Rise In Fraudulent ‘Fresh Air Invoicing’ By Cash-Strapped Firms

Number of companies abusing invoice factoring to obtain money on increase, reports business recovery professionals.

An uptick in ‘fresh air invoicing’ by cash-strapped firms in the UK is being reported by business recovery professionals.

The fraudulent practice involves companies raising an invoice which doesn’t relate to a trading transaction – no goods or services are delivered.

To get money in sooner they issue an invoice to the invoice finance company, which then advances 70% to 90% of the face value of that invoice and paid on the assumption that the goods have been dispatched or the service provided.

Acting on behalf of lenders, Azets, the UK top 10 accountancy and advisory firm, which has offices in Kent, has heard of more cases in the market.

Stephen Grant, an insolvency practitioner with Azets, working out of London, said: “Our message to businesses in Kent is to seek professional advice immediately and not to contemplate fresh air invoicing to get out of a financial hole. It is fraud.

“There is an uptick in fresh air invoicing. When times are tough, it is an easy way to get money. This is a growing trend, particularly around asset-based lending and fraud, which is a threat to lenders.

“We are seeing a number of businesses under pressure and strain at the minute, which may cause them to risk fresh air invoicing, often to pay front-of-queue creditors.”

He added: “We are seeing it in companies that have been going along perfectly normally, running a well-established business, but cash gets a bit tight, so they pretend that they’ve dispatched £10,000 worth of goods, send in the invoice to the invoice discounting company, get in £8,000 and think they will repay the £10,000 when they really do send out the goods.

“But this can spiral, gets out of hand, and it is fraudulent. Upon insolvency baffled customers are alarmed when they are chased for payment for goods and services they have no knowledge of.”