YCPA returns to Victoria with a home turf win! - Australian Institute of Credit Management
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Volume 26, No 2
December 2018
The Publication for Credit and Financial Professionals IN AUSTRALIA
YCPA returns to Victoria
with a home turf win!
Hear from the 2018 YCPA Sunny Sharma on page 74
l Learn how to create a robust credit application
l Ensure your security protects your interest in a changing environment
l Deep dive into using technology to improve your results
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Volume 26, Number 2 – December 2018
Message from the President 6
8
Credit Management
Wayne Smith
Cash flow squeeze is on, as SMEs seek broader 8
funding options
What the latest Scottish Pacific SME Growth Index results
reveal for credit managers
By Wayne Smith
The challenges and opportunities of Asia-Pacific trade 12
By Graham Crozier 12 14
Graham Crozier Ashley Clayton
Australian banking and financial institutions need 14
a seismic shift in culture
By Ashley Clayton
Why Australians are drowning in debt 18
By Melanie Randell
The winds are changing 20 18 20
By Kirk Cheesman Melanie Randell Kirk Cheesman
Canary in the Coalmine Survey 22
What credit managers can learn from the survey
By Roger Mendelson
How to create a robust credit application 24
By Alexandra Cain
22 28
Roger Mendelson Mark Harley
Legal
Changes to the Postal Evidence Rule 28
By Mark Harley and Callum Woods
PPSA
PPSR renewals – act now and review regularly 29 28 29
By Gavin McCosker
Callum Woods Gavin McCosker
Security interests of trade suppliers the changing 30
legal landscape
By Daniel Turk
Leadership and High Performance
The Future of Work 33 30 33
By Geraldine Margarey Daniel Turk Geraldine Margarey
December 2018 • CREDIT MANAGEMENT IN AUSTRALIA 3
ISSN 2207-6549
DIRECTORS
Trevor Goodwin FICM CCE – Australian President
Julie McNamara MICM CCE – Queensland and Australian VP
Lou Caldararo LICM CCE – Victoria/Tasmania
Rowan McClarty MICM CCE – Western Australia/Northern Territory 38 40 42
Gail Crowder MICM – South Australia
Peter Morgan MICM CCE – New South Wales Andrew Spring Clayton Lynch Patrick Coghlan
CHIEF EXECUTIVE OFFICER
Nick Pilavidis MICM CCE
Level 3, Suite 303, 1-9 Chandos Street,
St Leonards NSW 2065
PO Box 64, St Leonards NSW 1590
Tel: 1300 560 996, Fax: (02) 9906 5686
Email: nick@aicm.com.au
45 48 48
PUBLISHER
Trevor Middleton Rachael Hurrell Marcus Oakley
Nick Pilavidis | Email: nick@aicm.com.au
CONTRIBUTING EDITORS
NSW – Sev Indrele MICM CCE
Insolvency
Qld – Carly Rae MICM This Balance Sheet will self-destruct in 5, 4, 3, 2 … 38
SA – Gail Crowder MICM By Andrew Spring
WA/NT – Lisa Marr MICM
Vic/Tas – Donna Smith MICM CCE
EDITOR/ADVERTISING
Technology
Andrew Le Marchant LICM CCE Improve your cash flow using best practice technology 40
Phone Direct 02 8317 5052 or Mob 0418 250 504 By Clayton Lynch
Email: andrew@aicm.com.au
How technology can intervene with Australia’s 42
EDITING and PRODUCTION
payment problem
Anthea Vandertouw | Ferncliff Productions By Patrick Coghlan
Tel: 0408 290 440 | Email: ferncliff1@bigpond.com
THE EDITOR reserves the right to alter or omit any article Have you considered using SMS text messaging for 45
or advertisement submitted and requires idemnity from the
advertisers and contributors against damages or liabilities that your overdue collections
may arise from material published. CREDIT MANAGEMENT IN By Trevor Middleton
AUSTRALIA is published by the Australian Institute of Credit
Management, Level 3, Suite 303, 1-9 Chandos Street, St Leonards
NSW 2065. The views expressed in CREDIT MANAGEMENT IN Open banking – a seismic shift 48
AUSTRALIA are not necessarily those of Australian Institute of By Rachael Hurrell and Marcus Oakley
Credit Management, which does not expect or invite any person
to act or rely on any statement, opinion or advice contained herein
(whether in the form of an advertisement or editorial) and neither Braving the new world of open data: Why watertight 50
the Institute or any of its employees, agents or contributors shall security improvements are vital
be liable for any opinion contained herein. © The Australian
Institute of Credit Management, 2018. By Barry Libenson
JOIN US ON LINKEDIN International
Strengthening economic and business ties with Asia 52
By Amaran Navaratnam
Click Here Poland sets the standard for credit management in 54
Central Europe
EDITORIAL CONTRIBUTIONS SHOULD BE SENT TO: By Robert Dyrcz
The Editor, Level 3, Suite 303, 1-9 Chandos Street,
St Leonards NSW 2065 or email: nick@aicm.com.au
66
NSW: Collect With Confidence Toolbox (LtoR): Grant
Morris CCE, Doreen Khoury, Snezana Graparotta, Lynn
Condron, Nesrin Al-Faraj, Boyu Zheng, Ben Wu. Seated:
Sharon Boyle, Susan Ross and Annalisa Reyes.
50 52 54
Barry Libenson Amaran Navaratnam Robert Dyrcz
AICM Training news
Student of the year 58
Student of the year – Runner up 59 69
Advance your Career with an AICM Qualification 59
Qld: Life Members Greg Young and Grant Morris (Southern
Recent graduates 60 Steel) with AICM CEO Nick Pilavidis.
Credit workshops 61
Conference overview 62
Around the States
NSW 66 71
QLD 69 SA: Lisa Anderson MICM CCE, Nick Cooper MICM,
SA 71 Gail Crowder MICM and Alice Carter MICM CCE.
VIC 74
WA 78
New Members 82
Credit Marketplace 84
74
For advertising opportunities in Vic/Tas: The Holcim team supporting their winner Sean
Brasher, Sunny Sharma, Alison Beythien and Simon Holloway.
Credit Management
In Australia
Contact:
Andrew Le Marchant
Ph: +61 2 8317 5052
E: andrew@aicm.com.au 78
WA/NT: Networking with good food and good wine!
December 2018 • CREDIT MANAGEMENT IN AUSTRALIA 5
aicm From the President
Trevor Goodwin LICM CCE
National President
I
am delighted to write to you for professionals can confidently perform
the first time as National President their duties knowing the Institute gives our
of the Australian Institute of Credit members a voice on legislation matters.
Management, a position I am We are your best connection to having
honoured to hold and shall undertake with a say on proposed and changing legislation.
dedication, energy and responsibility. AICM is here to assist members and partners
Leading AICM is a tremendous privilege by inspiring more innovation, training and for
and I am excited to work and engage us all to be more connected.
with my fellow Board members, State I am based in Adelaide but aim to visit
Councillors and the National Office team to each division to engage with members,
represent the AICM interests and to further councillors and partners. So if we haven’t
enhance the strong relationships between met yet, please feel free to reach out to me
our members and partners. by phone or email (see below). I am happy
The Institute continues to go from to hear from you about what we are doing
strength to strength and we have a fantastic well, where we need to improve, and how
base from which to continue this growth. we may innovate for your benefit.
In today’s environment, the challenges I encourage our members and partners
to businesses are substantial and credit to be ambassadors of the AICM to build and
professionals are required to be technically grow our Institute. I am keen to see further
sound and always aware of new legislation, steps into the consumer, trade organisation
while having to foster good customer and and banking credit sectors, and anywhere
sales relationships. we can promote the Institute.
The AICM provides members with access I congratulate immediate past President
to a variety of education and networking James Neate on his substantial contribution
events, a quality magazine and topical as our national president for two years
newsletters. The Credit Network forum, during which time the Institute made
Seminars, RTO, Diplomas, Credit Toolboxes enormous strides, supported by our Board,
and Webinars all provide quality learning CEO Nick Pilavidis and the hard-working
opportunities and experiences. The Pinnacle national office team, and State Councillors.
Awards, YCP Awards and WINC, and the I also wish to thank Gregg Odlum our
State-based networking functions continue recently retired Vice President for his
to be key events of the calendar year. The contribution during his time on the Board.
Certified Credit Executive program provides Greg is stepping down to devote more time
an opportunity for our members to be highly to family and growing work commitments.
regarded in their profession and progress I welcome our new Board members;
on to being Fellows of the Institute. The Gail Crowder from South Australia who has
CTOY and Student Award have also been been the SA State President for the past
successfully introduced in recent years. 5 and a half years and Peter Morgan from
The Institute’s signature event of the year NSW. I also congratulate our new National
– the National Conference continues to reach Vice President, Julie McNamara from
new high standards in professionalism and Queensland and look forward to working
education, bringing our members, colleagues with all the directors in 2019.
and AICM sponsors together for 3 days of
learning and networking.
AICM also provides members with access – Trevor Goodwin LICM CCE
to great mentors and educators, and credit National President
6 CREDIT MANAGEMENT IN AUSTRALIA • December 2018
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Credit Management
Cash flow squeeze
is on, as SMEs seek
broader funding options
What the latest Scottish Pacific SME Growth
Index results reveal for credit managers
By Wayne Smith* Australian SMEs across a range of capital, nine out of 10 SMEs self-fund
industries, with annual turnover of growth rather than looking for funding
$1-20 million. options that would allow them to
Against the backdrop of a likely The latest findings show that cash bolster the working capital within their
property market downturn and the flow remains their biggest worry – business.
final Royal Commission into Banking SMEs are operating in an environment
report, our latest SME Growth in which they say they could have Best SME outlook in three years
Index paints a clear picture for generated, on average, 17% more First, the good news – the number
credit managers of Australia’s small revenue if their cash flow had been of businesses reporting positive
business owners’ key concerns. better. This equates to an annual growth over the coming 12 months
The two main take-aways, quite $A234.6 billion hit to the national (51%) is at its highest since early 2016.
likely interconnected, are that the economy. Between March and September
SME sector’s appetite for broader Working capital is what every 2016, SMEs flagging positive growth
funding options continues to grow, business always needs, whether fell from 58% to 48%. While not yet
and that cash flow issues are the they’re growing, steady or even back to the growth levels reported in
major brake on growth in the sector. declining. Our findings show that in our first Index in 2014, since late 2016
Our survey polls more than an economic environment where it there has been a steady move towards
1200 owners, CEOs or CFOs of is crucial to have reliable working a majority forecasting growth.
Wayne Smith
8 CREDIT MANAGEMENT IN AUSTRALIA • December 2018
Credit Management
both ends of the supply chain, placing
major strain on efficient working
capital management.
There has been a noticeable
tightening in cash flow throughout
2018, despite a low interest rate
environment and broadly improving
operating conditions and business
confidence.
More than one in four SMEs (27%)
said they had difficulty meeting tax
payments on time and one in five
(21%) were unable to take on new
work and capital expenditure due to
cash flow restrictions.
This finding shows credit
managers that there’s plenty on the
table for any SME business which can
improve its cash flow.
With cash flow concerns
increasing, and banks reluctant to
lend, the business owner who can find
innovative ways to fund growth and
However, the results also show that nights, we asked what caused the master cash flow management has a
SMEs who are performing poorly are biggest negative impact on their cash clear advantage over competitors.
in significantly more trouble than back flow over the past 12 months.
in 2014. The extreme negative growth As in previous rounds, SMEs Non-bank funding on SME radar
margin is much greater now. are still blaming Government red tape Despite an SME lending landscape
We also see that since our first and compliance issues (nominated dominated by the Big Four banks
Index, SME respondents’ average by 73%, across the total market of and their subsidiaries, 96% of SMEs
number of fulltime employees has growth, consolidating and declining could name a key advantage to
fallen from 88 to 71. SMEs). borrowing from an alternative (non-
The number of business owners The other main cash flow issues bank) lender.
who are not growing, but say they are the dual problems of customers Rapid credit approval was named
are stable (27%) or consolidating paying late (43%) and suppliers by one in four business owners as the
(13%), has increased from 32% in 2014 reducing payment terms (40%). main reason they’d use an alternative
to 40% now – 12% say their business SMEs are feeling the pressure from lender. ➤
is contracting, up considerably from
the 8.5% who were contracting in
2014.
Cashflow being squeezed
from both ends
Almost all SMEs (92%) said if cash
flow had been better in the past
12 months they would have generated
more revenue, with only 8% reporting
no cash flow issues in the past 12
months.
More than half (55%) indicated
that revenues could have increased
by 5-25% if cash flow improved.
With business owners saying cash
flow is their key cause of sleepless
December 2018 • CREDIT MANAGEMENT IN AUSTRALIA 9
Credit Management
Avoiding the banks’ document-
heavy regulatory requirements was
the next biggest drawcard, nominated
by almost one in five SMEs.
Another advantage was the
incentive of not having to borrow
against property, cited by one in five
SMEs. Almost one in 10 SMEs said the
revelations from the Banking Royal
Commission would prompt them to
seek out non-bank alternatives to fund
their business.
Encouragingly, only 4% of SME
owners say they would never consider
a non-bank lender.
This is good news for the long-
established debtor finance (invoice ramp up, alternative lenders will loans with a tenure of one to three
finance) sector, and the emerging continue to increase in prominence years (64%), ahead of longer three
fintech industry, who are offering as a preferred funding source. to five-year credit facilities (12.5%)
SMEs broader funding options beyond For the whole SME market (growth or shorter two to four quarter terms
the banks than ever before. and non-growth), nine out of 10 (12%).
plan to use their own funds for new One thing is clear – SMEs are
Property security out of favour business investment, ahead of primary looking for growth funding. The fact
With SME Growth Index findings bank borrowing (22.5%), alternative that one third of respondents wanting
showing many business owners lenders (15%), taking on new equity to borrow are seeking $500,000 to
are cash-strapped, time-poor and (13%) and borrowing from regional $2million over the next 12 months,
confused about how to fund their banks (10%). combined with the positive growth
growth, it’s interesting to see one Of the 733 respondents planning trend, are reassuring signs for the
thing they are not confused about – to seek new credit, more than Australian economy.
around 91% would prefer not to have half (56.5%) would prefer a loan However, with recent property
to use property as security. secured against non-personal assets, market falls across most capital cities,
A shift away from primary and a quarter (almost 23%) would and the trend of declining home
bank relationships is taking place prefer to borrow against receivables. ownership especially in younger
in the SME segment, despite SMEs More than one in five preferred age brackets, the challenge facing
historically being reluctant to shop an unsecured overdraft facility – a business owners is finding ways to
around for improved credit terms. full 30% were not sure about their fund growth.
Analysts East & Partners believe preferred funding method. Entrepreneurs and small business
that as customer switching intentions SMEs generally prefer business owners can no longer rely on the
buoyant property market to deliver
the increasing equity they’ve
historically depended on to source
additional funding.
Given that so few want to use their
home as security, credit managers
can play a role, along with other key
influencers, in sector-wide education
to highlight to SME business owners
low-risk options that are not secured
against property.
An option beyond property
security
For all SMEs, days outstanding is more
than just a statistic. It can really have a
10 CREDIT MANAGEMENT IN AUSTRALIA • December 2018Credit Management
substantial impact on cashflow and on
costs – even on the personal finances
of the business owner.
Fortunately, there are now
finance options that help keep
business finances and personal
finances separate, that don’t require
property as security and that can
have a positive impact on a business’
cashflow position.
Receivables funding, also known
as debtor finance or invoice finance,
is what Scottish Pacific has specialised
in for 30 years and is a style of
funding that can help keep SMEs
credit-worthy.
An SME business will use their line with the value of the invoices the allow a business to access precious
receivables – outstanding invoices business owner has outstanding, so working capital to fund growth and
owed by customers – rather than use they don’t fall short of cash as they business plans.
property to gain financing. grow. With bank credit tightening, it’s
It allows a business to draw down There’s a lot to be said for being an option more SMEs, and those who
against the value of the receivables able to pay suppliers promptly, not advise them, should explore.
ledger, getting a cash injection up the least is that if an SME doesn’t
front instead of waiting out their pay suppliers or meet tax obligations
typical cash cycle before gaining promptly, it can have a significant *Wayne Smith
Group Executive Debtor Finance
access to the funds. impact on their credit rating. smithw@scottishpacific.com
This method frees up working Late payment poses significant Ph: 1300 207 166
www.scottishpacific.com
capital to pay wages, suppliers and risks to any SME business. Yet smart
Scottish Pacific prepare this survey twice a year
anything else required to sustain the financial solutions such as invoice and have prepared this article from excerpts.
To download the complete current issue
business or to fund its growth. As an finance, coupled with efficient or request previous editions please visit
additional benefit, the limits grow in accounts and collections procedures, https://www.scottishpacific.com/news/research
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December 2018 • CREDIT MANAGEMENT IN AUSTRALIA 11Credit Management
The challenges and
opportunities of
Asia-Pacific trade
2017 was a banner year for trade In the background, political tension
By Graham Crozier*
growth in the Asia-Pacific (APAC) and the introduction of trade tariffs
region. In fact, the latest data between these two superpowers
from the Department of Foreign have the potential to disrupt global
Affairs and Trade reveals that the markets. This could expose Australian
value of Australian exports to key exporters in two ways: a slowing of
markets such as China, Japan and demand from China (our largest trade
the Republic of Korea increased by partner) and via supply chain links
between 14 and 22 per cent during with other Asian countries. It’s not all
the 2016-17 financial year, with APAC bad news for Australian businesses
countries now comprising a little over though, as there’s the potential to
75 per cent of Australia’s total export step up and fill some of the gaps as a
market. This reflects the breaking neutral partner of both sides.
down of barriers within APAC, as well
as several emerging opportunities Regional disputes and
2
which businesses on both sides of cooperation
the Pacific have been quick to take While recent years have been hugely
advantage of. positive for trade and cooperation
If the region’s major players – in the Asia-Pacific region, there are
including Australia – can continue still some dangers posed by ongoing
to tackle challenges and explore disputes within the region. One
opportunities, there’s no reason why example of this is the Indian state of
the next few years can’t see similar or Kashmir – a key trading route disputed
even improved development in Asia- by Pakistan.
Pacific trade. These regional disputes do present
So, what are these challenges and possible threats to APAC’s trade
opportunities, and what do they mean stability. However, the commitment
for Australian businesses and the made by countries such as China to
APAC region? cooperate with the rest of the region
is a positive sign that suggests a
The US-China relationship shared desire to overcome territorial
1 The United States has arguments and find a working solution
traditionally been a major trading that benefits everybody.
partner of APAC countries. Over the
last few years, however, we’ve seen a US disavowal of the
3
small but not insignificant reduction Trans-Pacific Partnership
in the value of APAC’s trade with the One of the hottest talking points
US, while at the same time, China has surrounding trade in the Asia Pacific
Graham Crozier stepped in to fill the gap. region has been the Trans-Pacific
12 CREDIT MANAGEMENT IN AUSTRALIA • December 2018Credit Management
While the direct impact of the that prioritise education, eliminate
traditional retirement barriers and
B&R initiative on Australia is not open up new pools of employees.
Taking these steps will ensure that
as significant as other parts of the East Asia’s ability to provide economic
stimulus to itself and the rest of the
world, the project itself is likely to region won’t be threatened by the
provide opportunities to businesses. need to cover for vast numbers of
elderly dependants.
Partnership (TPP) – a deal that The initiative is seen as a key Access to global
6
aims to reduce tariffs and open up part of the rebalancing of China’s supply chains
new trading opportunities. While economy, as the country moves to a Finally, perhaps the biggest
the United States’ withdrawal from consumption-oriented model that’s opportunity presented by Australia’s
the deal in 2017 did create some more sustainable over the long term. place in the APAC region is access to
uncertainty around the TPP, an While there has been concern from some of the world’s most important
amended deal was eventually signed some quarters that this could lead to global supply chains, including the
in March 2018 by 11 countries: reduced trade with the rest of APAC, electronics, automotive, textile and
zz Australia there are benefits to this rebalancing machinery industries. This will only be
zz Brunei process. These include everything strengthened by deals such as a TPP-
zz Canada from more regional stability and 11 and Belt and Road, which underline
zz Chile prosperity to a growing Chinese the growing economic cooperation
zz Japan middle class, who enjoy improved within the region and a wider
zz Malaysia spending power and have been commitment to increasing trade.
zz Mexico boosting tourism throughout APAC In fact, Grant Thornton’s report
zz New Zealand – becoming Australia’s top source of found that 33 per cent of business
zz Peru tourists in 2017-18. leaders see increased cooperation
zz Singapore While the direct impact of the as the biggest opportunity for trade
zz Vietnam B&R initiative on Australia is not within APAC, up 9 per cent from
Known as the TPP-11, this deal as significant as other parts of the 2016. While Australia sits outside
offers huge potential to Australian world, the project itself is likely to the ASEAN region (Association of
businesses, particularly within the provide opportunities to businesses, Southeast Asian Nations) where
agricultural export sector. After the particularly via demand for Australian much of this change is taking place,
deal was signed, trade minister Steve exported minerals during the initial Australian firms still see ASEAN
Ciobo explained to The Guardian establishment phase. economic cohesion as hugely
that: “The world will be drinking more important.
Australian wine, eating more Australian Ageing “The ASEAN Economic
beef and using more Australian
5 populations Community is a thriving and rapidly
services thanks to the TPP-11.” According to a 2017 Grant Thornton growing part of the global economy.
report on trade in the APAC region, Trade is central to the agreement,
China’s belt and roughly a third of business leaders see and it is positive that businesses
4 road initiative ageing populations as one of the most inside and outside ASEAN see greater
Alongside the Trans-Pacific significant challenges that will need cooperation there as such a significant
Partnership, one of the most to be overcome to ensure continued growth opportunity,” explained Ian
important trade projects in the APAC growth. East Asia – and China in Pascoe, Managing Partner at Grant
region is China’s Belt and Road (B&R) particular – is the fastest-ageing Thornton Thailand.
initiative. At an estimated cost of region in the world.
$5 trillion, the B&R initiative will aim The effects of this include reduced
to improve infrastructure, in turn access to labour and a need to *Graham Crozier is the Chief Executive of
Coface Australia – a global provider of trade
facilitating trade and connectivity in redirect government investment
credit insurance, business information and
countries along the ancient Silk Road. towards support infrastructure. credit ratings.
These include Asia and the Middle The most important way to ensure
To get the latest industry and sector
East, but also Europe and Africa, with ageing populations don’t restrict updates visit www.coface.com.au
more than 60 nations signed up so far. growth is to create new policies or email au_info@coface.com
December 2018 • CREDIT MANAGEMENT IN AUSTRALIA 13Credit Management
Australian banking
and financial
institutions need a
seismic shift in culture
By Ashley Clayton* In light of recent news from banking and financial sector needs
the royal commission exposing to accelerate its adoption and
misconduct by Australian deployment of a new customer-
banking and financial institutions, centric business model.
businesses in the financial sector
should consider taking a look at Identifying customer-centric
their internal sales practices and behaviours to reward
potentially recalibrating their Making the strategic decision
corporate culture. to become a customer-centric
Institutions that have drawn organisation is huge – one that
criticism from the royal commission affects every area of the business
for being motivated by greed must and involves every employee. But,
refocus their energy on treating since call centre agents are often
customers fairly and balancing times one of the main customer-
customer needs with those of the facing contacts of banking and
business. This transformation may financial institutions, let’s focus
require a radical change in strategy on them for this discussion. It
from one that is primarily revenue is essential to the success of a
and profit-driven, to one that is customer-centric strategy that all
customer-centric and focuses first on call centre agents and managers
achieving an extraordinary customer understand what is expected of
experience. In the end, banking and them, that they are totally on-board
financial institutions that can turn the with the program and that they
tide will also improve their revenue are appropriately rewarded for the
performance. desired behaviours. It is also apropos
Gamification, which applies game that the rewards themselves befit the
mechanics to engage employees achievement, and considering the
by tracking and rewarding desired current climate, that the rewards are
behaviours, has made recent gains non-monetary.
in popularity in the global financial From the top-down, the agent
industry due to its effectiveness in behaviours that constitute a
improving engagement, customer remarkable customer experience must
experience and customer loyalty. be clearly defined along with the key
It just might be the enabling performance indicators (KPIs) for
Ashley Clayton technology solution the Australian achieving them.
