The FT reported the unsavoury (unprofessional) relationship between KPMG and the Gupta companies that has led to the demise of senior managers including the chief executive in South Africa. Serious errors of judgement in its relationship have come to light.
As the FT quoted Karthik Rammanna: 'KPMG might find it has gotten caught with its hands in the cookie jar just as the lights have been turned on'
KPMG is likely to suffer a loss of revenue and hence cashflow as a consequence of loss of existing clients and opportunity costs from not gaining new clients.
Debt factoring will help restore that cashflow.
Conventional debt factoring (also known as invoice finance) is a useful alternative to borrowing more debt to obtain cash. It involves the sale of invoices (from credit sales) in exchange for immediate cash. To manage the risk the debtors will not pay for their purchases (credit risk), the factor will purchase invoices for around 80% of their value and pay the balance when the debtor pays, less the factors's fee. The factor will usually also want a debenture over the company's assets and possibly also directors' personal guarantees.
Factoring fees can be of many types including arrangement, servicing, renewal, and credit protection fees. These inevitably raise the all-in cost of factoring for the company, but its benefit are immediate cashflow without adding to debt levels, and transfer of credit risk to the factor (though some factors transfer credit risk back to the company if the debtor defaults).
What is single invoice finance?
Cash for Invoices Limited offers single invoice finance (sometimes called spot factoring or selective invoice finance) - a type of debt factoring that has key advantages over conventional debt factoring and invoice finance: