Establishing systems to assist your clients to minimise their potential exposure to problems from not registering customers or businesses that they are dealing with on the Personal Property Securities Register is a critical risk management assignment for accountants to undertake.
Risk Number 1 – Proper legal documents
Ensure that documentation has been prepared by a commercial lawyer relating to:
- Terms of Trade Agreement(s)
- Retention of Title Agreement
Risk Number 2 – Written system
Ensure that a written system has been prepared which is operating in a satisfactory manner and includes sufficient information for the person performing the work to understand the requirements for:
- forwarding the Terms of Trade Agreement and Retention of Title Agreement with the “new customer letter” to every new customer with a request that the customer signs the documentation and returns it to the office promptly (within ten days)
- Monitoring the return of the signed documentation from the customer
- Calculation of the potential exposure from the customer if payment is not made
- Decision by management whether to register the new customer on the Personal Property Securities Register
Risk Number 3 – Subcontracting?
If the business is subcontracting and going to receive progress payments from a builder or principal the system should pose the following questions:
- Who is the customer?
- Is the customer financially sound?
- What is the value of the contract?
- If payment is not made because a liquidator makes a demand for repayment of progress payments already made, claiming that the payments were an unfair preference payment, – what is the potential exposure to your client?
- Would this amount of exposure financially embarrass your client?
- Should this customer be registered on the Personal Property Securities Register?
- Will the customer sign the Terms of Trade Agreement and Retention of Title Agreement?
- If your client suspects that the customer would not sign these agreements, should your client by proceeding with this contract?
Risk Number 4 – Where are the businesses assets?
- Does the business have consignment stock? If so:
- Which businesses have consignment stock been provided to?
- What is the value of stock held by each business?
- Would non-payment for this consignment stock cause financial embarrassment to your client?
- Does your client have stock stored on someone else’s property?
- Does your client have assets (including livestock) stored on someone else’s property or being used by someone else?
- Has your client provided goods that are being used for growing crops by someone else?
- Has your client made supplies of feed for livestock owned by someone else?
If your client was unable to recover any of these assets would this cause financial embarrassment to your client?
If so, a decision needs to be made as to whether to register these businesses on the Personal Property Securities Register.
Risk Number 5 – Leasing of Assets
Is your client leasing assets (plant, motor vehicles, aeroplanes, boats or other types of watercraft) for:
- an indefinite period?
- Lease for up to two years automatically renewable?
- Term of more than two years?
If your client lost these assets because their customer had a liquidator appointed would this cause your client financial embarrassment?
If so a decision needs to be made as to whether to register these businesses on the Personal Property Securities Register.
Why is ignorance of PPSR a concern?
Over $400m has been lost by Australian businesses primarily through ignorance of the effects of this legislation since the Personal Property Securities Act commenced in 2012.
Small/medium enterprise clients need proactive assistance from their “trusted advisor”, their accountant to safeguard them from potentially losing valuable assets or even suffering business failure through ignorance of this legislation.
ESS BIZTOOLS has developed a “Personal Property Securities Register Due Diligence System” product package to assist accountants to undertake reviews of the critical issues affecting businesses from this legislation.
The Personal Property Securities Register Due Diligence System is part of the ESS BIZTOOLS’ Silver Package which is our “New Financial Year Promotion” whereby a special offer is being made to “For Accountant” readers:
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Your investment – $1,532.30 (including GST) for a twelve month, 24/7 subscription per office. To avail yourself of this fantastic offer, please Click Here
If you need any further information please send me an email – Peter@essbiztools.com.au or telephone on 1800 232 088.
Peter Towers | ESS BIZTOOLS