14 CREDIT MANAGEMENT IN AUSTRALIA • December 2018Credit Management
Here is a list of some of these KPIs: company can change when everyone percentage of detractors to arrive
is focused and rewarded on satisfying at your NPS. A study by global
Customer Satisfaction Score (CSAT) the customer rather than just on the consulting firm Bain & Company
CSAT is usually measured by asking basis of hitting a sales number. indicates that businesses with a high
a customer to rate their overall NPS grow 2X faster than competitors
experience with a product or service Net Promoter Score (NPS) in their industry.
in a customer feedback survey. The NPS refers to the results
Respondents are asked to rate their achieved when you ask customers Customer Effort Score
level of satisfaction on a scale of 1 if they would recommend you. This score measures how satisfied
to 5, with 1 being very unsatisfied Measured on a scale of 0 to 10 a customer is with the amount of
and 5 being very satisfied. The (would not recommend to would effort it took on their part to solve
CSAT score is the average of all the definitely recommend or have their problem quickly. It adds another
scores received, and it is expressed recommended), it is a widely used dimension to what is needed to
as a percentage (# of satisfied metric of customer satisfaction and create a loyal customer. At the
customers/# of survey responses = captures sentiment about a service completion of a study conducted
% satisfied customers). Only scores or product. A 0-6 rating categorises by the Harvard Business Review,
of 4 and 5 should be counted as customers as “detractors”. A rating only 9% of customers that reported
satisfied. of 7 or 8 categorises customers as expending a low effort were likely
Something remarkable happens “passives”, and a rating of 9 or 10 to become disloyal, whereas 96% of
when agents have some skin in categorises them as “promoters”. those that reported that a high effort
the game in improving customer Simply take the percentage of was required were likely to become
satisfaction. The entire culture of the promoters and subtract the disloyal. ➤
December 2018 • CREDIT MANAGEMENT IN AUSTRALIA 15Credit Management
Below is a typical CES question you might ask:
To what extent do you agree or disagree with the following statement?
XYZ Bank made it easy for me to handle my issue/request.
Strongly Agree Somewhat Undecided Somewhat Disagree Strongly
Agree Agree Disagree Disagree
Strongly consider also asking Here are some additional desired rewards that will reinforce customer-
customers why they rated you the behaviours that can be tracked centric behaviours, and the actual
way that they did. Their answers through an analytics platform and fed rewards you are going to give. With
will identify the specific areas you directly into the gamification system the current scrutiny of Australian
can improve. Were wait times too to reward agents. banking and financial firms, it may
long? Did they have to repeat their zz Adhered to compliance regulations be best to stay away from monetary
information too many times? Were zz Demonstrated active listening rewards. The good news is that in
they transferred several times? Did zz Recommended right-fit products/ a recent survey by analytics leader
they have to call back or was the services Gallup (“Employee Recognition: Low
call dropped? Was the agent rude? zz Displayed empathy Cost, High Impact”), respondents
Armed with this information you can zz Secured customer feedback ranked financial returns toward
coach individual agents or identify the bottom of the list of desired
pervasive agent, product/service or Other KPIs use support data for incentives.
technology issues that need to be measuring customer satisfaction. Near the top of the list is
addressed. This data can be fed into the recognition from senior executives
gamification system to track for great performance. Whether
Soft-Skill KPIs improvements and reward agents. it’s a personal visit from the
There are also soft-skills KPIs that can They include: Support Ticket Volume, CEO, an email or a call, a simple
dramatically improve the customer Number of Interactions to Solve an thank you or a firm handshake,
experience and be tracked and Issue, Average First Response Time acknowledging a job well done
rewarded through gamification. and Average Resolution Time. goes a long way.
Improving these skills can positively Here is a list of non-monetary
affect NPS. Choosing appropriate rewards awards that some of our customers
Customer Service Benchmarking Shifting from a primarily profit-driven are leveraging. We are sure you will
Australia (www.cbsa.com.au) suggests to a customer-centric driven firm have others. Whatever you choose,
some attributes customers can be requires engaging every employee you will want them to align with
asked to rate in a post-interaction in the organisation. The call centre your brand and fit the achievement.
survey. agent population, likely being the Consult your agents. Be creative.
zz Agent gave correct information largest group and certainly the And have fun!
zz Agent was polite and courteous group with the highest customer- 1. Receive recognition from your
zz Query was promptly resolved touch, has the power to produce the supervisor, VP of the department
zz Communication was clearly greatest result. That is why it is so and CEO (personal recognition
presented critical when designing your rewards as well as at department and
zz Agent followed up as promised program that you take the time to companywide meetings are best).
zz Agent was friendly properly identify not only what KPIs 2. Leave one or two hours early on
zz Agent was knowledgeable to reward, but also the types of Friday.
Shifting from a primarily profit-driven to a
customer-centric driven firm requires engaging
every employee in the organisation.
16 CREDIT MANAGEMENT IN AUSTRALIA • December 2018Credit Management
Putting the customer at the centre of your decisions
and policies – from the products and services you
offer to the values you expect from every employee
every day – is not only the right thing to do, it can
really pay off for your business.
3. Premium parking space. supervisor gets on the phone and extraordinary experience, customer-
4. Lunch with the Manager. does your job for an hour. centric businesses are boosting the
5. Dinner with the CEO. 18. Catered lunch for their team from probability of selling to existing
6. Pizza Party for you and five restaurant of their choice. customers, which keeps costs down
co-workers. and profits up.
