TCRI score hits new low… but insolvency hits projected to increase!
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One of our meat clients held a multi-million dollar limit over their largest customer up until August 2020 when their insurer’s appetite to cover this customer changed and they imposed a 75% reduction on the limit overnight. NCI repeatedly appealed this decision based on supportive financials, strong trading history between our client and their customer, coupled with this particular client having an excellent track record at collecting their trade debts.
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Welcome to 2021, another stop-start year for businesses? I think by now we have all become accustomed to mini lockdowns, circuit breakers and working from home.
2021 is another year of uncertainty. So far, due to government support and protection mechanisms, there have been minimal insolvencies during the Covid period, but will this continue? How much did Jobkeeper and ATO/Bank support relieve the “cash flow” pressure for businesses and, once these are wound back, will we see a new wave of insolvencies and higher unemployment?
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Government intervention gives reprieve to Credit Risk… but what about 2021?
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At the end of December last year, the Attorney-General announced a review of Australia’s Privacy Act to determine to what extent it is protecting and empowering consumers and best serving the Australian economy.
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The ASIC company register has released the following breakdown of activity between 1 July and 30 September 2020:
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As we approach the end of 2020, business confidence looks to be increasing with many industries performing well and most lockdown restrictions now removed. NCI’s latest Trade Credit Risk Index reported a sharp decline in credit risk, mainly due to lower incoming claims and collections activity, plus a reduction in Insurer credit limit actions.
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A Purchase Money Security Interest (PMSI) is defined by the PPSA as occurring where ‘collateral secures its own purchase price’.
This happens when a supplier sells their goods subject to a Retention of Title right – it also happens when goods are sold out of a Consignment Stock arrangement or Leased.
The PMSI designation is important because it allows the supplier to enjoy a ‘super priority’ over the goods they are selling that will rank higher than any bank’s general security interest even when the bank’s interest was lodged earlier.
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Once a liquidator is appointed to a debtor, they are allowed to ignore any security interests registered during the 6 months leading up to their appointment if they hadn’t been lodged within 20 business days of the security agreement being formed.
In a trade credit context, the security agreement is usually the completed credit application incorporating your Terms & Conditions (eg, your Retention of Title right).
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Trade credit insurance is the ultimate protection against bad debts, where you have your debtors insured against the risk of insolvency, protracted default or political events.
Credit risk management is a vital tool used to protect the financial health of your business. Our credit risk management service is proactive and designed to grow your company's sales...
Good credit management should ensure that customers pay on time, we understand that this is not always the case and not everyone has a trained and dedicated credit manager.
Over the years we realised that while our core product was insurance broking, our business was actually about protecting the profitability of our clients.
