As the new financial year begins, it’s more than just a time for fresh budgets and strategic planning—it’s also the ideal time to ensure that the financial risk posed by non-paying customers is minimised and that your legal documentation is robust. One critical area that often gets overlooked is the terms and conditions of sale, particularly in relation to the Personal Property Securities Act 2009 (PPSA).

Under the PPSA, businesses that supply goods or equipment on credit, under retention of title and similar arrangements can register a security interest in those goods and equipment on the Personal Property Securities Register (PPSR). The aim is to secure a priority position in relation to the goods, customer assets and any distributions should your customer enter into an insolvency situation without paying you.

But here’s the catch: unless you have a written agreement with your customer and that agreement is correctly drafted for the PPSA, any PPSR registrations may not be valid or enforceable. This means that you are exposed to losing ownership of any unpaid goods you have supplied to the customer, as well as the money you’re owed for them. Ouch.

Why This Matters

If a customer becomes insolvent and you haven’t properly registered your security interest—or if your documentation doesn’t meet PPSA requirements—you may rank behind other creditors or, worse, lose the goods altogether. This could have a significant impact on your cash flow and bottom line.

EOFY: What You Should Be Doing Now

Review your current terms and conditions or other commercial agreements with customers to ensure that the document:

• Clearly identifies the legal entity of your customer with any corresponding ABN or ACN
• Clearly creates a security interest which secures your customer’s payment or other obligation
• Entitles you to claim a Purchase Money Security Interest (PMSI), if that is applicable to you
• Includes proceeds of sale to maximise the value of your security
• Is incorporated into your onboarding or sales process correctly so that you can register on the PPSR in time

Audit your PPSR registrations:

• Are they current, accurate, and complete? For example, know when to register as against the customer’s ABN versus an ACN
• Have they ticked the PMSI box if you are entitled to super priority?
• Have the registrations been lodged on time?
• Do they match your PPSA terms and conditions?

Seek professional advice:

• If you’re not sure whether your PPSA terms are sufficient, contact us for a complimentary FCWcheck: Contract Health Check – we’ll give your PPSA terms a score out of 10 and identify any low, medium and high risks in the clauses
• If you think one of your PPSR registrations is incorrect or has been lodged out of time, contact a professional to confirm your position and what remedies you might have
• Seek PPSA advice and secured creditor advocacy if you have a PPSR registration that is being disputed by a liquidator, administrator or bankruptcy trustee
• A legal or credit management specialist can help identify gaps or risks in your onboarding process with a PPSR Registration Policy & Procedure

Protecting Your Interests

Customer insolvency isn’t something you can predict—but you can prepare for it. Having the right documentation in place and properly registering your security interests on the PPSR puts you in a much stronger position to recover goods or retain priority to assets/distributions over other creditors in a customer insolvency scenario.

So, as you set your business goals for the new financial year, make sure one of them is to safeguard your interests. A proactive review now could save you from costly consequences down the track.

Need help reviewing or updating your terms and conditions? FCW Lawyers’ Commercial team are here to help. Reach out at fcwlawyers.com.au or contact us directly to speak with a Commercial law expert.