Ever heard of PPSR and just had no idea what it was or why it was important?
CreditorWatch understands, and has put together an easy explanation for Dynamic Business readers, as it’s something that all small business owners should be aware of.
Byline: Patrick Coghan, CEO, CreditorWatch
In the event of a customer or supplier’s liquidation, PPSR essentially protects your security interests.
The PPSR (Personal Property Securities Register) came into existence in 2012 as a result of the PPSA (Personal Property Securities Act 2009).
PPSR is a vital business component for anyone who supplies goods on credit terms; leases, rents or hires out goods; or accepts personal property as security for outstanding debt.
So why is PPSR necessary?
In the event of a liquidation, Retention of Title clauses aren’t enough to protect your goods.
This is because the administrator will review the Personal Property Securities Register and prioritise assets accordingly. Those who have registered their security interests on the PPSR will take priority.
If you haven’t registered, you will be competing with other unregistered debtors and face the possibility of losing your collateral or any monetary value.
The flow on effect of the loss of goods in the event of a customer’s liquidation can be a risk to your own credit and cash flow.
PPSR can provide an alternative to a potential nightmare. Since your security interests take priority, you won’t be hit as hard if a debtor goes into administration.
For further peace of mind, you can choose to list your collateral on PPSR for 7 years, 25 years or indefinitely.
The importance of getting it right
PPSR lodgements aren’t that simple. All of the information in the registration must be entered accurately. Any errors will void the registration and you might not find this out until a liquidation – when it’s too late. Some things to look out for include:
- Registering within the strict PPSA time frames based on whether the customer is a company, inventory or not an inventory
- Accurate details such as correct ABN or ACN, secured party details, grantor details, description of collateral and end time for registration
- Correctly identifying a PMSI or ALLPAAP
If a customer’s information changes or you realise there is a defect, registrations must be amended as soon as possible.
Benefits of PPSR:
- Your registered security interests will take priority in the event of a customer’s liquidation
- Improves accuracy of data since you have to register with correct information
- Protects cash flow from negative flow on effects of customer’s liquidation
CreditorWatch’s PPSR Logic is an innovative online platform that simplifies the way you register on PPSR.
PPSR is complicated but the benefits of registering far outweigh the risks of not registering at all.
Patrick Coghlan is the CEO and one of the founders of CreditorWatch. CreditorWatch is an innovative and customer-centric commercial credit reporting bureau, empowering over 50,000 users to perform due diligence and determine risk to their business with credit management tools and credit risk information on any entity in Australia.