How to Prepare Your Team for an ABL Field Examination

A field examination can be an important part of an asset based lending process. It gives the lender a closer view of the records and controls supporting the assets offered as collateral. Preparing the team before the review can reduce avoidable confusion.

The OCC's ABL handbook describes field audits as part of due diligence and ongoing monitoring. Scope varies by facility. A field exam should not be treated as a substitute for a financial statement audit or as a guarantee of loan approval.

Agree on scope and responsibility

Ask for the examiner's request list, reporting dates, proposed schedule and main contact. Confirm which systems and locations are involved and who can answer questions about accounting, inventory and collections.

Choose one coordinator to maintain the request list. This person should route questions to the right employee and keep track of what has been supplied. The goal is a consistent response process, without hiding operational questions from the people best able to answer them.

Reconcile the records before explaining them

Use one reporting date to compare the receivables aging, inventory records and relevant general ledger balances. Identify timing differences and document how they arise. Preserve the original exports so later versions can be traced.

For an original illustration, suppose the receivables aging totals $1.8 million while the ledger shows $1.75 million. If a $50,000 credit memo was posted in one report after the other's cutoff, the team needs the dated records that explain the difference. Silently editing the aging to make the totals match would obscure the transaction history.

Follow a transaction through its documents

As an internal preparation exercise, select a recent sale and locate its order, evidence of fulfillment, invoice, any subsequent credit and customer payment record. Then repeat the exercise for a disputed or returned item.

For inventory, identify where records describe location, ownership and quantity. Ask operations staff how discrepancies are investigated. Use this rehearsal to find missing explanations, not to create documents that did not exist.

Keep sensitive records in a controlled exchange process and confirm the intended recipients before sharing them.

Turn findings into an operating plan

After the examination, ask the lender to explain any proposed adjustments and their effect on financing availability. Distinguish questions that can be resolved with better documentation from weaknesses that need an operational change.

Assign an owner and date to each agreed action. A recurring reporting problem will not be solved by a one time response during underwriting.

Lirodean can support the organization of a financing package and communication through lender due diligence. Contact us to discuss your ABL request and the preparation needed for your business.

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