Dear Valued Client,
As the Federal and State governments react to this ever-changing Coronavirus situation, we at Optimum want to keep you as updated as possible about the possible impacts to your business. We have outlined below the latest Judicial and Economic responses and the steps you can take now to cushion the blow.
Please remember that we are here to help you recover what’s rightfully yours. While we understand and respect the need to be considerate to businesses that may be hurting financially, we will also be acting to protect your interests by having open, positive and transparent conversations with you and your debtors.
Judicial Response
While the judicial system is considered an essential service to the community, we are already seeing Courts across the country (particularly in New South Wales and Victoria) take the unprecedented step of suspending new jury trials. In addition to this, at the end of last week, we were notified by one of the Magistrates Courts of Queensland that all Enforcement Warrants are now on hold until July 2020. This has created a moratorium period of approximately 3 months, a timeframe that could be extended further.
As mentioned above, we’ll continue to keep you informed of any developments as they occur, but we’re already looking at proactive strategies so we can use this as an opportunity to reach out to debtors during this time to discuss interim payment arrangements regarding a Judgment Debt.
At this stage, there are no restrictions on commencing proceedings in Queensland, New South Wales and Victoria, however, we cannot rule out any further changes.
Economic Response
In addition to the judicial response, the response from the Federal Government on Sunday 22 March 2020 was to:
- Provide a temporary increase in the threshold at which creditors can issue a statutory demand on a company (from $2,000 to $20,000) and bankruptcy notices on an individual debtor (from $5,000 to $20,000), as well as the time companies and individuals, have to respond to such documents (from 21 days to 6 months), thus increasing the time for a creditor to initiate bankruptcy and winding-up proceedings;
- Provide temporary relief for directors from any personal liability for trading whilst insolvent; and
- Provide temporary flexibility in the Corporations Act 2001 (Cth) to provide targeted relief for companies from provisions of the Act to deal with unforeseen events that arise as a result of Coronavirus health crisis.
Specifically, the ATO will also look at tailoring solutions for directors of a business, including the temporary reduction of payments or deferrals, or withholding enforcement actions such as Director Penalty Notices and Wind-Ups.
At this stage, these changes will apply for 6 months but again, with the focus of the government to cushion the blow and assist businesses to get to the other side of Coronavirus, it is certainly not known how the impact of this pandemic will develop. Further economic measures may be introduced and existing measures may be extended.
Full details on the Government’s economic response can be found on the attached Fact Sheet that we strongly encourage you to read.
How you can cushion the blow
The above responses will no doubt have a significant impact on the collection of debts between $2,000 and $20,000. Here’s what can you do now to start cushioning the blow:
- Ensure that your invoicing is clear, timely and accurate
- Follow up late payments swiftly – the longer an overdue account is left to sit idle, the higher your chances of non-payment become
- Watertight accounts receivables procedures will help your business plug any late payment leaks
- A quick phone call to your customer the day after the payment falls due is essential to preempt late or non-payment, and if you enter into any payment arrangement with your customer, you must document this immediately
- Monitor your key clients consistently and automate this process as much as possible by signing up to receive automatic alerts from a credit bureau
- If you don’t already have one in place, look at implementing a hardship policy subject to your specific risk appetite
- Be transparent. If a customer requests a payment arrangement and you don’t already have appropriate credit documentation, ensure that you arrange for this as well as any additional securities to frame any amended repayment agreements to protect your interests.
We will keep you updated as much as we can, but if you require any assistance to navigate these changes, please do not hesitate to contact us for advice that is specific to you and your credit and cash flow management situations.
Angela McDonald
Managing Director
