. For example:
- Personal Property Securities Register. To become a Secured Creditor, to be in the best position if a client goes into liquidation
- Veda credit reporting to check out new clients before extending credit to them and to also set up alert systems in case an ongoing client generates any adverse credit information.
This is one for the books! I spoke to a client of mine recently who is a roofing specialist in the Illawarra. He is a great young guy who EC drafted Terms and Conditions of Trade for a little while ago. He has been assuring me for the last few months that he didn't need to register his clients on the Personal Property Securities Register, as his clients have been around for years and are good mates of his. In his own words â€œMitch, all my clients I trust, they will always pay meâ€.
Well! Last week I received a call from my client in the early hours of the morning. He had just heard that one of his larger clients was going under. He wanted to meet with me as soon as possible to set up his business to make a registration on the Personal Property Securities Register to become a Secured Creditor. So if there is any money realised in the liquidation his business will be in a stronger position to recover anything owing and will also make him exempt from preferential payment clawback.
He was freaking out! I would be too, if my client was owing me $55,000 and to hear they might be going under!
When we sat down at a job site in the Illawarra I was able to confirm that this large client who was potentially going under had signed his contract authorising our client to make a registration against them. In essence all we needed to do now was to make a registration on the business who was potentially going under and hope that it is not too late with the timeframes. We also set our client up with a Veda Credit Reporting membership so in future he will be notified earlier of anything adverse occurring with his clients through their alert system. Two weeks later I received the call from our client saying that it had all happened, he was notified that his client had gone into liquidation. He was also too late in making the registration on the Personal Property Securities Register which meant he was not a secured creditor. To make matters worse our client has now had to pay back $30,000 he received as a preferential payment. This was money his client who had gone under had paid our client in preference to the other creditors.
Our client was gutted!! Such an expensive lesson to learn, he now wishes he done things differently. He and his crew will not be having much time off over the Christmas holidays, it will be time to play catch up! This is a perfect example of being proactive instead of reactive!! This is new legislation that was introduced in early 2012. In addition it just so happens that insolvency rates are on the rise, yet many business owners still are not aware of this important piece of legislation and the effect it can have on their business.
Who knows what is around the corner, no matter how long you've been working for a business or how well you know them!!! This is a simple task to prevent your business potentially folding with your clients!!