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A guide to surviving COVID-19 for SMEs

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Bad Debtors – Tips to help you identify and reduce your risk

by Mar 28, 2020COVID-19 Resources, Managing Cashflow

The impact of the Corona Virus on SMEs is massive and many have already been forced to close their doors.  

Here are some tips to to help you identify and / or reduce your risk if your clients are SME businesses.

  • Re-assess your whole ledger to identify risk
  • Be aware of phoenix activity- more than ever
  • Make it personal – pick up the phone and know how your customer’s business is doing
  • Reduce credit limits or move to a C.O.D. basis
  • Register on the PPSR where appropriate
  • As 90% of all businesses are SME’s, they will suffer as most only have cash reserves for a few weeks. As we have seen, many businesses are already closing.
  • Insolvency changes are coming that may help
  • SME’s are typical “non-critical” suppliers so are often not first to get paid or are paid slowly
    “Critical suppliers” such as banks, telcos and landlords get paid first
  • Use Creditor Watch for risk mitigation and look at previous 2 years – We can conduct searches on your behalf if you are not a member
  • Look out for companies with a default history as 50% of those companies go into administration within 18 months. Also look at all info including cross directorships
  • Credit scores below 500 are concerning

Changes to enforcement proceedings and insolvent trading

  • Please be aware a temporary increase in the threshold at which creditors can issue a statutory demand on a company (from $2,000 to $20,000) and the time companies have to respond to statutory demands they receive (from 21 days to 6 months);
  • A temporary increase in the threshold for a creditor to initiate bankruptcy proceedings (from $5,000 to $20,000), an increase in the time period for debtors to respond to a bankruptcy notice (from 21 days to 6 months), and extending the period of protection a debtor receives after making a declaration of intention to present a debtor’s petition (from 21 days to 6 months);
  • Temporary relief for directors from any personal liability for trading while insolvent.
  • Note: These changes are not through Parliament yet, however they will be moving fast to bring these changes in as soon as possible.

Please stay safe during this time as we all support each other with kindness, intelligence and care.

We can monitor debtors for you via Creditor Watch and advise if there is any negative activity reported
If you would like further information on any of the above, please contact us on 03 8488 8000 or info@repaid.com.au

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