Cash flow – watch your back!

3rd May 2022

The Government’s financial support packages have probably meant that more businesses have survived the worst of the pandemic than they would have done during a recession or severe economic downturn. However, the anticipated positive effects of the forecast bounce back have not come to fruition for a galaxy of reasons that we are all familiar with.

This is starting to hit the cash flow of some companies very hard.

Receiving unexpected invoices from suppliers

A client contacted us after being invoiced twice in relation to services that were supplied. Quite rightly they had challenged the second invoice and requested proof of the alleged additional work. The client is still waiting for a response.

Another client got in touch after they were threatened with a winding-up petition by a supplier. When it challenged the supplier to prove the debt, they were provided with a mountain of invoices, a significant number of which were addressed to the wrong company. As we investigated further, some of the invoices were said to be supported by timesheets signed off by the client. A significant number of these timesheets were wholly fictitious. Some had been signed off by representatives of the client who had no authority to do so.

Their accounts team is now having to devote a great deal of time getting to the bottom of the issue, that time and resource could be better spent elsewhere.

Don’t pay for goods or services which are deficient or not complete

When you are busy, it is easy to cast a cursory eye over invoices received and pass these for payment. When it comes to recovering the money that has been paid to a supplier as a result of a mistake, it can be difficult and costly to rectify.

As pressures on cash flow increase, we suggest that invoices should be scrutinised more closely and always queried where appropriate.

Don’t be strong-armed into making payments on account to suppliers.

We appreciate that this is often easier said than done, but where you have a contract for a mix of goods and services, could you pay for any goods that you need and have them delivered directly to you? In the worst case of your contractor going out of business, you would only need to find somebody to carry out the works using the materials you have purchased.

Build robust processes

Where a third party is providing services which are recorded using timesheets, have a clear system and line of authority for signing off on these. At the outset make it clear which directors and/or members of staff can do the signing and nobody else.

Good cash flow is the lifeline of any business that is going to survive what seems to be an inevitable downturn. Making sure that you only pay for the valuable goods and services you have received is a part of ensuring the health of that lifeline.

If you are facing issues with cash flow or supplier demands, get in touch, we’re here to help.

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