POB Payment changes -Does it suit you?
UPDATE: The proposed changes have been put on the back burner for this year, and discussion will take place at a later date to determine the best way forward with this process, including a survivable transition period. Well done Australia Post for listening to Licensees feedback.
A fair bit of consternation building about the news to the proposed changes to the POB Payments from Licensees who have attended their local LEEP meeting so far.
It is fair to say this concept has been rumoured for the past 2 decades but has never been progressed past that point. Now we are apparently being advised that it is a done deal!
Who did the deal? Certainly not LPOG!
During the past few years with a more constructive dialogue channel with Australia Post, this concept of monthly POB payments has been raised a few times, as an option or potential for future changes. LPOG has not rejected the concept outright, because monthly payments may well ease out the cash flow for Licensees, which would be a good thing potentially. The thorn in the side has always been the transition period, and it is pretty obvious that this has been holding back this concept for decades.
LPOG's response has never changed, happy to agree to monthly payments to begin 12 months in advance, right after the renewal cycle has been completed and we have this year's money, we will happily convert to monthly payments. The first year would be funded by Australia Post, and would require a fair bit of managing when/if POB leases decline, and or LPOs change hands. That would only last 12 month, so it could be managed.
Apart from raising the 2014 Senate Inquiry, LPOG's next best achievement from that time was enormous pressure from a very worried Senate Committee getting Ahmed Fahour to pay the POB advance in Jan of 2014. And every year since because it is the glue that holds many LPOs together. Thank you again Senator Barry O'Sullivan and former Senator Nick Xenophon!
This wasn't done out of any good will, Licensees, at the time, owed millions of dollars in outstanding stock bills for the previous 12 months, or longer. With so many Licensees on COD terms, or stop credit, Ahmed Fahour saw this as a way of showing the Senate he was listening, but more importantly he figured he could clear up his outstanding stock accounts by paying the POB advance 3 months early, and then clawing it back for the debt. It was the only thing that kept many of us trading back then.
So the current proposal presented at the LEEPs that have been held so far, seems to suggest that Licensees will fund this transition by forgoing any cash flow from payment for POBs from 5th working day of June 2019 POMs payment, until receiving 1/12th of the Feb 2020, March 2020 and April 2020 renewals on the 5th working day of May 2020 (assuming that we will never see the best case scenario of 3rd working day POMs payment). From then we will see the rest dribble down over the next 11 months. So, our POB holders may renew their POB in Feb of one year, and we will not see all of that money for another 14 months, however Australia Post has had access to all these funds from the day the customer paid. One can only imagine how good that will make the average Licensees feel!
Many Licensees rely on the POB payments to commit to their rent and overheads. Many might look forward to buying a new car, or taking a holiday one day, but it hasn't happened yet for most of us, so it could be a fair way off still. The proposed changes mean that idea is now dead in the water! The biggest issue is the rent for the location of these POBs, that we will have to commit to for upwards of 5 years, to provide for a monthly fee in arrears. Quite often the accommodation is required to be paid in advance monthly, and usually committed to in advance by our lease agreements, which are usually 3 or 5 year terms, and insisted upon by Australia Post as part of our agreement obligations. So we sign up for a 5 year lease term with CPI increases if lucky, to be paid monthly in arrears with no surety of any tenure. At any time, Australia Post can disrupt this product, drive it into the ground as has happened over the past 10 years, with no skin off their nose, leaving us with the cost to accommodate the vacant POBs. Who thought that was a winning idea?
Then there is the worry of Christmas. The busiest period of our year, with the least profitable period of our year, with the biggest risk factor of our year. When Christmas does not fire, as happened for many this year, we have shops full of excess stock, wholly discounted to well below our cost price by corporate stores if it was purchased from AP, but we need to at least recover some of our costs, so its still on our walls and shop floors. The POB payment helps us to keep trading while we try to clear the leftovers to recover some trading capital. Without that fallback position, many Licensees will not have the ability to take a punt on Christmas.
Everyone in business knows cash flow is KING! How is 14 months of reduced cash flow going to help Licensees, and where would the incentive be for Australia Post to manage this product with any mutual benefit with 14 months, before we see the entire pot of cash our customers paid to renew their POB in the previous year. They might even renew for the next 12 months before we have received the full payment for their previous renewal.