Fisker temporarily lost track of millions of dollars in customer payments as it scaled back deliveries, prompting an internal audit that began in December and took months to complete, according to TechCrunch.
The EV startup was eventually able to trace the majority of those payments or request new ones from customers whose payment methods had expired. But the disarray, which three people familiar with the internal payments crisis described to TechCrunch, took employees and resources from Fisker’s sales team at a time when the company was trying to save itself by restructuring its business model.
Fisker struggled to track those transactions, which included down payments and in some cases, the full price of the vehicles, because of lax internal processes for tracking them, according to the people. In a few cases, he delivered vehicles without collecting any payment method at all, they said.
“The checks were not cashed on time or were simply lost altogether,” one of the people told TechCrunch. “Often we would try to find checks, credit card receipts and any wired funds a few months after selling a vehicle.”
Alongside the internal audit, external auditor PwC asked Fisker for more documentation about its vehicle sales as part of the process of compiling the company’s annual financial report, according to two of the people. Fisker was often unable to provide satisfactory documentation, leading to more requests from PwC.
“The paperwork that was collected was not always collected completely or sent to the same places,” said another of the people.
Those sources requested anonymity because they were not authorized to speak to the press about internal matters.
That internal confusion put the company in a position where it couldn’t say exactly how much revenue it had generated, according to the people, who noted that it’s one of the reasons Fisker has yet to file its annual financial report. for 2023.
Tracking payments may end up offering little solace to a startup on the brink of bankruptcy. Fisker halted production of its only vehicle, the Ocean SUV, after it struggled to meet internal sales targets and struggled to support customers facing a series of quality issues. It has alerted investors that it may not be able to continue operations without a new cash infusion.
This week, the New York Stock Exchange suspended trading in Fisker’s stock and delisted the company, raising the possibility that it may not be able to raise money to survive. The company exposed prices — up to 39% — on its remaining stock as of Wednesday morning.
Representatives for Fisker and PwC did not respond to requests for comment.
Red flags raised
Fisker has warned investors since last year about problems with its internal accounting practices. In November the company mentionted that it had discovered multiple “material weaknesses” in its internal financial reporting.
The company initially said it did not have “a sufficient number of professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyse, record and disclose accounting matters in a timely and accurate manner”.
This statement followed the resignation of two chief accountants within a month. “Specifically, adequate controls are not in place to ensure that the accounting department is consistently provided with full and adequate support, documentation and information, and that issues are resolved in a timely and efficient manner,” the company wrote at the time.
In the same filing, Fisker disclosed a second major weakness related to “risks of material misstatement related to the accounting for inventory and related income statement accounts.”
On February 29, Fischer admissible in a press release that it identified an additional material weakness “in revenue and related balance sheet accounts.”
That legal jargon was a way for Fisker to admit what the sources told TechCrunch: that it simply didn’t have the people or the processes to put its books together properly.
Fisker’s poor internal processes have created problems beyond tracking payments.
The company also struggled to keep up with making required payments to various state DMVs when setting up new customers, according to the people.
This resulted in at least dozens of customers spending months with temporary license plates. Some owners had to pester the company multiple sets temporary plates as they continue to expire. The same goes for some past owners stuck waiting for their title and registration.
Fisker hired contractors in February to help resolve the title and registration issues, but the backlog was huge, according to the people. One of the people said the group was working on amending the paperwork for orders that extend as far back as August 2023.
“There was no infrastructure before the wheels of the sales machine turned,” one of the people said.
