Suspected insolvency: bring unbilled commitments into the review
Identify operational commitments missing from the accounts when preparing an urgent insolvency assessment.
Corporate Recovery Partners
01 / 06
The creditor report is incomplete
Imagine a director reviewing an accounts report that shows $60,000 due. The project manager knows another subcontractor has finished a stage but has not invoiced. Materials have also been ordered for next week. An apparently complete creditor report can omit information essential to advice. Ask the operational team what has happened outside the accounting system since it was last updated.
ASIC says company records must explain transactions, financial position and performance, and directors need ongoing awareness of the company's position. Its guidance recommends qualified advice when inability to pay debts is suspected. Treat the missing commitments as information for that assessment. Do not try to decide legal solvency by adding a few estimates to an old report yourself.
Check completed work awaiting an invoice, purchase orders accepted, recurring charges and contract commitments under review. Ask each manager for the supporting document and expected timing. Distinguish a quote being considered from an order already placed. The aim is a reliable picture of obligations and uncertainty, not the largest possible list of imagined future expenditure.
Match the operational list against bills already entered and payments already made. In the hypothetical example, the completed subcontract stage may already be included in an accrual prepared by the accountant. Mark the match instead of adding the amount again. Keep the source of each figure visible so the adviser can question the treatment where necessary.
Record where an amount is provisional, disputed or dependent on an event. Include the reason and relevant contract rather than leaving the entry out. Ask the accountant and legal adviser how those items should be treated. A commitment list is a preparation tool; it does not resolve when a debt is legally incurred or whether a particular claim is valid.
Send the available information promptly and identify what is still being checked. Give each outstanding enquiry an owner and a short return time. Bring the accounting report and operational schedule to CRP or the qualified adviser handling the review. The useful improvement is a transparent account of what the ledger contains and what it may still be missing.
