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Volume 28, No 2 January 2021 The Publication for Credit and Financial Professionals IN AUSTRALIA Navigating 2021 requires a strategic approach. This edition covers: l Insolvency reforms and what credit professionals need to know l How open banking will affect consumer credit decisioning l How to get the best from your team in challenging circumstances
71 74
Qld: Your councillors celebrate Queensland winning the President’s trophy. NSW: NSW Division celebrates with their Young Credit Professional.
78 80
SA: Networking evening at the Little Bang Brewery Company. Vic/Tas: Finally a Vic/Tas Council Face2face catchup.
Contents
Volume 28, Number 2 – January 2021
6 9 13
Message From the President 4
Nick Jenkins Adrian Floate MICM Jon Sutton
Credit Management
Where to from here for Credit Risk Management? 6
By Nick Jenkins
Strengthen your business systems now to prepare 9
for the unknowns of 2021
By Adrian Floate MICM 18 22 24
Top of mind for SMEs in 2021: paying down debt 13 Patrick Coghlan
MICM
Richard Atkinson Ashley Clayton
and finding new ways to fund business
By Jon Sutton
ATO’s disclosure of business tax debts to credit 18
reporting bureaus
By Patrick Coghlan MICM
Consumer Credit 28 31 34
ACCC misses opportunity to fine-tune open banking rules 22 Jodie Bedoya Clare Venema MICM Michael Pearse
By Richard Atkinson MICM
Compelling conversations: Debt Collections 24
Call Centres find value in speech analytics
By Ashley Clayton
How to use collector behavioural profiling to get 28
the best out of your collections team
By Jodie Bedoya
38 40 46
Open banking – Is it here to stay? 31 Fiona Reynolds Tracy Rafferty Andrew Spring
By Clare Venema MICM MICM MICM
2 CREDIT MANAGEMENT IN AUSTRALIA • January 2021
85 DIRECTORS
ISSN 2207-6549
WA/NT: End of year Sundowner held at The Camfield, Perth. Trevor Goodwin LICM CCE – Australian President
Lou Caldararo LICM CCE – Victoria/Tasmania & Australian VP
Rowan McClarty MICM CCE – Western Australia/Northern Territory
Leadership and High Performance Gail Crowder MICM – South Australia
The golden rules of a great resume 34 Peter Morgan MICM CCE – New South Wales
By Michael Pearse MICM Debbie Leo MICM – Consumer
Decia Guttormsen MICM CCE – Queensland
Legal CHIEF EXECUTIVE OFFICER
Recent court decisions provide greater clarity on 38 Nick Pilavidis FICM CCE
how to deal with trust assets of a bankrupt estate Level 3, Suite 303, 1-9 Chandos Street,
St Leonards NSW 2065
By Fiona Reynolds MICM
PO Box 64, St Leonards NSW 1590
Harnessing the new anti-phoenixing laws to 40 Tel: (02) 8317 5085, Fax: (02) 9906 5686
Email: nick@aicm.com.au
maximise recoveries
By Tracy Rafferty PUBLISHER
Nick Pilavidis FICM CCE | Email: nick@aicm.com.au
Insolvency CONTRIBUTING EDITORS
Insolvency reforms – what credit professionals 42 NSW – James Smith MICM CCE
need to know Qld – Stacey Woodward MICM
SA – Clare Venema MICM
Insolvency Reform 2021 – “the Good, the Bad and 46 WA/NT – Jeremy Coote MICM
the Ugly” Vic/Tas – Michelle Carruthers MICM
By Andrew Spring MICM
EDITOR/ADVERTISING
Andrew Le Marchant LICM CCE
Masterclass Phone Direct 02 8317 5052 or Mob 0418 250 504
Measuring collection efficiency 50 Email: andrew@aicm.com.au
EDITING and PRODUCTION
Training Anthea Vandertouw | Ferncliff Productions
Tel: 0408 290 440 | Email: ferncliff1@bigpond.com
Which qualification is right for you? 56 THE EDITOR reserves the right to alter or omit any article or
Recent graduates 60 advertisement submitted and requires idemnity from the advertisers
and contributors against damages or liabilities that may arise from
Virtual classroom training calendar 60 material published. CREDIT MANAGEMENT IN AUSTRALIA is published
by the Australian Institute of Credit Management, Level 3, Suite 303,
1-9 Chandos Street, St Leonards NSW 2065. The views expressed in
2020 Virtual Awards Night 61 CREDIT MANAGEMENT IN AUSTRALIA are not necessarily those of
Australian Institute of Credit Management, which does not expect or
invite any person to act or rely on any statement, opinion or advice
contained herein (whether in the form of an advertisement or editorial)
2020 National Conference 65 and neither the Institute or any of its employees, agents or contributors
shall be liable for any opinion contained herein. © The Australian
Institute of Credit Management, 2021.
Member Anniversaries 68
JOIN US ON LINKEDIN
Division Reports
Queensland 71
New South Wales 74 Click Here
South Australia 78 EDITORIAL CONTRIBUTIONS SHOULD BE SENT TO:
The Editor, Level 3, Suite 303, 1-9 Chandos Street,
Victoria/Tasmania 80 St Leonards NSW 2065 or email: aicm@aicm.com.au
Western Australia/Northern Territory 85
New members 88
For advertising opportunities in
Credit Marketplace 90 Credit Management In Australia
Contact:
January 2021 • CREDIT MANAGEMENT IN AUSTRALIA 3 Andrew Le Marchant
Ph: 1300 560 996 E: andrew@aicm.com.au
aicm From the President
Trevor Goodwin LICM CCE
National President
O
n behalf of your AICM online all to ensure making your team
Board and National Office lockdown proof. Ensuring you leverage
team I welcome you to the technology will enable businesses to
first addition of our Credit move their credit teams to customer
Management magazine for 2021. I thank facing roles.
