Fisker had a tumultuous start to 2023 as it struggled to keep up with the demand for its electric vehicles. As the company scaled up deliveries, there was a temporary loss of track of millions of dollars in customer payments. This led to an internal audit in December, which took months to complete, according to sources.
The EV startup eventually located most of the payments or requested new ones from customers whose payment methods had expired. Despite this, the chaos caused a distraction for employees and took resources away from Fisker’s sales team. This happened during a critical time when the company was attempting to restructure its business model in order to save itself.
Sources familiar with the internal payment crisis revealed that Fisker had trouble keeping track of transactions, including down payments and in some cases, the full price of the vehicles. This was due to lax internal procedures for monitoring payments. In some instances, the company even delivered vehicles without collecting any form of payment at all.
“Checks were not cashed in a timely manner or just lost altogether,” one source told TechCrunch. “We were often scrambling to find checks, credit card receipts, and any wired funds a few months after a vehicle was sold.”
Along with the internal audit, the outside auditor PwC was also requesting more documentation on Fisker’s vehicle sales as part of putting together the company’s annual financial report. However, Fisker was 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 source said.
Sources requested anonymity as they were not authorized to speak to the press about internal matters. This confusion within the company hindered its ability to accurately report its revenue, which is one of the reasons Fisker has yet to file its annual financial report for 2023.
While the company was able to track down the payments, it may not be enough to save the struggling startup. The pause in production of its only vehicle, the Ocean SUV, and numerous quality problems have resulted in Fisker alerting investors that it may not be able to continue operations without additional funding.
This week, the New York Stock Exchange suspended trading of Fisker shares and delisted the company, making it less likely to raise money to stay afloat. To make matters worse, the company reduced prices, up to 39%, on its remaining inventory.
Representatives for Fisker and PwC did not respond to requests for comment.
Red flags raised
Fisker has been warning investors since last year about issues with its internal accounting practices. In November, the company reported multiple “material weaknesses” in its internal financial reporting.
The company initially stated that 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.”
This announcement came after 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 stated at the time.
In the same filing, Fisker disclosed 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 acknowledge what sources told TechCrunch: that the company lacked the people and processes to properly compile its books.
Fisker’s inadequate internal procedures have caused issues beyond keeping track of payments. According to sources, the company has also struggled to make required payments to various state DMVs when setting up new customers.
This has resulted in dozens of customers receiving temporary license plates for months and constantly having to reach out to the company for new ones as they keep expiring. The same is true for some customers who have been waiting for title and registration.
In February, Fisker hired contractors to help resolve the title and registration problems, but the backlog was significant. One source revealed that paperwork from orders as far back as August 2023 needed to be amended.
“Prior to spinning up the wheels of the sales machine, there was no infrastructure in place,” one source said.
