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Post Info TOPIC: Unusual ways to beat the banks
cherry


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Unusual ways to beat the banks
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Hi everyone,

Can you give me your thoughts on the legitimacy of the following please?

A long standing client (it gets complicated so lets call him client A) of one of my clients (client B) is having trouble with their bank. They have an overdraft which the bank is trying to reduce. Consequently, every time any payments are made into client A's bank account the bank simply removes the money. This effectively means that they are unable to operate normally as they have no cash with which to pay their suppliers.

My client (client B) works on client A's projects. In the past client B has invoiced client A for work and had trouble getting payment due to the bank swiping any money coming into client A's bank account from the end customer. As a way round this they have devised a method whereby client B invoices the end customer for the full amount of the job and client A then invoices client B for their portion of it. this means that my client (client B) is more certain of getting paid. Because the bank will take any money going into the business account client B is making payment directly into the personal account of one of the directors of client A.

All this seems a bit dubious to me but I am not entirely sure why and I would be grateful for any thoughts. My main concern is with client B, to make sure that there is nothing here that could come back and bite them.

Many thanks for any ideas


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farmergiles


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This sounds like lack of confidence by the bank. Are the trading figures sound? It doesn't really sound as such. If they are a Ltd Co.(which you seem to imply) are they trading insolvently? It is illegal for a Ltd Co to trade insolvently.
The problem I see with the invoicing is that client "B" could take "A" out of the equation and deal direct with the end user.
I can't see that anything is going to come back and bite "B" on the bum, all he is doing is paying bills in accordance with "A's" instructions. It is "A" that will run into trouble because what they are doing can be interpretted as defrauding the company by having the money paid direct to the directors bank account. Could come unstuck if the company goes into insolvency/liquidation.
My own opinion(for what it is worth) is that client "A" is going to go bust, therefore make sure any outstanding fees are paid, in cash, before that happens.

Kind regards
Peter

-- Edited by farmergiles on Friday 8th of May 2009 11:10:48 AM

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cherry


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You're right, client A has been on the verge of going bust for a while, which is why my client is happier invoicing the end client direct and then reimbursing client A for their share. It's good to have reassurance that there is nothing obvious that could come back against my client though so many thanks for your reply.

Kind regards

Margaret

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