members and their colleagues for your Importantly we must be aware COVID
support in 2020. I hope you all had an isn’t going away. It’s going to continue for
enjoyable Christmas and New Year and a while yet until the vaccination is readily
took advantage of some annual leave. available. On top of that is the trade issues
2020 proved to be a difficult year for with China.
all of us with many challenges impacting 2021 will be a year where legislation
us. But it was also a year of growth. Faced continues to change and evolve,
with hardship, we had to change the way particularly the process of insolvency that
we go about daily life and re-evaluate has been reviewed. Stay connected to
our priorities. In the process, we’ve the AICM and make full value out of your
strengthened our values, held on tighter membership utilising our service to stay
to the people we love and built a stronger informed of the updates we will provide
sense of community. throughout the year. Check out AICM’s
With a challenging start to the new submissions page. We work hard for you
year it will be one of budget repair for to ensure you’re represented and we’re
most businesses. The immediate focus keen to hear your feedback.
has been on survival: cost-cutting and Our website is a ready reference for
streamlining operations, implementing you to not only stay aware of our policy
new health and safety measures. In 2021 submissions made on your behalf but a
it will be important to review how you do source to check your CCE qualification
business, revisit customer relationships points. 100 points is the minimum
and how you can support them for mutual required to sit for your CCE while 30
benefit. points over a 3 year period is required for
A huge number of businesses have seen recertification.
their teams move to remote working, while Our Councils in each division are
surging e-commerce and social distancing hopeful our social and educational events
restrictions have curbed foot traffic in will return to normal in 2021 through face
many retail locations. to face attendance. These have proven to
Businesses will need to ensure they be the best way to broaden your networks,
have access to latest technology with to connect and discuss credit and learn
developments such as automation of and develop.
bank receipts, access to website for Notwithstanding the desire for Face
payment and having your contract with to Face events COVID-19 caused the
your customer digitised and available need for holding webinars and zoom
4 CREDIT MANAGEMENT IN AUSTRALIA • January 2021
From the President
aicm
“Businesses will need to ensure they have access to latest technology
with developments such as automation of bank receipts, access to website
for payment and having your contract with your customer digitised and
available online all to ensure making your team lockdown proof.”
attendance in 2020 which worked well seeing the expiration of the temporary
for the Institute under trying conditions. moratoriums that had been put in place by
In 2021 our Institute will continue to the government as a result of COVID-19.
present several new and very popular From an Advocacy position AICM
online events via webinar for you with will continue to follow through on
qualified speakers to keep you well our doorknock to Canberra despite
informed. We have a number of 2020 the Parliamentary ban on visitors – all
webinars including financial hardship, meetings with Ministers, Shadow Ministers,
diversity and mental health available for Treasury and Attorney General officials
you to review if you haven’t already seen will continue to be held via Zoom where
them. needed.
I, like many members am looking In 2020 the AICM Board developed
forward to a return to a “normal” National a new three year strategic plan outlining
Conference in October and we will be five strategic priorities and initiatives
planning a conference not to be missed! to support their implementation. These
Ensure you include the conference in your included to grow membership, enhance
2022 financial year budget. learning and development, lift professional
In 2021 we will see consumer credit standards, strengthen our voice and
reforms crossing into small business. The recognition and to improve operations.
Australian Small Business and Family The strategic plan explains who the
Ombudsman (ASBEFEO) is offering AICM is and outlined our purpose, vision
assistance and a voice for small business. and promise to members through eight
Access to capital is an ongoing problem pillars including education, professional
for small business. Easier access to standards, advocacy, promotion of credit
capital will help small business to survive professionals, events, communication,
difficult trading periods. We support the governance and stakeholders. You will hear
governments draft amendments to the more from us on our initiatives as the year
consumer credit framework that relate to progresses.
small businesses. I am confident 2021 will be a year
Already we have seen the new when opportunity and innovation will
Payment Times Reporting coming allow AICM members to reassess, regroup
into effect on 1 January requiring large and rebuild. The Institute will continue
businesses with an annual income of to be dynamic and at the forefront for
over $100 million to report on their our members, providing education and
payment terms and practices for their events ensuring a successful 2021 for the
small business suppliers. In addition, the Institute.
commencement of 2021 has seen the
introduction of the significant changes to Trevor Goodwin LICM CCE
Australia’s insolvency reform, while also National President
January 2021 • CREDIT MANAGEMENT IN AUSTRALIA 5
Credit Management
Where to from
here for Credit Risk
Management?
Collection teams and risk managers augment traditional financial data
By Nick Jenkins*
face the prospect of challenges and conventional assumptions with
ahead as the COVID-19 pandemic newer high-frequency information
continues to drive changes to and behavioural insights, credit
the credit environment, customer risk management may become
behaviour and the global economy significantly harder in the challenging
into 2021. The next six months times that lie ahead.
are expected to bring continued
economic uncertainty resulting in From deferrals to?
possible significant challenges with As the home loan deferral period
delinquencies and loan defaults. ends, customer communication
In this ever-shifting landscape, strategies should be updated using
real-time data and analytics are real-time insights to enable tailored
proving their value in helping and fair outcomes. While many
organisations and customers find a borrowers have transitioned back
quicker path to recovery. Dynamic, to normal contractual repayments,
agile risk tools and machine learning a substantial number are flagging
techniques can be highly effective in vulnerability still needing payment
delivering a closer profile of customer deferral programs. As of late
risk and vulnerability for informed September 2020, 7.4% of total
decision making. housing and 10.8% of SME loans
If COVID-19 has taught us remain on payment deferrals (Source:
anything, it’s the importance of APRA) at a value of $168 billion.
acting on fact, not on assumptions. For some customers, this might be
For lending institutions, this means the first time they have experienced
harnessing external data sets as a financial insecurity, and they will be
means for making timely, proactive looking to their lender to understand
decisions. Without the ability to their needs and provide personalised
“If COVID-19 has taught us anything, it’s the importance
of acting on fact, not on assumptions. For lending
institutions, this means harnessing external data sets
Nick Jenkins as a means for making timely, proactive decisions.”
