Patisserie Valerie enters administration.

29/1/2019.

Patisserie Valerie has entered administration after the failure of rescue talks with banks. The cake chain, which is unable to pay its debts, reported uncovering “significant, and potentially fraudulent, accounting irregularities” in October, with a number of suppliers left unpaid. The outlook worsened in January however, when the chain’s forensic accountants discovered “thousands of false entries into the company’s ledgers.”

A report commissioned by the board of the company identified several finance staff and a supplier enlisted to provide fake invoices as being involved in the suspected £40m fraud. In a statement to the stock market, Patisserie Holdings said that its collapse came as the “direct result of the significant fraud,” which left the chain unable to renew its bank facilities and without “sufficient funding to meet its liabilities.”

Concerns over fake invoices ignored

Executive chairman Luke Johnson is not implicated in the scandal, but has faced widespread criticism alongside the group’s auditors and banks for failing to identify extensive issues with unpaid supplier invoices. Many feel the chain’s leadership should have investigated the unrealistic profit margins and suspicious sales figures reported by the group’s accounts sooner. HMRC raised concerns with parent company Patisserie Holdings over some of its invoices and cheques potentially being forged over two years ago.

Suppliers left unpaid for months

Evidence detailed in the report suggests that the business may have deliberately delayed payments to suppliers for as long as possible in order to artificially inflate profit margins and cash holdings. Widespread issues with late payments to suppliers were identified during investigation of the chain’s accounts, and several suppliers have pursued legal action over problems caused by late payment. According to one Patissierie Valerie supplier, “Their [payment] terms were supposed to be 60 days but they would often stretch it out to double that.”

Suppliers – and in particular small businesses – are often unfairly and disproportionately affected by late payments from clients who are struggling financially, with sometimes catastrophic consequences for their own business. Reports show that nearly a third (32%) of small businesses are prevented from growing by slow payments. For supply businesses without strong credit management systems in place, this figure rises to 70%. Enlisting a professional advisory service to strengthen credit management systems and chase down late payments can therefore be essential for SMEs in minimising the risks associated with late payment.

Update 4th February 2019 :  Buyers eye Patisserie Valerie

About 100 parties and individuals are in the running to buy Patisserie Valerie, with a deadline for bids expiring yesterday. KPMG is to consider formal offers, with a source telling the Times that the business could be sold in its entirety or be broken up into chunks. Meanwhile, around 900 Patisserie Valerie workers who lost their jobs last month say they have not received their final pay packet. KPMG said it is helping staff who have been made redundant to make claims to the government-backed Redundancy Payments Service.

from Sunday papers: Patisserie Valerie rescue blocked

Restaurateur David Scott, the former boss of cafe chain Druckers, says his efforts to rescue Patisserie Valerie have been blocked. A letter from law firm Gateley, which is assisting KPMG with the chain’s administration, said Mr Scott would not be granted access to private information prepared for interested parties, with concerns raised over whether he would adhere to the terms of auction. Elsewhere, sources familiar with a forensic report by PwC say Patisserie Valerie staff used fictitious Groupon vouchers to inflate the cafe chain’s sales

How can CPA help?

Were you owed money by Patisserie Valerie? Did they regularly pay you late?

Just because you have been dealing with a customer for many years without any issues, it doesn’t mean you are trading risk free.

Healthy companies can see their fortunes change , leaving suppliers who have extended credit caught out.

Just look at how many other big chains have disappeared from the high street  in recent years.

It may be too late to help you with Patisserie Valerie but what about your other customers?

At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.

We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports predict approximately 96% of company insolvencies long before they arrive.

Companies in trouble usually have very bad bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.

As a third party collector, we can get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.

Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper.

Also if you have regularly been paid paid late by business customers, why not talk to our new Late Payment Compensation department? We can help unlock hidden potential compensation claims you are due from those bad payers. This compensation could springboard your business to success.

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For help or advice on credit management, entirely without obligation.

Call us today

0330 053 9263

The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!

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