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Case Studies

Audit uncovers breach of invoice discounting facility

Audit uncovers breach of invoice discounting facility

A routine audit has uncovered problems with an invoice finance client’s EDI systems that led to a breach of their monthly overdue covenant.

In the baked goods sector, the failure of the EDI identified issues with the recovery of overdue debts on two accounts on the client’s ledger; both buying groups consisting of a number of privately owned customers.

These groups account for almost two-thirds of the ledger. So the fact our audit found that month-end overdues had reached 7%, despite the covenant on the £600,000 invoice discounting facility only allowing overdues of 5%, was a concern for the instructing lender.

The first buying group, comprising 36% of the ledger, will not accept invoices older than 60 days, and the client is required to deal with each of the privately owned members to seek approval of the invoices before payment can be obtained from the buying group.

The second, at 27%, requires the client to provide a transaction listing and copies of all PODs to support invoices over 70 days.

Based in Northern Ireland, the client is estimating that up to 5% of the ledger will need to be written off. However this could have been much higher had our auditors not uncovered these issues.

Our clients

  • PNC Business Credit
  • Investec
  • IGF Invoice Finance
  • Ultimate Finance
  • Leumi ABL
  • Factor 21
  • Bibby Financial Services
  • GapCap
  • Woodsford Tradebridge
  • Secure Trust Bank
  • Close Brothers Invoice Finance
  • Nucleus Commercial Finance

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