6 CREDIT MANAGEMENT IN AUSTRALIA • January 2021
Credit Management
“The residential property market has defied expectation
debt restructuring solutions. Equifax
analysis shows that borrowers aged
between 36 to 45 years are among
the most vulnerable, with the highest
by showing resilience in the face of the pandemic.
number of mortgages in deferral (as Mortgage demand remained strong in the September
of May 2020). Borrowers from tourist-
dependent Queensland regions and 2020 quarter, and house prices in Australia/capital cities
outer-Melbourne estates are also
grappling with a higher proportion of
experienced a 0.4% rise in October.”
deferrals compared to the national
average.
Quite commonly in a period of showing resilience in the face of people need from their homes, with
crisis we see a direct correlation the pandemic. Mortgage demand more people seeking a desirable
between borrowers with low credit remained strong in the September environment from which they can live
scores who need longer deferrals 2020 quarter, and house prices in as well as work.
than those with higher credit scores. Australia/capital cities experienced
Borrowers in the lower score bands a 0.4% rise in October (source: Increased use of digital
had the largest increase in the rate CoreLogic). While refinancers channels
of deferral from May 2020. Accounts initially drove demand, government Working from home dynamics
exiting deferrals have higher scores stimulus measures have encouraged are also changing the way
than those entering or remaining in an increasing number of first home customers communicate with
deferrals experiencing lengthened buyers into the property market. financial institutions. There is a
credit stress. The high-end of the residential greater need for digital channel
market has grown substantially in contact, executed in a way that
Property market boom or bust major Australian cities and across respects borrower preferences
The residential property market regional areas. The pandemic has and suitability. Applying digital
has defied expectation by changed the perception of what technology to collections is crucial ➤
January 2021 • CREDIT MANAGEMENT IN AUSTRALIA 7
Credit Management
in efficiently addressing the data for validation rather than relying enough to move with their customers.
challenges of rising delinquencies. on old norms will help identify these A robust well-thought-out approach
Delivering on customer experience variances in borrower behaviour. to credit risk management and debt
also requires an understanding of collection is essential.
the mentality of consumers living A future full of variables Resilience to the ongoing
through a crisis. Fear of the unknown As 2021 unfolds the only constant disruptions of the COVID-19 crisis
can bring on a scarcity mindset, this will be change, and the credit requires pertinent data and advanced
means short-term decision-making industry may be susceptible to many analytics to replace assumptions and
overrides and sense of future impact. different economic variables. The fill gaps in existing knowledge. The
Helping customers understand and Government Stimulus has highly future of credit risk management
manage their financial situations for influenced outcomes so far for is knowing your customer, keep
the short-term and long-term, benefits financial institutions giving a sense communicating with them and
everyone in the equation. Constant of security. As we move into a more knowing where to look to predict
communication with customers can targeted focus in Fiscal Policy and customer needs more efficiently and
help borrowers to behave differently a high dependence on a Covid-19 with greater empathy.
and not make uncharacteristically vaccine, the underlying vulnerabilities
poor decisions. will start to surface with challenges
With no end date to this more evident.
pandemic, there is a considerable There is no silver bullet to deal *Nick Jenkins
Debt Services Solutions Consultant
way to go before customers return to with these uncontrollable variables.
Equifax
pre-COVID-19 information processing Collection teams and risk managers T: +61 427129852
and decision making. Using factual need to be flexible, prepared and agile E: nick.jenkins@equifax.com
Online
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8 CREDIT MANAGEMENT IN AUSTRALIA • January 2021
Credit Management
Strengthen your
business systems
now to prepare for the
unknowns of 2021
By Adrian Floate MICM* The fiscal policy measures Digital technologies can drive
introduced by the State and Federal change
Governments to cushion the Restricted cash flow due to late
economic impacts of the COVID- payments and a downturn in revenue
19 pandemic have provided some significantly affects a company’s
businesses with a much-needed stability. Payment problems impact
lifeline. a business’s finances and cash flow.
While many businesses have This has flow-on effects, including
been able to use these measures to a reduced ability to invest in and
keep creditors at bay while operating grow the company and difficulties
smoothly, taking the time now to accessing finance in the future.
strengthen your business systems While regulators have intervened
will reduce risk and ensure your with measures aimed at addressing
organisation is in a strong position to some of these issues, businesses
capitalise on opportunities in the year need the tools and systems to get
ahead. paid on time and unlock capital now.
Credit management and finance In a year like 2020, where
professionals should be using companies have seen the
the time between now and when importance of investing in the right
measures such as JobKeeper end to digital technologies, systems and
introduce better systems that will processes, this should also be the
reduce debtors, unlock cash flow to focus for credit management and
strengthen cash reserves and open finance professionals, particularly
opportunities for further growth those who work in industries that
in 2021. Now is not the time to be have been heavily affected by the
complacent. pandemic. ➤
“While regulators have intervened with measures
aimed at addressing some of these issues, businesses
need the tools and systems to get paid on time and
Adrian Floate MICM unlock capital now.”
January 2021 • CREDIT MANAGEMENT IN AUSTRALIA 9
Credit Management
The competitive edge may in order” before these measures however, that fixing just one system
be greatest in the retail, change. Strengthening your business will not provide a competitive
manufacturing and wholesale systems should be the first step in edge. Implementing e-invoicing in
sectors this process. an organisation, for example, has a
According to illion’s Late Payments payback period of six to 18 months.
