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Case Studies

Sales ledger review reveals cause for concern

Sales ledger review reveals cause for concern

A recent sales ledger review has uncovered several areas of concern for our asset based lending client.

We were instructed to review their invoice finance client’s processes, incorporating debt verification and paper trails, and to explore the reasons for recent high levels of dilutions, credit notes and debt turn.

Our team were also asked to consider the retrieval and storage of important data and information that would be required in the unlikely event of having to consider a collect out.

Despite difficulty in contacting the client’s top four customers, whose accounts offices were based overseas, we were able to complete the review inside a day and provide a number of recommendations to the lender.

What did we find?

The review revealed a number of potential issues for the lender which, left unaddressed, could pose significant risks going forward.

These included pre-notification of up to 15 days, with invoices raised prior to despatch, and a high volume of credit and reinvoicing with no valid reason – with invoices remaining unpaid.

Dilutions stood at 20%, with corrections being made between 163 days and 321 days later.

Further still, many customers had no copies of the funded invoices, with a number of credit notes withheld to correct duplications, returns and faulty orders. Credit notes were even being backdated in some cases.

Paperwork was a concern throughout, with the client lacking purchase orders to support debt, purchase order numbers missing from the invoices raised and delivery notes incomplete.

To compound matters, the client lacked a cohesive credit control function, not helped by their top customers’ accounts offices being based overseas.

Armed with this insight, the lender is now able to make a more informed decision regarding the future of the facility and consider potential changes that might reduce the level of risk that’s posed, for instance by outsourcing the credit control function or switching to a full factoring facility.

Our clients

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

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