In business the most important thing is your bottom line.  You need to get paid.  The best way to do that is to only accept cash.  Unfortunately that does not work for everyone who is in trade, some businesses need to take goods and/or services on credit in order to keep operating. It makes more commercial sense for some businesses to pay you once a month. The first step in debt collection is having good systems in place from the start, to make sure you do eventually get paid.

Selling goods and services on credit (on a “buy now pay later” basis) means taking on a huge risk and it is important to do everything you can to make sure you get paid on time.  A good start is having terms and conditions of trade that allow you to register a security interest over your customer’s assets.  An even better start is to take the next step and actually register the security interest.

If your customers obtain goods and/or services from you on credit it is a good idea to attach your terms and conditions of trade to your credit application form. All of your customers should sign the credit application form (containing the terms and conditions) before you do any work for them or supply any goods to them. The only instance where you might not need to have your customers sign the credit application form is if they are paying cash at the time you provide the goods and/or services to them. You can send your credit application form to your customers via fax, post or email and have them sign and fax, post or scan and email it back to you.

Those terms and conditions of trade should contain a “PPSR” clause (Personal Property Securities Register). In that clause your customer will give you permission to register a security interest over the asset they are purchasing, or over all their present and after acquired personal property. These terms of trade will in effect be your “security agreement”.  A signed security agreement is required before you can register your security interest on the PPSR.

Whenever goods are sold on credit, it is prudent for you to register a security interest over those goods. By registering your interest over goods you supply to your customers on credit, you will secure the right to repossess and sell the goods if your customer does not pay you as required.

To register a security interest you will need to go to the official website www.ppsr.govt.nz. When registering a security interest over a vehicle, you will need to record the registration number, the vehicle identification number (VIN), the chassis number, the year of manufacture, and the vehicle make and model. Also if the security interest is over parts that have serial numbers you will need to record those details as well.

It is best practice to register a security interest before, or at the same time as, you supply the goods.  Registered security interests rank in priority in the order they are registered.  That is, unless they are purchase money security interests (aka “PMSIs”) – this is when the debt owed was used to pay for the goods which the security interest is being registered over.

Once the security interest is registered, you will have the right to enforce your interest by taking possession or selling the goods.  You will not be able to do this if you don’t register your security interest, and someone else has a registered security interest over those goods.

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