Australia September Quarter Have a whole-of-business This kind of project, while worthwhile,
Analysis, late payments increased 1.6 approach to improving systems resolves issues in only one part of the
per cent in September and 20.7 per Company-driven solutions and business.
cent year-on-year (YoY)1. Some of a move to better systems will While targeted innovation may
the biggest increases in late payment help you to identify and address improve one area of your business,
times occurred across the retail (13.9 financial problems and risk across the biggest advantage is available
days), manufacturing (13.1 days) and your businesses, allowing your to businesses who use one platform
wholesale sectors (12.6 days)2. These organisation to be ready to capitalise across a range of business functions.
payment times haven’t yet filtered on opportunities in 2021. These
through to an increase in insolvencies opportunities may include accessing How can your businesses
and external administration, capital to grow through acquisition strengthen its systems?
which is likely due to the Federal or expanding to new markets, either Digitising data across your
Government’s changes to insolvency geographically or with new products organisation and establishing systems
and bankruptcy laws. It is, however, and services. that “talk” to each other should be
a timely reminder to “get your house It’s also important to remember, your core objective as you strengthen
your business’s systems.
Look at digitising and integrating
“Digitising data across your organisation and establishing data in all areas of business operation
to drive stronger, data-driven decision
systems that “talk” to each other should be your core making. These areas may include
warehousing and logistics, debt
objective as you strengthen your business’s systems.” collection, payments, procurement,
10 CREDIT MANAGEMENT IN AUSTRALIA • January 2021Credit Management
“Sometimes the idea of new systems is daunting for
improving your business’s systems,
consider introducing the infrastructure
professionals across a business, particularly if you’ll to establish an intent to pay
framework between your business and
be interacting with the platform every day, and it its suppliers, and your customers. This
significantly changes your workflow.” framework will reduce your trading
days and improve cash flow, which
ultimately improves the business’s
ability to manage risk proactively.
eCommerce and your point-of-sale allow your organisation to become An intent to pay framework
system. The goal here is to eliminate more proactive. allows customers to set a scheduled
siloed systems that are open to the This may include the ability to use payment plan with their suppliers
risk of human error and the burden of your data in negotiating more credit to settle overdue debt. Workflow
manual data entry. and new funding facilities when it’s payments are introduced early in
needed. the payments process, allowing a
Use one platform across the On the other hand, you may use business to get paid for products
business the data internally to make a case and services at the point the job is
By using one platform amongst for why the business can’t take on complete, or a delivery made, using
various functions in your organisation, any further debt. Your data will tell verified customer payment details.
you’ll have access to the real-time the story, and it provides you with With this infrastructure, friction is
data you need to unlock capital an opportunity to be more strategic removed from the payment process
and improve cash flow. This data every day. and certainty is created in debt
allows you to identify the business’s recovery for the seller.
strengths and areas that may be Drive a culture of implementing
underperforming and increasing risk. intent to pay frameworks and Consider the long-term cost
In underperforming areas, the instant payments of inefficient systems and
data may reveal particular customers, If your organisation doesn’t invoice processes
products and industries that expose until after goods and services are Sometimes the idea of new systems
the business to unnecessary risk. delivered, you are leaving the business is daunting for professionals across
Over time, more robust data will open to further risk. As part of a business, particularly if you’ll be ➤
NCI, more than just
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January 2021 • CREDIT MANAGEMENT IN AUSTRALIA 11Credit Management
interacting with the platform every Go digital and unlock cash flow adapted quickly this year, showing
day, and it significantly changes your While regulatory measures in recent they’re well-equipped to continue
workflow. years have brought much-needed driving productivity and growth.
What this year has shown like awareness to business finance and Using technology to strengthen
no other, however, is that the risk of payment problems across Australia, your systems and unlock capital will
not strengthening your business’s these measures, understandably, can’t be no different. It’s the competitive
systems, especially its payment address the common cause of the edge businesses will need to
processes and data integration, grows issue – outdated business systems and capitalise on the opportunities that
the longer you leave it. Real-time data processes. will arise from the unknowns in the
and business intelligence will give all To proactively manage risk, your year ahead.
areas of your business a competitive business needs one platform with
edge. application across the business to
Not only do better data and get paid faster, make the payment *Adrian Floate MICM
Managing Director, Cirralto
systems make everyone’s lives easier process seamless for customers,
E: Adrian.Floate@Cirralto.com.au
especially when it comes to financial integrate data for better reporting and T: 0412 377 877
reporting and funding, but in today’s decision making, and unlock capital to Adrian Floate is the CEO of Cirralto and the
Managing Director of Spenda, a product of
data-driven world, your decisions are reduce your credit risk and increase Cirralto
only as good as the data you have borrowing capacity.
available. Many Australian businesses have FOOTNOTES:
1 illion, Late Payments Australia September
Quarter Analysis 2020.
“What this year has shown like no other, however, is that URL: https://www.illion.com.au/wp-
content/uploads/2020/11/ION_Late_
the risk of not strengthening your business’s systems, 2
Payments_Sept_Quarter_AU.pdf
illion, Late Payments Australia September
especially its payment processes and data integration, Quarter Analysis 2020.
grows the longer you leave it.”
12 CREDIT MANAGEMENT IN AUSTRALIA • January 2021Credit Management
Top of mind for
SMEs in 2021:
paying down debt
and finding new ways
to fund business
Small businesses have signalled they’ll be looking for different ways to fund their
businesses in 2021. This, and other insights that should be on the radar of credit
managers, from the latest ScotPac SME Growth Index.
By Jon Sutton* Small businesses have named paying they may sell or close if conditions
down debt as their top priority for don’t significantly improve.
2021 and have flagged building on Since 2014, ScotPac has engaged
their 2020 efforts to find new ways East & Partners to undertake SME
to fund their businesses. Growth Index research twice a year,
These are two key findings in the interviewing more than 1200 small
latest ScotPac SME Growth Index. businesses in the $1-20m turnover
It has been a very challenging year range (a representative sample of
for the small business sector: efforts metropolitan and regional businesses
to prevent the spread of COVID- across all mainland states and major
19 created hard internal borders, industries).
temporarily devastated certain Given many of the federal stimulus
industries and led to a government measures which helped prop up the
stimulus package of unprecedented national economy were designed
size and scope. around businesses taking on more
Conditions were so challenging debt, it’s worth looking at the SME
that at the time of the research debt landscape.
