Fisker temporarily lost track of millions of dollars in customer payments as it scaled up deliveries, leading to an internal audit that started in December and took months to complete, TechCrunch has learned.
The EV startup was ultimately able to track down a majority of those payments or request new ones from customers whose payment methods had expired. But the disarray, which was described to TechCrunch by three people familiar with the internal payment crisis, took employees and resources away from Fisker’s sales team at a time when the company was attempting to save itself by restructuring its business model.
Fisker struggled to keep tabs on these transactions, which included down payments and in some cases, the full price of the vehicles, because of lax internal procedures for keeping track of them, according to the people. In a few cases, it delivered vehicles without collecting any form of payment at all, they said.
“Checks were not cashed in a timely manner or just lost altogether,” one of the people told TechCrunch. “We were often scrambling to find checks, credit card receipts and any wired funds a few months after a vehicle was sold.”
Alongside the internal audit, outside auditor PwC was asking Fisker for more documentation about its vehicle sales as part of the process of putting together 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.
“Paperwork being collected wasn’t always being collected in full, or sent to the same places,” another one of the people said.
These sources requested anonymity because they were not authorized to talk to the press about internal matters.
This internal confusion put the company in a position where it couldn’t accurately say how much revenue it had generated, according to the people, who noted it is one of the reasons Fisker has yet to file its annual financial report for 2023.
Tracking down the payments may wind up offering little solace to the startup, which is on the brink of bankruptcy. Fisker has paused production of its only vehicle, the Ocean SUV, after running into trouble meeting internal sales goals and struggling to support customers dealing with a number of quality problems. It has alerted investors that it may not be able to continue operations without a fresh infusion of cash.
This week, the New York Stock Exchange suspended the trading of Fisker shares and delisted the company, increasing the likelihood that it won’t be able to raise money to survive. The company gutted prices — by as much as 39% — on its remaining inventory 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 reported that it had discovered multiple “material weaknesses” in its internal financial reporting.
The company initially said it lacked “a sufficient number of professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately.”
That statement followed the resignation of two chief accounting officers within a month. “Specifically, there are insufficient controls to ensure that the accounting department is consistently provided with complete and adequate support, documentation and information, and that matters are resolved in a timely and effective manner,” the company wrote at the time.
In that same filing, Fisker revealed a second material weakness involving the “risks of material misstatement over the accounting for inventory and related income statement accounts.”
On February 29, Fisker admitted in a press release that it identified an additional material weakness “in revenue and the related balance sheet accounts.”
This legal jargon was a way for Fisker to admit what sources told TechCrunch: that it simply did not have the people or processes in place to properly assemble its books.
Fisker’s poor internal procedures have created problems beyond keeping track of payments.
The company has also struggled to keep up with making the required payments to various state DMVs when setting up new customers, according to the people.
This has resulted in at least dozens of customers spending months with temporary license plates. Some owners have had to bother the company for multiple sets of temporary plates, as they keep expiring. The same has been true for some owners who have been stuck waiting for their title and registration.
Fisker hired contractors in February to help resolve the title and registration problems, but the backlog was immense, according to the people. One of the people said that the team was working on amending paperwork on orders stretching as far back as August 2023.
“There was no infrastructure in place prior to spinning up the wheels of the sales machine,” one of the people said.
Comment