7. Extra 15-minute break. The payoff for shifting to a Changing the corporate culture is
8. Weekends off for one month. customer-centric culture a long-term commitment to sustaining
9. Preferred schedule choice. Putting the customer at the centre continuous improvement to the
10. Prime cubicle location. of your decisions and policies – from customer experience. Accomplishing
11. Upgraded work headset. the products and services you offer this requires a highly engaged and
12. Upgraded desk chair. to the values you expect from every happy call centre agent workforce.
13. Additional PTO – full day or employee every day – is not only Gamification can help you get there
half-day. the right thing to do, it can really and keep you there.
14. Two-hour lunch (or double normal pay off for your business. According
lunch time). to Forrester (“The Customer
15. Paid for their one lunch hour while Experience Index”), customer-centric
*Ashley Clayton
taking it. companies garner a higher valuation Business Manager
16. Be supervisor for a day, half day, than their competitors. Also, by Noble Systems Australia Pty Ltd
Ph: +61 3 9008 1700
hour. doing a better job of treating Email: aclayton@noblesystems.com
17. You run the team while your customers fairly and providing an www.noblesystems.com
“...it is so critical when
designing your rewards
program that you take the
time to properly identify
not only what KPIs to
reward, but also the types of
rewards that will reinforce
customer-centric behaviours,
and the actual rewards you
are going to give.”
December 2018 • CREDIT MANAGEMENT IN AUSTRALIA 17Credit Management
Why are Australians
drowning in debt?
Borrowing in Australia has reached country, Australians with a dream
By Melanie Randell*
unsustainable levels, some credit of home ownership continue to pay
experts warn – with personal debt these prices – and lenders have
rising steadily over the past three accommodated by lending up to 95%
decades. of the purchase price. As a result,
Household debt has soared to the size of loans relative to income
211% of income, which translates to an continues to grow – and not all
amount of around $169,000 per year Australians understand the profound
for an Australian earning an average long-term implications of a mortgage
income of $80,000. (1) on their financial position.
With Australia recently becoming
the fourth most indebted nation in the 2. Narrow means of funding
world, and the role of those providing Debt is not always a choice. As
credit more complex than ever before, the cost of living continues to be
the question needs to be asked: how pushed up at a higher rate than
did we get here? average incomes, nearly one-third
of Australians are now living from
1. Choosing debt paycheque to paycheque. (4) Without
With an increasing number of credit savings to fall back on, more people
providers offering lending products, are reaching for their credit cards and
Australia has become a nation of other ‘quick fix’ financial solutions. In
‘buy it now’ consumers. Interest-free June 2017, the Australian Securities
loans, same-day lending and readily and Investments Commission found
available credit cards mean that there were 14 million open credit card
people can choose to buy whatever accounts, with an outstanding balance
they want now and worry about of almost $45 billion. (5)
paying it back later – sometimes When financial hardship strikes,
without giving much thought as to such as a medical diagnosis, a
whether that will be possible. With so serious accident, or an unexpected
much credit choice available, credit redundancy, people may feel they
has changed how people save and have no other choice but to use their
spend. While previous generations credit cards or take out personal loans
usually had to save their money before to pay their healthcare bills or keep up
making a purchase, the same isn’t true with everyday expenses while they’re
today. In fact, 22% of Australians don’t out of work. This can be the start of a
have any savings at all. (2) debt spiral in which many Australians
For many Australians, the number find themselves trapped for years or
one source of debt is their home. even decades.
More than one-third of Australians
are paying off a mortgage (3), and 3. Unsustainable debt
home loans make up the greatest When consumers take up financial
proportion of all personal debt in products they don’t understand, they
Australia, at 56.3%. Despite property can end up in a cycle of borrowing
Melanie Randell prices rising steadily across the to repay interest. Credit cards and
18 CREDIT MANAGEMENT IN AUSTRALIA • December 2018Credit Management
as well as assisting them to manage
their debt. (6)
With an increasing number of
credit unions, payday lenders, other
financial institutions, and post-
purchase short term financing
programs facilitating credit,
consumers rely on lenders to be open
and honest in their communications
and marketing around financial
products – ensuring they’re matched
with the best solution for their needs.
To achieve this outcome, the royal
commission is working on a tightening
of lending regulations to help stop
people taking on more debt than they
can afford.
We feel the most positive way
forward is to work together to
increase the financial literacy of
individuals, families and communities.
Increasing the level of literacy,
coupled with providing greater
mechanisms for matching products
to circumstances is surely a step in
the right direction. By aligning with
business partners who share the same
philosophy of financial education
and empowerment, we can all help
Australians make better financial
choices and enjoy a financially
sustainable future.
*Melanie Randell
Head of Business Optimisation and Risk
personal loans can seem an easy realise the interest-free period only recoveriescorp
Ph: +61 3 8627 0600
solution to all financial problems. applies to the original debt, not to
E: Melanie_Randell@recoveriescorp.com.au
However, around 1.9 million Australians new purchases made with the card, www.recoveriescorp.com.au
are struggling to repay their credit and they don’t expect the interest rate
card debt: 550,000 people are in to rise at the end of the promotional
FOOTNOTES:
arrears, 930,000 have persistent debt, period. As a result, almost one-third of
1 OECD, Household debt (indicator). doi:
and 435,000 people are only making consumers actually increase their debt 10.1787/f03b6469-en, Accessed August
small repayments on their cards. (6) by 10% or more after transferring the 2018.
Recent findings have brought balance. (6) 2 ANZ, Australian Financial Wellbeing
Report, April 2018
to the fore Australians’ low level of
3 Australian Bureau of Statistics, 2016
financial literacy, and this is a major What can we do? Census QuickStats.
contributing factor to consumers’ Without adequate levels of financial 4 BT Financial Group, Australians still living
high debt to income ratios. Some literacy, many consumers are making pay cheque to pay cheque, May 2017.
consumers don’t understand the poor financial decisions. What’s more, 5 ASIC Media Release, ASIC’s review of
conditions of promotional financial 80% of Australians don’t receive credit cards reveals more than one in six
consumers struggling with credit card
products, such as an interest-free guidance from a financial adviser to debt, July 2018.
period for balances transferred to help with complex financial matters 6 Investment Trends, 2015 Direct Client
a new credit card. Some may not such as insurance and superannuation, Report.