(September and October 2020) one The November 2020 Index
in three small businesses indicated records rising angst amongst small ➤
“Given many of the federal stimulus measures which
helped prop up the national economy were designed
around businesses taking on more debt, it’s worth
Jon Sutton looking at the SME debt landscape.”
January 2021 • CREDIT MANAGEMENT IN AUSTRALIA 13Credit Management
“We’d urge Closing, selling, looking beyond
businesses not to Job Keeper – impact on SMEs
wait until 2021 to SMEs looking for new
make sure they SMEs looking
funding options
have the right to close or sell
2/3
funding in place. 1/3 planning to adjust business
funding method to deal with
pandemic aftermath
The businesses
SMEs plan to sell or close
their business if no
significant improvement
who will be best ER
NG D
DA EA
AH
placed to take
CL
O
DOSIN
W G
N
C
advantage of the
TO LO
LE
T S
E
D
Smaller SMEs hit hardest
recovery are those SMEs in $1-5m turnover range are almost
double as likely to look to close or sell within 6
that are planning months than those in $5-20m range
now.”
Source: scotpac.com.au
business owners about debt levels. businesses who will be best placed to without significant improvement
SMEs told us the factors they were take advantage of the recovery are equates to approximately 88,000
most positive about for 2021 were those that are planning now. The clear businesses around Australia in the
getting “back in the black” and its message is: don’t get caught short as $1-20m annual revenue bracket, with
corresponding factor of reducing debt the protection of government stimulus about 50,000 of these businesses
levels. The top challenges SMEs said tapers off, take the time now to make looking to sell and more than 37,000
they must overcome in 2021 were sure you have the right finance in looking to close.
servicing excessive debt levels and place. The smaller the business, the more
diversifying their funding base/finding severe the impact of the pandemic on
new sources of funding, along with Impact of the pandemic their long-term strategic objectives
avoiding insolvency. Only half (54%) of all the small and solvency. Two out of every five
Historic Index data shows a very businesses polled say they are not smaller sized SMEs ($1-5m turnover)
large proportion of small businesses looking to sell or close due to the are looking to sell or close by April
use easy access debt (such as impact of the pandemic, with a 2021 unless conditions markedly
personal credit cards or their own further one in three SMEs considering improve.
funds) to access working capital for those options if conditions don’t This is also the situation for almost
their enterprises. significantly improve. one in four larger SMEs ($5-20m
Credit managers would be aware This serves as a point-in-time turnover).
the post-pandemic period offers indicator, given the research was Retail has been hardest hit,
an opportunity for SMEs to make undertaken when Victoria was still with only 9% of retailers definitely
tough decisions within their business. in lockdown. However it provides not making plans to close or sell.
This includes finding better funding a stark indication of the precarious For manufacturing SMEs, without
options, to unlock capital and ease the situation for the small business significant improvement 17% would
cashflow issues that can be crippling sector if there was another major be looking to close; for transport 3%.
even in good times let alone during a state lockdown or significant border Nine out of 10 mining SMEs indicated
recession. closures. they would continue in their business
We’d urge businesses not to East & Partners extrapolates from even if conditions did not significantly
wait until 2021 to make sure they the data that the one in three SMEs improve.
have the right funding in place. The looking to sell or close their business For Queensland SMEs, 8% were
14 CREDIT MANAGEMENT IN AUSTRALIA • January 2021Credit Management
Forecasting growth: Optimism varies by industry
Mining the
Transport sector most resilient
staying positive
88%
60% forecast positive
growth
expecting growth
“The critical
message for Retailers expect
small businesses, revenue decline Manufacture and
Wholesale SMEs
their advisors 39% are optimistic
and for others
expect revenue decline
compared to 33.5%
expecting growth 37%
with influence on expecting growth
the sector is: get
ready.” Source: Scotpac.com.au
saying they could close; in WA 6% business owners were looking for the projected Federal Government
were eying closure. Victoria was the new answers to perennial funding stimulus initiatives end.
only state where more than half of problems, with one in 12 adding Other funding adjustments include
its SMEs (54%) were looking to sell non-bank funding facilities to deal decreasing their borrowings for 2021
or close – 29.5% listed closing, with with the impact of supply chain (24% plan to pull back, ahead of 18%
24% looking to sell, making Victoria and revenue issues created by the looking to increase their business
also the only state with a higher sell shutdown. borrowing).
than close percentage. NSW small We asked SMEs what funding SMEs with a clear strategy
businesses are much more confident adjustments they’d make in and appropriate funding will put
– only 9% flagged closing. response to stimulus measures themselves in the strongest position
ending by April 2021, and their to face 2021 – so it is not ideal that
SME borrowing sentiment responses point to a significant 40% of smaller businesses (under $5m
More than half the SME sector shakeup within Australia’s small annual turnover) have no set idea how
(56%) experienced no significant business funding sector. to fund their business in the short
change in borrowing demand during Nearly two thirds are planning term.
the COVID crisis. This figure was to reassess the way they fund their The critical message for small
split evenly between those who said business, with almost a quarter businesses, their advisors and
they relied on government stimulus saying they will reassess their actual for others with influence on the
and those who didn’t require the funding provider. This was more sector is: get ready. Plan ahead to
stimulus. marked in the $5-20m SME category give yourselves the best chance
One in five SMEs reported their (32% looking to reassess provider) of success and to ensure that your
funding needs increased in the compared to the smaller $1-5m business is not at the whim of the
short-term, with a further one in 16 revenue SMEs (15%). markets.
preparing for an indefinite increase in Many are more open than ever With JobKeeper ending in late
credit demand. about using multiple funders, March 2021, and enforcement of ATO
Only one in 10 SMEs had increasingly non-bank lenders. One debt on the horizon, SMEs must have
decreased borrowing demand as a in eight SMEs say they plan to add funding in place to unlock working
direct result of the pandemic. non-bank funding facilities to cope capital and ensure continuity of
In the midst of the COVID crisis with their cash flow needs once all business (download ASBFEO and ➤
January 2021 • CREDIT MANAGEMENT IN AUSTRALIA 15Credit Management
ScotPac’s Business Funding Guide for Top funding frustrations government guaranteed loans
a detailed overview of the main small More than nine in 10 SMEs reported during COVID-19. Nearly a quarter
business funding options). funding frustrations, with perennial were frustrated that online lenders
SME funding pain points remaining were charging high rates.
