Managing cashflow well is key to the success of any economic operator, big or small. The relationship between creditors and debtors is followed with eagle eyes on a daily basis, and in the management accounts. An entity will be chased by its creditors. It has to do its own chasing as regards debtors.

If the debtors-to-creditors ratio is allowed to get out of hand, the entity will be heading for trouble. Effectively it will be financing its debtors’ operations while being chased to settle its own debts by creditors.

This is even more basic than the ABC of accounting, a principle known to all those who take a serious interest in running their business. It is remarkable, therefore, that the principle is so lax in some members of the public sector. The energy and water corporations are prime examples: Their inability to cover cashflow control is remarkable.

To cover their cashflow control, Enemalta and Water Services Corporation set up a joint company, ARMS Ltd. Through the hearings of the Public Accounts Committee on Enemalta procurement we recently learned that it was set up against the advice of Enemalta’s then Chief Executive Officer.

He was prescient in his assessment. ARMS Ltd had not yielded any positive results. More often than not it is in the news because it is criticised by consumers. Wrong bills, late bills, or no bills at all are three of the most common complaints.

Consumers are right to demand answers. They want to keep their affairs in order. ARMS Ltd does not help them do that. Incredibly it is known to turn away consumers – its debtors – who go with cash to settle their accounts.

While consumers speak out, the corporations remain silent even though they are the hardest hit by the shortcomings of ARMS Ltd. It is well known that the debtor balances run into millions of euros with substantial amounts classifiable as aged debtors in any economic entity.

If the corporations managed their debtor positions properly, their basic problems will not go away. The effects of bad tariff policies and worse outlays on procurement will take years to unravel. But if the debtors’ position is brought under control Enemalta should not remain in a position where it cannot transfer Excise Duty to the Treasury, thereby debilitating the government’s own strained cashflow.

An update of the situation should be given by ARMS Ltd, rather than by the Energy Minister

Frankly, over six months into the life of the new administration, one expected clear updates about the position at ARMS Ltd. No doubt the situation is being reviewed. The company now has one of the best chairmen in the public sector. Granted too, Rome cannot be dismantled in a day.

But, what is happening? How has debtors’ control been reviewed? How is it going to be revised? How strongly is the company revamping its credit control?

Another basic question is, who are the debtors who have fallen so far behind in their dues to the corporations via ARMS Ltd? To the extent that debtors are corporate, they are being allowed to give secondary importance to their overdue payments to ARMS Ltd. If pressed for early settlement many of them will probably scream. They should not, of course, since outstanding tariff payments ought to be provided for.

The situation may be more serious to the extent that debtors are mainly households. Households should keep tight budgets. Some do. Others just pay what they must pay, leaving bills to accumulate when they are not harassed. If seriously pressed for payment they will raise an outcry and their complaints will end up as more political fodder.

Whoever the debtors of ARMS Ltd are, they cannot be allowed to remain outstanding any longer. The credit-control company should come out with well-thought out schemes to ensure that debtors start paying off their arrears against a carefully set time frame.

The methods of billing and collecting used by ARMS Ltd also have to be radically revised. Possibly, if not probably, one of the reasons put forward to explain collection delays will be the functioning of the company’s IT system. Whatever the problem and whoever the operators are, fix it... or get off the train.

At the end of it all, whoever the consumers running up high bills might be, the end mess is picked by consumers in their role of taxpayers. A ridiculous situation if ever there was one.

An update of the situation should be given by ARMS Ltd, rather than by the Energy Minister. The minister carries political responsibility for the company. That does not mean he should account for its day-to-day running. There is, in fact, too much of that going on – ministers or parliamentary secretaries speaking out when it should be the role of an entity’s directors and managers to account for themselves in the first instance.

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