December 2018 • CREDIT MANAGEMENT IN AUSTRALIA 19Credit Management
The winds
are changing
By Kirk Cheesman*
Has anyone else noticed the weather NCI is in a unique position to
conditions recently in Australia have gauge a number of key elements
been unseasonal and changing? relating to trade credit business
Droughts, snap cold fronts, storms conditions. Collection activity, credit
and heavy rains have confronted limit approval rates and reductions
many parts of Australia. by insurers, overdue reporting and
I can also feel changes in the claims activity. This data forms part
business climate and conditions of our quarterly trade credit risk
relating to trade credit risk. index.
A decade ago to the month, a However it’s the word of mouth
major storm brewed around the globe and the underlying feeling of credit
leading to the Global Financial Crisis managers, which has me questioning,
(GFC). Whilst those storm clouds what may be on the weather map for
rolled in quickly and had a major 2019?
impact globally, the rumblings of Comments recently have
future storms this time has been more outlined tougher trading conditions
Kirk Cheesman subtle. However, they are brewing. and difficulties in collecting money
20 CREDIT MANAGEMENT IN AUSTRALIA • December 2018Credit Management
which is raising eyebrows. Having The recent insolvency of RCR may be with ‘blue chip’ customers,
experienced credit managers Tomlinson is a big reminder of how insolvency could occur at any stage
stating collections are the toughest substantial ASX listed businesses leaving your business exposed to a
they have been for some time, with a long trading history, can hit potential bad debt.
is perhaps the best indicator of the wall. A business that seemed In the case of RCR, the ripple
what’s to come. to be trading well, impacted by effect of creditors not being paid will
However, it also matches the NCI solar farm contracts, met its demise cause further failures to occur over
average claim statistics which have in November 2018 leaving many time. A trade credit insurance policy
been increasing over recent months. unsecured creditors out of pocket, can act as a circuit breaker to the
At the height of the GFC, NCI were and being touted as the largest domino effect.
experiencing on average 125 claims insolvency in WA since Forge Group. Many businesses do not question
per month. In 2014/15 this dropped Fortunately, many of the suppliers the fact that plant, machinery, stock
down to 83 claims. In October 2018, hold trade credit insurance and will and equipment need to be insured.
it jumped back up to 118 received receive recoveries through their However in most cases the customer
claims. It is the volume of activity, insurers for unpaid debt. receivables of a business (the life-
not so much the severity of the It is an important reminder that blood of their cash flow) are quite
insolvencies, which is building. no matter how comfortable you often their largest asset.
The start of the New Year
should be a trigger for businesses
It is an important reminder that no to consider their weather pattern
outlook for the upcoming year, rain
matter how comfortable you may hail or shine.
be with ‘blue chip’ customers,
insolvency could occur at any stage *Kirk Cheesman MICM
Managing Director
leaving your business exposed to a National Credit Insurance Brokers
Ph:1300 654 500
potential bad debt. Email: kirk.cheesman@nci.com.au
www.nci.com.au
December 2018 • CREDIT MANAGEMENT IN AUSTRALIA 21Credit Management
Canary in the
Coalmine survey
What Credit Managers can
learn from the results
Since 2006, Prushka has carried out situation arises and only 18.8% rely on
By Roger Mendelson*
a client survey of its SME client base. bank funding.
The survey is carried out every 6 This is confirmation of the
months. underlying health of the SME sector
The results of the survey are an and is probably a result of the fact
important indicator of the real state that virtually since the GFC, banks
of the economy and of the intention have severely curtailed their lending
of SMEs, because they are fresh and to SMEs, particularly unless there is a
provide an insight into the thinking of real estate security provided.
SMEs, well before anything hits official
figures. Concerns of SMEs
The client base is just short of The major concerns of SMEs are
57,000 SMEs and the survey covers continuing to grow their business
twenty industry classifications. (41%) and profitability (38%). Unpaid
There is a great deal to be learnt debts were a concern for 24.8% of
from the results, including some respondents.
surprises. Again, my conclusion here is
The relevance of the results is that the SME sector is essentially
that almost all of the SMEs surveyed sound. This is borne out by external
will be customers of larger suppliers indicators, such as the low rate of
which have a credit manager running company liquidations and also low
their credit departments. Accordingly, business related bankruptcy rates.
if there are early warning bells arising,
it is best to know about them now, Credit Policies
rather than later, when they hit official SMEs tend to operate conservative
figures. and sensible credit policies. 70.4%
have trading terms of under 30 days
Optimism and only 5.1% have trading terms
The biggest surprise to me was that of over 90 days or no set time for
55% of respondents are planning for payment.
growth in the following 12 months and I am sure that many credit
25.6% are planning for consolidation. managers would be envious of those
Only 19.4% are planning to cut costs. figures.
This is a really positive indication SMEs tend to refer their overdue
of the health of the SME sector. accounts to a debt collection agency
much later than larger businesses.
Cash Flow Only 14.4% refer accounts at under
Surprisingly, 45.4% of respondents 60 days overdue whereas 61.1% make
Roger Mendelson have a cash buffer in place, if the referrals beyond 90 days.
22 CREDIT MANAGEMENT IN AUSTRALIA • December 2018Credit Management
A common mistake made by
SMEs which we continually observe
is that they are nervous about
referring overdue accounts to an
agency because they do not “want
to upset the client”. This attitude is
very different from larger companies,
where the credit and collections
functions are handled by different
people from the sales and customer
service personnel.
Industries at Risk
The standout industry is building
and construction. This category
includes every business which is
directly related to building and
construction, including suppliers and
subcontractors.
Respondents indicated that 21.1%
believe that this industry takes the
longest time to pay invoices.