Small business funding trends a bigger concern than COVID- The SME frustrations that
SME Growth Index results show SMEs specific frustrations. The top three recorded the biggest proportional
are actively diversifying their funding frustrations were loan conditions increase this year was that funders
base to navigate the aftermath of (84%), having to provide property were hard to deal with and not
COVID-19. security (80%) and lack of flexibility meeting all the needs of their
Small businesses are now almost (74%). borrowers.
twice as likely to fund their new In 2021 the uncertainty SMEs with non-bank borrowing
investment using a non-bank rather surrounding housing prices could rather than bank finance reported
than their main bank. Intention to mean many businesses owners far fewer frustrations than their
fund new growth using a non-bank will no longer be able to use their bank borrowing peers about loan
reached an all-time high of 27%, family home to fund their business. conditions, flexibility and funders
and main bank funding of new SME It is important that business owners being hard to deal with.
investment is now at its lowest (17%), are aware of funding options that
down from 23% in H2 2018 and from can provide them with the working Good results for SMEs who
the high of 38% in the first round of capital they need by using the assets turned to advisors
the Index in 2014. already in their business (for example, With the Australian economy battling
Just over half the SMEs polled their outstanding invoices) so they out of recession, as Victoria reopens
are looking to fund growth over the don’t need to rely on the family and SMEs plan ahead for life beyond
next six months (650 out of the 1252 home. JobKeeper and other government
businesses). The popularity of non- Of the COVID-specific response stimulus offerings, the message to
bank funding amongst these growth options, two thirds of SMEs were small business owners and those who
businesses has doubled since 2018 frustrated by the lack of a clear work with them is: don’t panic, look
(then, 12% planned to fund growth recovery path out of the pandemic- for what you can do to improve your
using non-banks, now this figure is induced recession. Almost half business.
23%). encountered difficulty accessing Advisors play a key role in
Most states expect positive
“SMEs with non-
growth in next 6 months
bank borrowing
rather than bank
finance reported far
fewer frustrations
than their bank
borrowing
peers about
loan conditions,
flexibility and
funders being hard
to deal with.”
Source: scotpac.com.au
16 CREDIT MANAGEMENT IN AUSTRALIA • January 2021Credit Management
SMEs reliance on trusted
“Advisors play
advisors grows in 2020 a key role in
improving SMEs –
53% 63% just over half the
businesses polled
of SMEs relied more
on their key advisor of SMEs leaned on their key
during the pandemic advisor for cutting costs
82%
said this had a positive
relied more on
impact on their business
RREE
SSEE
RRVV
their key advisor,
for example their
EEBB
AANN
KK
accountant or
broker, since the
37% pandemic began.”
of SMEs sought advice on
accessing government stimulus
Source: scotpac.com.au
improving SMEs – just over half the Rebounding in 2021 response, by a significant margin.
businesses polled relied more on Despite the massive impact of the The other key items on the small
their key advisor, for example their pandemic, SME revenue growth business wish list were legislated
accountant or broker, since the forecasts through to April 2021 did 30-day payment terms and
pandemic began. not dramatically decrease, although insolvency reform.
They approached their advisors this round of research did record a
three times more frequently than lowest ever all-respondent positive *Jon Sutton
average, and of those SMEs who growth average of +0.1%. Chief Executive Officer
E: suttonj@scotpac.com.au
sought advice from trusted advisors, Australia is dealing with its first T: 1300 209 417
eight in 10 reported that this external recession in 30 years, and against
business advice had a positive this backdrop a record low 47%
impact. of small businesses are expecting
The top five positive impacts small revenue growth, and around a
businesses said their advisors had quarter are forecasting a revenue
were: drop through to April 2021.
— Reducing costs (63%), to help In a positive, despite a
improve their bottom line significantly challenging six months
— Helping SMEs access government for the small business sector the
support and stimulus measures number of SMEs forecasting a
(37%) revenue decline moved only one ScotPac is Australia and New Zealand’s largest
non-bank SME lender, and for more than 30 years
— Providing confidence about the percentage point, to 23.8%, since has helped thousands of business owners with the
direction the business was taking March 2020. working capital they need to succeed. ScotPac
prepared this article from excerpts of their twice a
(28%) When asked to name the top year SME Growth Index research. To download the
— Improving customer relationships three factors needed for them latest Index or request previous Index research please
visit www.scottishpacific.com/news/research.
(19%) to rebound from the recession, For more information contact:
Kathryn Britt, Director, Cicero Communications
— Helping them access funding Australian small business owners
kathryn@cicero.net.au
(18%) named open borders as the top 0414 661 616
January 2021 • CREDIT MANAGEMENT IN AUSTRALIA 17Credit Management
ATO’s disclosure of
business tax debts
to credit reporting
bureaus
By Patrick Coghlan MICM* Businesses with significant tax debts will have their
information reported to credit reporting bureaus;
credit scores will be impacted.
1. Tax debt information information under the Confidentiality
disclosure of Taxpayer Information provisions.
This means that credit reports
What is the Taxation Administration currently do not factor in existing tax
(Tax Debt Information Disclosure) debt and provide a limited overview
Declaration? of an entity’s creditworthiness.
