Cash flow crisis

By PETER ESILA
NINETY companies are facing serious cash flow problems and moves have been made to wind them down, a major liquidator has revealed.
Pini Accountants and Advisors principal Andrew Pini revealed that in 2023, he signed more than 80 consent forms and another 10 in the first three months of this year. He said this was a worrying sign for the economy.
A consent form is a legal document that lawyers draw up when a company is facing serious cash flow problems and an aggrieved creditor takes the company to court to wind it up because its debts have not been paid.
Opposition Leader Douglas Tomuriesa also expressed similar concerns, saying that the Government and State departments and agencies, were not functioning properly due to severe cash flow constraints.
“Public servants are being paid their salaries, but they cannot perform their jobs because they cannot access goods and services such as stationery, fuel, airline tickets, and so on in order to perform their duties,” Tomuriesa said in a statement yesterday.
He said in many cases, public servants were paying for fuel and stationery from their own pockets “with very slim possibility that they will be reimbursed”.
“Even Parliamentary Services cannot acquire printer toners for the Opposition offices so MPs and staff have to chip in.
“Despite doing their best, the Internal Revenue Commission and PNG Customs cannot collect revenues fast enough because the Department of Finance is forced to prioritise the Connect PNG road programme which has sucked up all the available government cash flow,” Tomuriesa said.
Pini, on the other hand, has blamed the prolonged shortage of forex and rampant crime as major reasons for the demise of many companies.
“Most companies are not readily able to meet their obligations during the course of their business operations,” Pini said.
He said this behaviour indicated insufficient income being earned, or may have a lot of loans with interest accumulating and, when the repayments are made, it depletes their cash flows and they cannot meet other debts and obligations.
“Last year, a good number of companies went into liquidation. And, the trend is increasing with a good number of consent signed this year.
“Most companies are not able to meet their obligations on a timely basis (within the given invoice terms of payment of debts), and that is why most maybe trading while being insolvent,” Pini said.
“Only when one aggrieved customer files a petition for winding up of their operations, then they start reacting in securing funds to meet those urgent obligations.
“There have been numerous consents for liquidation or receivership appointments I have signed to the court but, when the petitions are brought before the court, those defaulting companies take immediate action in repaying the debts and, hence, petitions for winding up filed by lawyers are withdrawn.”
He highlighted high crime rates and the forex shortage issues as the main factors forcing companies to wind down and go into liquidation.
Pini said: “The market must be conducive for companies to operate. Law and order must be minimal or nil.
“Foreign currency shortage issues must be given ultimate attention and be resolved urgently.
“Funds remitted overseas for payment of goods are not released on time by commercial banks due to foreign currency issue and, hence, stocks cannot be bought in on time to sell, generate income and meet operational costs.
“There must be injection of cash into the economy by getting people involved in SMEs and a lot of support to agricultural businesses.”
Pini said it would also help if major businesses, including those foreign-owned, keep money in the country.
“There must be money brought into the country with less going out, which will help build the reserves. We must look for ways and means to improve our falling Kina and give value to it as soon as we can,” he said.