What was meant to be a modernisation drive through the introduction of a new IT system turned into a financial nightmare. The bankruptcy report of Carpetright Netherlands reveals that the implementation of this system not only led to substantial accounting errors, but also caused the financial top management to lose control, with disastrous consequences.
The new computer system was intended to better align sales registration, invoicing, and stock management. However, it soon became clear that major discrepancies had emerged between what was recorded in the system and what was actually invoiced. In some cases, transactions were double-counted, making sales appear higher on paper than they were in reality.
© CarpetrightThe Carpetright store on Haarlemmerweg in Amsterdam is one of 75 shops that had to close.
Yet the reports went into the books as if there was a recovery. The financial management initially assumed that the problems were temporary. Payments to tax authorities, among others, were therefore postponed; a decision that proved disastrous in hindsight. The erroneous figures gave a false picture of recovery, wasting crucial time to save the company.
When the extent of the errors finally became apparent, the damage was incalculable. By 2023, Carpetright was already suffering a loss of €17.5m, followed by a negative result of €10.5m on turnover of around €70m. Hopes of reorganisation through WHOA proceedings proved futile: the company was simply not viable enough.
Lost control of core processes
The Carpetright drama shows how an IT transition can disrupt an entire organisation when financial control is lacking. For too long, the CFO and his team relied on faulty data and missed signals that pointed to deeper system failures. That is precisely where it went wrong: financial reporting should have raised the alarm earlier.
In projects like this, the role of the CFO is crucial. A new IT system directly affects the core of all business processes, from sales to cash flow. Without thorough testing and a clear contingency procedure, one technical error can grow into a strategic risk. Reliable data and transparent reporting are essential to prevent the figures from painting too rosy a picture.
Fatal domino effect
The decision to delay payments in the expectation that the software problems were temporary turned out to be the tipping point in hindsight. What started as a technical problem grew into a financial crisis. In such situations, a CFO must not only rely on recovery, but also work out scenarios in case the errors turn out to be structural.
As soon as turnover figures suddenly deviate or transactions no longer track, immediate action must be taken. Dashboards, internal controls and independent validations should be able to spot deviations before they cause irreparable damage. At Carpetright, this did not happen or happened too late, causing losses to pile up.
Strategic consistency also played a role: the IT system turned out not to be well aligned with the organisation's scale and structure. What was meant to simplify processes was actually making them more complex. The technology did not serve the strategy, but undermined it.
Hard lesson for the retail world
The bankruptcy of Carpetright Netherlands is thus not only a story of failed digitalisation, but also of poor financial vigilance. At a time when IT and finance are inextricably linked, a misjudgement at the top can be fatal.
Sources: Carpetright bankruptcy report / CFO.co.uk