In the future, businesses with With this legislation, there
significant overdue tax debt will have will finally be transparency over
their information become public. businesses that have excessive tax
When the Taxation Administration debt and have not engaged with
(Tax Debt Information Disclosure) the ATO to manage their debts.
Declaration 2019 comes into effect The default would be visible on a
the ATO will be releasing their tax commercial credit report and could
debt information to registered credit negatively affect an entity’s credit
reporting bureaus (CRBs), including score.
CreditorWatch.
In the 2016-2017 Mid-Year 2. Transparency of tax debt
Economic and Fiscal Outlook, the information
government announced its intention
to allow the ATO to report tax debt Problems with the lack of
information of certain entities to transparency
CRBs. On 19 December 2019, the The lack of transparency about
declaration was made official and the significant tax debts is detrimental to:
legislation will come into effect later – Creditors
this year. – Employees
Currently, the ATO is not – Wider community and industry
Patrick Coghlan MICM authorised to report any tax debt – Government & economy
18 CREDIT MANAGEMENT IN AUSTRALIA • January 2021Credit Management
“When an entity is wound up due to its overwhelming
billion. When an entity fails to pay
their employees, this responsibility
tax debts, its employees often don’t receive their falls onto the government (via the
Fair Entitlement Guarantee or FEG),
entitlements and/or end up losing their jobs suddenly. which in turn affects all taxpayers.
The government and economy suffer
While this can result in emotional and financial hardship, when tax debts are unpaid.
it could also have been avoided...” Benefits of tax debt information
disclosure
Having more visibility over overdue
Creditors Employees tax debts will help address these
When suppliers are unaware that an When an entity is wound up due issues.
entity has significant tax debts, they to its overwhelming tax debts, its
enter into a situation without getting employees often don’t receive their Creditors
a full picture of that entity’s financial entitlements and/or end up losing Businesses, financial institutions and
position. It can be detrimental for their jobs suddenly. While this can credit providers will be able to make
them to make decisions about result in emotional and financial more informed decisions about the
providing credit while being oblivious hardship, it could also have been entities they engage with and make
to an entity’s staggering debts. avoided if there had been more more accurate assessments about
Currently, a creditor often only warning signs or transparency their creditworthiness. This legislation
realises that their debtor has an regarding the tax debt. will empower creditors to take more
overdue tax debt when the ATO preventative measures instead of
takes legal action to recover it and Government & economy recovery actions and will help to
ultimately winds up the debtor. This As of the 2018-2019 financial year, reduce the risk of the domino effect.
could result in a domino effect, where small businesses owe the ATO about
the creditor faces cash flow problems $16.5 billion in debt. Tax evasion Debtors
themselves as their debtor is forced to through illegal phoenix activity is The risk of being exposed places
shut down leaving the creditor out of estimated to have an annual direct extra pressure on entities with
pocket. impact between $2.85 billion and $5.13 excessive tax debt. They will have ➤
January 2021 • CREDIT MANAGEMENT IN AUSTRALIA 19Credit Management
to take appropriate actions to avoid 3. Releasing tax debt which at least $100,000 is overdue
being reported by the ATO. This information* by more than 90 days
will hopefully encourage entities - It is not effectively engaging
to engage with the ATO earlier to Who will receive this information? with the ATO to manage its tax
manage their tax debts. (More on In order to receive tax debt debt
effective engagement in Section 4.) information, the CRB must: - The Inspector-General of Taxation
- Be registered with the ATO (IGT) is not considering an
Industry - Enter into an agreement with the ongoing complaint about the
This legislation will create a fairer ATO about reporting terms proposed reporting of the entity’s
playing field between entities that do tax debt information
not comply with their tax obligations Which entities will be reported?
and those that do. Companies that The ATO can only disclose this What information will be reported?
ignore their tax obligations operate information when the following If the entity meets the above criteria,
from a lower cost base and can criteria are met: the ATO will report to CRBs the
therefore undercut competitors. Once - It has an ABN and is not an following information:
reported, these companies will face excluded entity (i.e. deductible - Unique identifiers like their ABN
sanctions beyond the ATO – loss of gift recipient, registered charity, and legal name
investors and suppliers, significantly government entity, or complying - Balance of overdue tax debts at
reduced credit score, and more. superannuation entity) the time of initial reporting
- It has one or more tax debts, of - Regular updates on the balance
Economy & Government
There will be greater transparency in
the supply chain, making it harder for
illegal phoenix activity or tax evasion “Ultimately more tax revenue will be returned
to occur. Ultimately more tax revenue
will be returned to the government and
to the government and less public money paid out
less public money paid out via FEG. via FEG.”
20 CREDIT MANAGEMENT IN AUSTRALIA • January 2021Credit Management
“If you have an active review with the Administrative Did you know?
Appeals Tribunal (AAT) or appeals to the Courts, you will In 2018 – 2019…
not be reported by the ATO.” z The ATO received 19,826
complaints (inclusive of
IGTO complaints)
z The ATO resolved more
of the overdue tax debt until managed sustainability and than 26,000 objections (up
the entity no longer meets the address ways to mitigate risks. from 24,350 objections the
reporting criteria You must be compliant with this year before)
- Notification when the entity no plan, otherwise you could still be z There were 441
longer meets the reporting criteria eligible for reporting. applications for review or
appeal to the AAT or other
When will this information be To stop a report from going through, courts
reported? consider one of the following: https://www.abc.net.au/news/2019-
The ATO will give the entity a 21-day - Raise an objection and request a 10-24/ato-debt-book-grows-to-
2445b-in-australia/11633312
notice period before releasing their review or appeal
tax debt information. At the end of * Dispute your taxation
the 21 days, if no action has been assessment, determination,
taken by the entity, the ATO will notice or decision by lodging a CreditorWatch has been working
attempt a final phone call to help the Part IVC objection. with the ATO since 2014 to plan
entity address their debt. If this is * Then, if you are still dissatisfied and design this legislation. We are
futile, their information will then be with the objection outcome, proud to see it come into effect and
officially released to registered CRBs. request a review of that decision. are confident in its ability to assist
- If you have an active review companies to better assess credit risk
4. How to prevent your business with the Administrative Appeals and reduce bad debt. If you have any
from being reported – effective Tribunal (AAT) or appeals to the questions about how this legislation
engagement with the ATO* Courts, you will not be reported by will affect your business, get in touch
If your business is facing a significant the ATO. with us today on 1300 50 13 12 or
tax debt, as long as you effectively - Lodge a complaint with the at https://creditorwatch.com.au/
engage with the ATO, they won’t be Inspector General of Taxation contact/.
