There has been much press about the ending of JobKeeper and what it means. The press has largely focused on the most exposed industries such as cafes and restaurants, particularly those in the CBD.
So the question is how exposed is your business if your customers are at risk?
At worst, it may be best to not sell to someone who is at risk of falling over.
it costs you $600 to service a $1,000 sale and
they go down owing you $2,000
Then you will need sell someone else another $5,000 just to cover that loss. It’s a tough assignment at any time let alone in today’s market for many business owners.
The sad reality is that most accountants don’t ensure their clients accurately record and report on the trust cost of servicing the sale of a good or service. It’s really really important to know this so for so many reasons – but in context to the discussion here, knowing what is at stake when making a sale that may not be collectable.
So think about whether you should continue to sell to existing customers. Another option is to ask for payment up front.
And now would be a good time to review your terms of trade. And with that, you should consider whether it is worth protecting your interest under the Personal Property Securities Act (PPSA) – the modern form of Romalpa clauses. It’s a measure of last resort but can save your bacon. It’s beyond the scope of a blog to explain how you can use PPSA but we would be happy to explain it to you and refer you to a qualified solicitor to attend to the necessary paperwork.
So in these difficult and unusual times:-
Don’t sell to anyone without evaluating their ability to pay.
Put the proper protection mechanisms in place.
Be crystal clear on what it costs you to sell your goods and/or services.
Want to better understand your situation? Then ask us as we have decades upon decades of experiences gained from a range of clients operating in an array of industries.
At MRS, we will spend today planning for your success.