Invoicing errors 3

[sean01]

Hi all,

I recently joined a small privately owned engineering company who uses a 'factors' company when collecting invoices from its customers.

For those who don't know what this is - basically the are an organisation who 'buy' your invoice to your customer for a certain value - typically about 90% thus giving you a guaranteed cash flow - then collect the remaining 10% within the agreed payment schedule. This service costs us about 2.5%.

My concern is that I was recently promoted to technical manager within the company and I have noticed that throughout the year a number of the managers have signed of delivery documents for work that hasn't been completed - sometimes 'pulling' work from four months in advance, saying it is complete (ie signing the despatch note on behalf of the customer) and passing it to the factors company for payment.

I believe this represents fraud - (the figure involved being about 1.5 million GBP) and I am now concerned how to report this, firstly to the general manager and then to the police. I have already been advised by the I.O.D. that I must call a meeting of the companies senior management to highlight this concern and that if they don't agree to a course of action that rectifies this problem - then I have no other course open to me than to resign.

Anyone got any ideas ?

sean

 

[ctopher]

IMO, turn it in. If the company is caught with fraud, and you knew it was going on, you could be personally be involved in the case. I would not take the chance. Get a lawyer, turn it in and look for another job.

 

[zdas04]

Right now. Today. Go to an attorney and get competent advice. You are behaving quite stupidly by posting this on eng-tips. The sums are too large and the penalties for delay are staggering.

Whether or not to resign is just a dumb question. The only question that would be in my mind is "how do I stay out of jail?".

David

 

[Skogsgurra]

It's not about ethics any more. It is about getting out of a dangerous situation that you seem to have been dragged into. If you stay in and accommodate, you will soon become a real criminal. GET OUT!

 

[tomaspin]

It is entirely feasible that the directors are not aware of the problem. Raising the issue formally would accomplish two things:

1. It allows you to assess whether or nor they are aware of the fraud
2. Also should there be a police investigation, then having brought this to the attention of the senior management strengthens you position.

Just for a moment consider how it would look to an outsider if you resigned and left, with the fraud being discovered soon after. Most would construe this as guilty behaviour.

When advising the directors of the situation, do so formally in writing. I would also suggest that you send yourself a copy of this recorded delivery in a well sealed envelope and keep it in a safe place, or give it to your solicitor. This effectively 'dates' the letter - which may be important later.

I agree that this is a dangerous position to be in, howevever I do not believe that doing nothing and just leaving is an option, for the reasons given above. Your main concern should be escaping from the situation without a stain on your character.

If you blow the whistle to the directors, they could fire you or bribe you if they are in on the scam. If they are genuinely unaware of the situation, then you could end up in a much stronger position.

One other point to consider, is how this got past the auditors? Perhaps someone should be asking them some searching questions.

I'm no legal expert, but I hope this helps.

Tom

 

[VoyageofDiscovery]

Sometimes invoices need to be submitted to the customer's accounting department before the end of the fiscal year as projects move over into the next. If senior management is acting responsibly with the knowledge of the customer, this is not illegal. So find out the facts before you allege criminality.

VOD

 

[jmw]

VoyageofDiscovery makes a good point.

Ask for clarification of any anomalous or unsual practices before blowing the whistle.

You have spoken to the Institute of Directors but have you simply asked someone what is going on? This might save a lot of red faced grovelling if it all turns out to be above board.

If it comes to it, whistle blowers often have to accept that however virtuous they are and however heinous the crime they report, for some reason they find themselves out in the street and needing a career change. So, if it comes to it, hope for the best but plan for the worst, but don't duck the issue. If it is a criminal activity, then it does need reporting.

"Anonymous" is a good word.

BUT

"not all that glisters is gold" What you see may be quite legal and above board.

There are plenty of reasons why goods are invoiced early.

Proforma invoices are issued at the time of order and require payment to be made before any work starts. Pre-invoicing can also occur for similar reasons but when the work is in progress or nearing completion.

Stage payments may be required for large jobs to cover material procurements.

On the other hand, late payment is a fact of life, so too are retentions and stage payments.

So, if you are new or relatively new to this role, and you see something you don't understand, ask.

If these guys are doing this up front and not behind closed doors, it may be that there are rules that you are unaware of.

Do a reality check.
Who is/are the victims?
Can so many companies be involved in a conspiracy and no one of the victims blow the whistle?
What you see is invoices passed to the factors company. There may be very good reasons why this happens when it does but when is the client actually invoiced? Does the factors company get a daily or weekly dispatch record? In other words, what don't you know?

Why not just say "I'm curious, how does this factors thing work? Why do we use them?"

If you don't do this but call in the TV cameras and reporting legitimate activity as fraud to the police and the IoD, it isn't a good career move.

Of course, if you really suspect this is fraud and with reason, you may wish to try and find out what is happening without raising your own profile. Find out if there really are victims. Be thorough.

Your role appears to be that of technical manager. There is no reason why you should have been briefed on contract terms and conditions. A year in this job suggests much of this year would be high pressure learning the role and becoming effective. It is reasonable for you not to be informed about other policies in other areas.



JMW

http://www.viscoanalyser.com

Eng-Tips: Pro bono publico, by engineers, for engineers.

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips Fora.

 

[johnwm]

We seem to be missing the point here. The fraud is being committed initially against the factor.

We seem to be suggesting that just because the customer wants something illegal doing then it's OK. Signing a completion note without that part of the job being complete, and passing that completion note to a factor is to defraud the factor. The issue of what the customer wants or needs is irrelevant, as it's the factor's money that you're taking.

First make sure of your facts, with written evidence. Then take the matter formally to the Managing Director and ensure that he is aware what is going on. Before your meeting with him leave copies of your evidence in a sealed envelope with your solicitor. If the MD does not resolve the situation directly, get urgent legal advice.

If the MD is aware of the situation, then most likely the company is in deep cashflow problems, and its only a matter of time before it folds anyway.

Good Luck
johnwm
________________________________________________________
To get the best from these forums read faq731-376 before posting