allowed to disclose your tax debt (IGT) about your tax debt and the
*The ATO is currently in the design phase so
information. To do this, you may either fairness of the ATO’s approach in
the above information is subject to change.
enter into a payment plan or dispute their dealings with you. CreditorWatch will continue to provide
your tax debt. - Contact the ATO to claim updates as it progresses.
and demonstrate exceptional
To avoid or manage existing debt: circumstances
- Enter a payment plan * The ATO considers exceptional
* The ATO will work with you circumstances impacting your
to create a custom payment ability to pay your debts and you
plan tailored to your individual may be able to claim temporary
circumstances, including your reprieve. This includes family *Patrick Coghlan MICM
CEO
capacity to pay the proposed tragedy, serious illness, natural
CreditorWatch
amounts. Together, you will disaster impacts and other T: 1300 50 13 12
agree on a plan which can be circumstances. www.creditorwatch.com.au
“The ATO will work with you to create a custom payment plan tailored to your individual
circumstances, including your capacity to pay the proposed amounts. Together, you will
agree on a plan which can be managed sustainability and address ways to mitigate risks.
You must be compliant with this plan, otherwise you could still be eligible for reporting.”
January 2021 • CREDIT MANAGEMENT IN AUSTRALIA 21Consumer Credit
ACCC misses
opportunity to
fine-tune open
banking rules
The Australian Competition consumer’s consent to third
By Richard Atkinson*
and Consumer Commission has parties, including to their trusted
recently published its third set of professional advisors (such as
amendments of the Consumer Data accountants, tax agents and
Right (CDR) Rules which are required lawyers), and any third party on a
to underpin Australia’s emerging limited ‘insights’ basis.
open banking system. z Increase consumer benefit:
The amendments follow the allowing business and corporate
release of a Consultation Paper by consumers to access their CDR
the ACCC in October 2020, where data, and adding flexibility
feedback was requested on the and functionality to improve
following proposed Rules changes: consumer experience in relation
z Introduce new accreditation to the management of consumer
levels: creating new pathways consents to collect and use CDR
for service providers to become data, joint bank accounts and
accredited data recipients. accounts that have additional card
Proposals for new levels (‘tiers’) holders.
of accreditation are intended to
lower barriers to entry and reduce The latest Rules amendments have
compliance costs for service addressed the Increase consumer
providers that do not require benefit component, and illion is
unrestricted access to CDR data. strongly supportive of these changes.
They also recognise that supply illion is concerned, however, that the
chains for data services regularly amendments do not address the
involve multiple service providers, Introduction of new accreditation
and that CDR participants can levels or the Provision of greater
appropriately manage risk and choices for customers about who
liability through commercial they share their data with.
arrangements. illion has made several
z Provide greater choices for submissions to the ACCC’s CDR
consumers about who they Rules drafting process, and has long
share their data with: permitting advocated for a system that makes
accredited data recipients it easy for individuals to securely
Richard Atkinson to disclose CDR data with a share their data while providing
22 CREDIT MANAGEMENT IN AUSTRALIA • January 2021Consumer Credit
“The goal of the CDR is to give customers a right to direct responsibility for the drafting of future
Rules amendments passing from
that their data be shared with others they trust, so that the ACCC directly to the Treasury in
February 2021.
they can benefit from its value.” Where it all leads now is the big
unknown. The ACCC has addressed
the easy question, but what about the
mechanisms for businesses to accreditation of organisations to other, more difficult questions?
securely access CDR data, at the receive CDR data. We know from the introduction
same time minimising barriers to Based on the fact that we don’t of the UK’s open banking model that
entry. have a view on what the next stage regulation was a big problem. The
We note that the latest amendments looks like, it’s likely that other players UK’s open banking system has been
fail to meet the Government’s own in the market will not be able to operational for two years now but the
recommendations for tiered access participate until at least 2022. legislation and Rules haven’t provided
to data; Recommendation 4.8 in the In illion’s experience, the current a good foundation for it to be really
Government Inquiry into the Future model imposes a significant cost successful.
Directions for the Consumer Data on an organisation to achieve Let’s make sure we learn from their
Right. accreditation. There is a clear and issues and get it right in Australia –
The goal of the CDR is to give present danger that the benefit aligned to the original goals of the
customers a right to direct that their of CDR will not be realised as the Consumer Data Right and the Future
data be shared with others they trust, barrier to access the data (in the Direction that the Government has
so that they can benefit from its value. form of accreditation) is too high, articulated.
To achieve this outcome, the Rules evidenced by the fact that there are To access illion’s full summary of
framework must balance security only six data recipients accredited the latest amendments, click here.
and cost of accreditation against after six months – two of which are
facilitated data sharing. illion.
We are six months away from all At this stage it is now not clear *Richard Atkinson
ADIs having to expose transactional whether further amendments are General Manager Consumer Risk and AML
illion
data to the CDR, however the current planned to address these two critical M: +61 477 444 414
rules still have a single model for areas. This is further complicated by E: Richard.Atkinson@illion.com.au
January 2021 • CREDIT MANAGEMENT IN AUSTRALIA 23You can also read
