Observing the car crash that is the collapse of TPF, it's apparent that this company ticked pretty much all the boxes in Begbies Traynor's "likely trend of distress", outlined in a blog a few weeks back.
And yet suppliers - and customers - still chose to carry on dealing with the business. No doubt some felt this was their only hope of recovering outstanding debts, but that decision will probably prove fatal for some companies as the fallout from the debacle spreads. It's all terribly depressing.
As we know, the group's accounts for the year to June 2008 were way, way overdue and were finally filed at the beginning of this month. This, in effect, signalled the beginning of the end because the numbers laid bare therein were truly shocking.
It's worth repeating auditor Baker Tilly's note on those accounts concerning the uncertainties about TPF's ability to continue as a going concern, unless the directors managed to pull off ALL of the following:
- Receipt of additional shareholder funding of up to £3m
- Agreement by HMRC to a payment plan to clear significant arrears over the two year period to 30 December 2011
- Agreement by the group's bankers to an increase of £3.5m in the current invoice discounting facility
- Agreement by certain key suppliers to an extension in credit terms
- Achievement of the trading levels assumed in forecasts prepared up to 31 December 2011
As an aside, according to my reckoning point three would have required a doubling of the invoice discounting facility - with banking attitudes as they are I cannot imagine there was ever the slightest glimmer of hope that such an extension would be granted to a business that was by this point clearly a basket case.
What a pity that it was more than a year and a half after the trading period end before these concerns came to light. Bound up in legislation as we are, I can't help feeling that a fairly simple solution could and should exist to stop firms from effectively concealing the full extent of their problems by hanging onto their numbers for such protracted periods.