This is borne out by our own
experiences over the last 9 months,
where there has been a substantial lift
in accounts being submitted which
are owed by building and construction in a timely manner has remained policy to increase credit to SMEs,
debtors. constant over the last 12 months. subject of course to the normal credit
No other industry causes concerns The perception of the major checking processes.
like this. The next significant industry reasons why consumers have been The industry to watch closely is
is professional services, at 8.8%. unable to pay their debts can be building and construction.
To take away from this is to summarised as follows: A question which would have been
exercise caution when granting credit General hardship 34.7% good to include is; “Have you found it
to customers in the building and State of the economy 14.4% more difficult to obtain bank finance
construction sector. Where possible, Increased household living costs 13.1% since the banking Royal Commission”.
get personal guarantees and act The remaining items are My perception is that the emerging
quickly if there is a default. statistically insignificant. credit squeeze , caused by banks
The concern about this sector is over-reacting to the commission,
that it is a key driver of economic Summary may very quickly cause a credit
growth, so a slowdown will impact The report provided some reassuring crisis, which could jeopardise the
economic growth generally. conclusions. financial position of a large number of
Despite the constant negative businesses.
Consumers media picture, the economy is sound
SMEs tend to have a good handle on and the SME sector, which comprises
the economy, because they are talking more than 97% of the active trading
directly to their customers on a daily businesses in Australia, are essentially *Roger Mendelson
basis. Thus, their perceptions, when sound and well run. CEO of Prushka Fast Debt Recovery Pty Ltd
and Principal of Mendelsons National Debt
aggregated, really provide meaningful When providing credit to an SME, Collection Lawyers Pty Ltd
insights. provided that there is a track record Ph: 1800 641 617
www.prushka.com.au
The respondents believe that and good credit history, the chances
there has been little change in of that debt becoming a bad debt is
consumer spending behaviour over lower than many other periods I have Roger is also the author of The Ten Mistakes
Businesses Make and How to Avoid Them and
the last 12 months. 61% identified that experienced. Business Survival, both published by New
consumers’ ability to pay their debts A conclusion is that it is good Holland Publishers.
December 2018 • CREDIT MANAGEMENT IN AUSTRALIA 23Credit Management
How to create
a robust credit
application
A strong credit application is one of credit application, you’re not going to
By Alexandra Cain*
the most important foundations of have good credit management. Speak
every business. Importantly, it guides to a lawyer about how you want to set
the work of the credit department, it up because it needs to be specific
whose work relies on strong credit to your business.”
application documentation. Here, Taylor’s advice at the start of the
we explore what a sound application process is to make a series of business
looks like, as well as common pitfalls decisions. Agree whether the business
and how to overcome them. requires a personal guarantee or
security with credit applications and
How to create the application whether it intends to enforce its rights
The first step is to ensure the business over these. “Do you want a customer-
understands the audience for the friendly credit application or to take
credit application and its objective, a more hard-line approach?” she
says Anna Taylor, principal, Results questions.
Legal. Nova Legal director Raffaele Di
“Right from the start, think through Renzo says the best way to create the
your objectives, what you want to application is with a legally binding
achieve through the credit application agreement that clearly sets out all
and how you want to run credit parties’ obligations. “This includes
management. If you don’t have a good ensuring the agreement is between
Anna Taylor Raffaele Di Renzo Malcom Field
24 CREDIT MANAGEMENT IN AUSTRALIA • December 2018Credit Management
the correct parties, the parties says it’s imperative to ensure the
properly execute the agreement application template properly reflects
and the agreement’s terms are the business and the goods and Case study
unambiguous and fair for all parties.” services provided and the particular
BGW Group goes online
Other issues that require credit risks applicable.
resolution upfront include whether the “Get buy in from the sales team Jane Hay, BGW Group’s
application will be available online or who ultimately need to implement the accounts receivable and
in hard copy, or both. The breakout form and consider legal advice to be credit manager, says her
box (right) explores this further. sure it will be effective. Ideally, you will business switched to online
obtain a personal guarantee and some about three years ago and
Mandatory fields – and specifics form of security such as charging right is now reviewing the online
The application must uncover who over the goods supplied, proceeds application for the first time.
the credit department is dealing with, from the sale of those goods, the The company processes
for instance a company, a trust or an business real property and the about 300 new accounts
individual. proprietor or director’s real property,” each month.
“You’d be surprised how many he says.
“We went from having
times businesses don’t know who Field also recommends including
a seven-page manual
they’re dealing with when their a checklist of annexed items and
document to a one-page
customers complete a credit personal financial positions with any
form, with a two-page date
application. So, getting the full details trust assets noted.
of guarantee attached. It’s
of the identity of your customers is The application must also set out
very basic but important,” says Taylor. retention of title if the business is helped us streamline our
When it comes to mandatory supplying goods and its rights to be terms and conditions and
fields, Di Renzo says there should be a indemnified of any expenses such as incorporate a privacy policy,”
term or field that grants credit to the collection costs. It should also include she explains.
applicant and how much that may be, information about the interest rate Hay says after initially
so everyone is clear on the credit limit. that will be charged for late payment. replicating the hard copy
“There could also be a term that This may be something the business is form online, it’s now time for
relates to payments owing and if prepared to negotiate down the track a review. “The company has
there are payments owing under to achieve a successful outcome, says evolved and processes have
the credit agreement to the credit Taylor. changed, so we’re going
provider, how those payments should “If you’re trying to resolve an to add and subtract some
be made.” outstanding debt, the business may
information.” The business
Malcom Field, director of agree to waive interest. In this case,
also wants to ensure the
accounting practice SV Partners, the agreement should include a ➤
application is able to be
accessed through all mobile
devices and operating
systems.
The credit limit that
the customer wants is also
important. “They have to give
us a limit, but the application
includes terms and conditions
to allow us to change the
limit. But we don’t ask for
director details because that’s
included in the mercantile
report, which also gives us
trade reference footprints.”
Companies must also include
a signed deed of guarantee.
Nick Cooper Jane Hay
December 2018 • CREDIT MANAGEMENT IN AUSTRALIA 25You can also read
