It seems like we’ve been in something of a time warp over the past 3 months, but let’s not forget that legislation introduced by the Morrison government, effectively offering a safe harbour for struggling business will be over in less than 90 days.
The statutory demand and insolvency safe harbour measures will end on 24th September 2020, and when it does, those businesses who have been treading water this past three months could well go under.
Figures from CreditorWatch suggest that there will be a sharp rise in insolvencies shortly after September 2020, and the AFR has suggested that the insolvency sector is not properly equipped to deal with the likely tsunami of businesses falling into Voluntary Administration and indeed into Liquidation.
Interestingly, CreditorWatch data suggests that there was a sharp decline in defaults reported in March and into April, and this may have been a case of businesses showing great lenience toward their customers, a kind of “we’re all in this together” type of attitude. However, figures coming through from May and now into June suggest that that holiday is over, and businesses are now expecting payment, with a sharp increase in defaults being reported.
For the next three months, company directors remain exempt from personal liability for insolvent trading, and statutory demands issued during that time still give companies six months to respond to the demand. However, we think it’s a no brainer that creditors are now biding their time, sitting on those statutory demands, trigger fingers at the ready, waiting to launch them on September 25th. Challenging times may have only just begun if this plays out the way it seems to be heading.
Now is not the time to take your foot off the gas when it comes to collecting your overdue accounts, in fact now is the time to get cracking. Debt Collection in times like this requires a strategic approach, and after more than 25 years in the industry, there are few agencies as skilled and strategically aware as Nexus.