The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell says it is essential for small business owners to secure their assets and business loans, with economists predicting a steep rise in insolvencies this year.
Ms Carnell says small businesses need to secure their assets through the Personal Property Securities Register (PPSR) so they are better protected in the event of an insolvency.
“Given the incredibly tough past 12 months we’ve had and predictions of a wave of insolvencies to come, PPSR has never been more important,” she said.
“The greatest pity is that many small businesses find it too difficult to use.”
Releasing ASBFEO’s PPSR Research Paper, Ms Carnell said the PPSR, if used correctly, is a powerful tool that can deliver significant benefits to small businesses.
“Many small businesses are not aware that correctly registering their interests can save them a world of pain in the long run,” she said.
“So many small businesses have invested heavily in their businesses over the past 12 months, but few know that they can secure these loans, pushing them higher up the security chain if there’s an insolvency.
“More importantly, small businesses that register their interests won’t need to fight tooth and nail to retain title to their goods if a business customer winds up."
The Ombudsman’s research paper found an urgent overhaul of the PPSR system is required to make it accessible to small businesses.
Ms Carnell said that unfortunately, the PPSR in its current form, was not making life easier for small businesses.
“The name is confusing, the language is overly technical and the operation of the register is very complicated," she said.
“Many small businesses we spoke to said they would need a lawyer to help them register their interests – an additional cost burden for struggling small businesses.
“Put simply - systems and regulations imposed on small businesses by government need to be easy to get right and hard to get wrong. At the moment PPSR is hard to get right and easy to get wrong."
Ms Carnell said the report recommends streamlining the system, including encouraging small business cloud accounting platforms in to provide regtech solutions such as pop-up reminders to small business owners who record a personal loan to the balance sheet, alerting them to register it on the PPSR.
“I urge the government to implement the recommendations in our report, to build a system that works for the small business community and provides them with the certainty they need," she said.