Case Study – Big Steel Limited
Big Steel was a metal forming business - thin margins, but profitable based on historic financials. Our DD team identified a potential problem at a routine audit - major pre-invoicing/fresh air invoicing incident, with significant consequent cashflow implications.
The director/shareholders initially obstructive - suspicion grew that this was not the only ‘skeleton in the closet’. Financial performance plummeted as the accounting hole unwound.
Bank Credit were understandably very nervous.
What Happened?
File placed in Intensive Care. Collateral audits ramped up to monthly, plus bi-weekly sense checks on new invoicing and desktop checks on back up. Overpaid situation quantified and wound back over circa six weeks. Directors called in Advisors (acceptable firm) - effective three way communication established. Business failure likely - pre-recovery planning on the file started. Other invoicing anomalies were identified. Lender moved to critical payments. Once insolvency inevitable, team put on the ground to manage documentation preservation, verification, anomalies, disputes, strategy. Collect out/recovery initially used Big Steel accounts staff, but the business was repurchased by management and collections taken over by us directly.
Full recovery plus all fees, plus a significant surplus was achieved.