The recent Greensill scandal has made headline news the world over, and for good reason. For anyone who has been following the story closely, there are lessons to be learned from this example. Particularly concerning is the apparent lack of TDV, as has been highlighted by some recent reports.

“Greensill Capital’s administrator has been unable to verify invoices underpinning loans to Liberty Steel owner Sanjeev Gupta, the Financial Times reported on Thursday”

Telephone Debt Verification (TDV)

TDV is an important part of the due diligence process, however it’s also often the final part of the process and one that can sometimes be overlooked.

There are numerous reasons why this could be the case:

- It’s often very labour/time intensive
- There can be a lack of client co-operation
- It can be slow to yield results
- Often requires dedicated resources

There is a general concern that speaking to the customers will somehow negatively impact the existing relationship, which can be sensitive to address when on-boarding a new client. This “hesitation” towards telephone debt verification, is however, largely unfounded (when conducted properly of course).

The problems with TDV

In cases like Greensill, we often see that the audit team simply run out of time, and it’s not surprising, taking the above into consideration and the mounting pressure to close facilities in a speedy time frame. This is (of course) common knowledge to those who work within the Invoices Finance and Asset Based Lending industry.

The problem has now been further exacerbated by the pandemic, with most financial organisations struggling with staff working from home, as are their clients and service providers.

We are encountering a growing number of clients that are experiencing challenging situations due to the lack of robust internal controls impacted with the work from home ruling. This has meant that undertaking the standard Telephone Debt Verification process has brought new challenges and hurdles to overcome in 2021.

Can you relate? Now may be a good time to look at what potential risks are sitting in your portfolio!

Conducting a health check and periodically “pressure testing” your systems and processes is sensible at the best of times. Given however, the impact of the last year and how it will continue to play an important role in how modern businesses operate. So, if you haven’t already, then now is certainly the time to act.

Here at Breal CM we can offer a full professional audit of your current TDV processes, and because we are amongst some the U.K.s leading experts in this field, rest assured we’re able to effectively find and highlight any areas requiring your attention.

(simply send us an email info@brealcm.com to request your TDV audit today.)

The Importance of Conducting TDVs

Simply put, Telephone Debt Verification can be one of the most effective methods of testing the validity of the sales ledger!

The importance of regular TDV checks is well known, as it helps to build a clearer pattern of the sales ledger customers habits, payment terms, queries, and pinpoints potential and existing bottlenecks within the sales order and query management processes.

Knowing your customer’s customers, provides a deeper level of security and by capturing payment promise data, a simple cash inflow allows granular visibility into the sales ledger, immediately bringing matters to attention and allowing pro-active work with your client to bring about a positive result in the vast majority of cases.

What degree of monitoring are lenders undertaking in terms of their collateral base?

 

Referring to a recent Turnaround Management Association interview it was said that (as you would expect), “healthy companies are not being heavily monitored but those closer to insolvency are. As a company gets closer to insolvency, they often get called in to start monitoring monthly, weekly and even daily, looking at flash sales reports, daily stock levels, and making sure that the balance sheet and borrowing base are up to date so the lender knowns their position.”

In terms of how this relates to Crown preference, Dan said “monthly sales reports are being used to try and anticipate what next quarter’s VAT levels will be, rather than simply relying on historical data. By keeping on top of the data, he said that lenders can forecast with reasonable certainty what the liabilities going forward will be.”

Whether it’s a quick look at a sample size or a larger section of the ledger, Breal CM uses systems and processes to manage both. We are quick, nimble, and agile in how we approach this specialist type of work and can offer either a confidential or non-confidential service depending on each individual case.

We combine technology that will quickly validate the debtor company and even provide data on the propensity of whether the account will be paid, even before a call is made!

Coupled with supporting our clients processes it allows for a broader bandwidth of coverage across the sales ledger. Breal CM work to support your processes, portfolio teams and look to enhance the customer experience.

Outsourcing your TDV requirements to a third party has a whole host of benefits and will provide an unbiased view as well as freeing your audit teams to focus on the results and the more detailed aspects of the audit procedure.

If you’d like to talk to us about any aspect of your TDV processes and requirements, please feel free to contact our management team directly or call 0330 0430282 to arrange a call back when it’s convenient for you.

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