Patisserie Valerie acknowledges ‘backlog’ of unpaid supplier invoices.
16th January 2019.
Patisserie Valerie has acknowledged being late in making payments to a number of suppliers, as investigations into the chain’s finances continue. Accounting irregularities were discovered in a company audit in October 2018, after several of the firm’s suppliers complained of not being paid. In some instances, businesses reportedly resorted to legal action to secure their payment, with all entitled to receive pay within a maximum of 60 days under standard payment terms with Patisserie Valerie.
In a letter to the Business, Energy and Industrial Strategy Committee (BEISC), Patisserie Valerie’s interim chief financial officer Nick Perrin said that that the chain was making “gradual” progress with overdue payments, but added that there was still “much to be done,” noting that the firm’s new management had identified “many creditors with a large backlog of unpaid invoices.”
Mr Perrin affirmed that the company was making repayments using “significant funds” which were “injected into the business to enable the group to bring payments up to date” last year, referring to chair Luke Johnson’s contribution of £20m in emergency funds to keep the chain afloat in October. Shares in the chain’s parent company Patisserie Holdings are still suspended, as investigations by the Financial Reporting Council (FRC) continue. HMRC last year reported being owed £1.14m by the chain, whilst FRC investigators are also probing Grant Thornton’s previous, erroneous audit of Patisserie Valerie.
SMEs advised to tackle overdue accounts
BEISC chair Rachel Reeves praised the chain’s new management for “trying to clear up the mistakes of the past and get to grips with late payments to suppliers,” adding that her committee would “hold” Patisserie Valerie to a six month deadline for updating details on payment practices.
Ms Reeves also however emphasised the gravity of the company’s previous failure to pay suppliers, calling it “vitally important for SMEs that they are paid fairly and on time.”
Nearly one in three (32%) of small businesses report being hindered in their growth by slow payments from clients, with this figure rising dramatically to 70% where the business does not have an adequate credit management system in place. To avoid being exposed to damage by late payments, SMEs are therefore advised to tackle overdue accounts at an early stage with the aid of a professional credit management service.
Late payments
Big companies like Patisserie Valerie want to have their cake and eat it.
They drive down the margins of their suppliers and squeeze them tight but then cause even more pain by routinely paying late and creating a credit squeeze for the SMEs who supply them.
Late payment is a disease that spreads super fast. One company pays late, then its suppliers get cash flow problems so they pay their suppliers late. Those suppliers in turn pay late, so on and so forth.
IN CPA’s view, the only solution to solving late payment is to make suppliers believe that paying late is not in their interest. When paying suppliers late becomes the most expensive way of boosting cash flow, suppliers will switch to alternative cash flow solutions. This can be achieved through retrospective action. When existing legislation is actually applied, paying late becomes quite expensive.
Even if suppliers hold off on applying the legislation while their customer remains a customer. They can still go back and apply for compensation after the relationship ends.
CPA is helping suppliers get compensated for late payment. The late payment culture can be broken.
Read our blog here on how this can be achieved.
CPA’s late payment compensation department can help you fight the late payment culture. Contact us to find out how.
How CPA can help
Don’t let your debtors have their cake and eat it. If they ordered your goods or services, then they should pay for them! And on time!
CPA is a credit management company that can help with your late paid invoices.
Trading for over 100 years, CPA have collected billions for our members.
At the Credit Protection Association,we provide a suite of credit management services to help you minimise late payments and modify the behaviour of late payers.
We provide first class credit information that can help you avoid being over extended to customers who are at risk.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports predict approximately 96% of insolvencies long before they arrive.
Our debt recovery services also chase down late payers, resolving over 80% of debts referred, recovering money that our members can use to boost their cashflow.
Our members have used this extra cash to invest in additional materials, new staff, extra equipment or new technology, to boost their business.
At the same time, our credit checks and credit reports are utilised by our members to investigate all suppliers and customers. It is important to scrutinise everyone within your business, to ensure their financial history will show no bad payment behaviour or maltreatment of suppliers. Our reports help avoid bad payers or being over extended to a customer beyond their means.
We come across business owners who have decided to scale back their businesses and stop selling on credit because the hassles were not worth it.
Our services have helped them trade again in confidence
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
James Salmon, Operations Director, 16th January 2019
17/1/19 Update
As an addendum to this story, the owner of Patisserie Valerie has announced that the accounting scandal uncovered in October was worse than it thought, with an investigation revealing “extensive” misstatement of its accounts and “very significant manipulation of the balance sheet and profit and loss accounts”.
The chain said work carried out by its forensic accountants, which the Telegraph reports are believed to be PwC, shows profitability and cash flow were overstated and “materially below” figures announced in October.
The matter saw finance director Chris Marsh, who is being investigated by the Serious Fraud Office and the Financial Reporting Council (FRC), arrested. Patisserie Valerie’s auditors Grant Thornton are also under investigation by the FRC.
Patisserie Holdings has appointed RSM as auditors and says it has “hired KPMG to assist it in a review of all options in order to recover from the devastating effects of the fraud, and to preserve value for its stakeholders.”
18/1/19 Update – Deputy chairman exits Patisserie Valerie
Lee Ginsberg, Patisserie Valerie’s deputy chairman and former head of its audit committee, has resigned with immediate effect. The chain has seen a number of departures from its board since it revealed a £40m hole in its accounts and potential fraud in October.
The café chain has hired KPMG to carry out a “review of all options” as it tackles the fallout of the crisis. Meanwhile, the FT reports that shareholders are concerned that the chain could be sold cheaply or put into administration.
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