No credit cap given by asphalt plant inspection report
Kaieteur News – Details of the recently released audit report on Garden of Eden’s Asphalt Equipment, show that customer credit treatment was poor.
In fact, according to the report, due to the no-cap credit given, coupled with a lack of credit policy, the plant was exposed to the risk of giving credit and not being paid on time.
“Management was not in control of the risk and cost involved in giving credit. This has resulted in large amounts of credit being issued for a long period, leading to the high cost risk associated with receivables, ”the team highlighted in their report.
Particular reference was made to Courtney Benn Contracting Services Limited (CBCSL), a company that had been regularly credited but failed to pay those debts.
To this, the report stated: “The minutes of the Board of Directors meeting dated November 29, 2016, revealed that the directors were concerned about giving credit to CBCSL when there was no policy for providing credit for such a large amount. ”
The team also noted that with this construction company, credit was given without a credit review process.
In fact, credit is still being given to CBCSL despite the directors’ decision to cease selling asphalt on credit to this client until all outstanding money is collected, he said report.
At December 18, 2020, the balance owed by Courtney Benn was $ 12,031,153.
As part of their recommendations, the team said that management should make every effort to ensure that monies due are collected on time and that plant policies are adhered to at all times.
In their report, the team also highlighted the need for a credit policy, which would set out credit and payment terms for customers, and establish a clear approach for late payments. Due to this lack of credit policy, the report says, all credit sales were approved by the General Manager (GM) without any evidence of a credit review process being undertaken and credit limits set for the various customers.
The absence of this policy also exposed the Asphalt Works to a high risk of clients failing to pay on time, as mentioned previously.
To this end, the report said: “An analysis of receivables revealed that on average 75% of debts were outstanding beyond 90 days. We were unable to determine whether there was consistency in management’s decisions. ”
The auditors were unable to determine whether the sale of asphalt on credit is of economic benefit to the factory.
Surprisingly, when the special team arrived at a response from the asphalt factory management on this issue, management noted that it had an “active and engaged” credit policy approval system in place.
To this, the team specifically noted: “There is no credit policy. We have noted that, in 2019, the asphalt factory established a system that collects information about the customer applying for credit and does not assess the creditworthiness of the customer. ”
The audit was ordered by Public Works Minister Juan Edghill after independent contractors and others filed complaints about racks being run at the factory.