The risks of getting PPSR wrong aren’t worth it

January 2019 marks the seventh anniversary of the Personal Property Security Register (PPSR) commencing in Australia. For many businesses, this milestone means it’s time to determine whether existing registrations need to be renewed.

But registering and maintaining registrations on the PPSR is so easy to get wrong and the risks, both financial and reputational, of having incorrect PPS registrations, or worse no registrations at all, can be dire for businesses, particularly SMEs. In light of this, it’s important that businesses start to think now about how they’ll approach the renewal process when the time comes.

The good news is, the beginning of the renewal process is a perfect time for businesses of all sizes to do a hygiene check on their existing customers and PPS registrations, and implement a smart, fast and simple process that will ensure their PPS registrations are renewed correctly.

The current state of play

The PPSR is a national online register that allows businesses to register their interests in goods or personal property that they have sold on terms or leased to a customer. Personal property includes all forms of property other than land, buildings and fixtures; that means machinery, equipment, crops, cars, boats, livestock, intellectual property and shares are covered.

The PPSR makes it easier for businesses to protect their security interests and recover goods, or the value of goods, from customers who become insolvent.

The PPSR was introduced in January 2012, so it has been in effect for nearly seven years (although the ‘grace period’ extended by the government lasted for two years until 2014).

Whilst the term for each registration is different, many businesses applied a seven-year term when first registering their security interests, which means these will be up for renewal in early 2019. 2018 is therefore a crucial time for businesses to understand how to renew existing registrations and ensure that these are, in fact, renewed correctly.

Why is the PPSR so important to get right?

Many businesses, particularly SMEs, are still not aware of the register, the legislation behind it, or the consequences of not having registered their interest in goods if they need to recover assets from a customer who has gone bust.

Equally, those who have registered their security interests incorrectly could find themselves in the same situation as a business who has not registered at all.

These businesses are putting themselves at real risk, given every year in Australia more than 25,000 businesses become insolvent. Customers defaulting on their payments or becoming insolvent is a serious issue for any business, but it often adversely effects SMEs more than larger organisations, drying up their cash flow and leaving them in danger of going bust themselves.

What can businesses do to prepare for PPSR renewals?

Understanding your existing PPS registrations and customers is important, as it will help inform how you approach the PPSR renewal process. Consider these three tips:

• Tip #1 - Check the accuracy of your registrations. Many businesses may not realise that they have incorrect registrations that, if tested, would not hold up in court. Maximise the protection of your property by ensuring existing registrations are correct and enforceable before renewing.
• Tip #2 - Check the status of your creditors. Are your creditors financially viable, or are they deemed high risk? Don’t let a customer’s insolvency impact your bottom line – check their status to avoid any expensive surprises.
• Tip #3 - Clean up your data. Ensure your customer database is up-to-date so that you can register your interests against the company that has hired your assets correctly.

Registering on the PPSR can be complex. But with the right advice, the PPSR can protect your assets if your customer becomes insolvent.

Speak to Equifax. We can work with you to accurately and efficiently setup, monitor and maintain your PPS registrations. Email us to organise a time to speak to a PPSR Specialist.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.