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Defending yourself against fraud

What’s the best way to protect a business from fraud?

George Agorastos, sales manager for Arizona Sky Produce, Inc. BB #:269689 in Nogales, AZ, recommends “short credit terms: either cash up front or limited credit, with a 10-day PACA prompt term.”

Roberto Franzone, sales director for Arizona Sky, adds, “references—WE DO CALL THEM” (emphasis his).

Rick Fryman, president and COO of TC Marketing, Inc. BB #:126889 in Napoleon, OH, says the same thing: “We interview references; we contact their financial institutions.”

Intuition often provides a clue. “You just have to get a feel for it,” Fryman stresses. “Sometimes, your gut just tells you not to work with certain companies/individuals.” Furthermore, there should be established protocols for vetting new business partners, and they should be followed without exception.

Certain steps “must be followed before any verbal or written agreement is made,” says Richard Copelan, president and CEO of the Better Business Bureau serving Ventura, Santa Barbara, and San Luis Obispo counties in California.

“First, the business should ask the solicitor to forward as much information as possible in writing or email. All terms and conditions should be clearly defined. Any new vendor should be subjected to a background check. The background check should include thorough research of information on the company and its principals, as previously mentioned.

“At a minimum,” Copelan continues, “general research on Google and at least one other search engine is good and should include viewing links to Better Business Bureau reports, LinkedIn, Glassdoor, and the customer review websites.”

Jennifer Lobb, writing on the website of Nav, a business finance marketplace, agrees. “Perhaps the easiest and most important step in B2B fraud prevention is verifying the information provided by those seeking or requesting your services or products.

“If you’ll be extending terms to another business, or making a large sale without collecting full payment upfront, always make it a point to thoroughly review and vet information provided by the business. From the proper name of the business and the owner/representative to the physical location of the business, make sure everything on the application is accurate, and ask questions if it’s not,” Lobb says.

Another telltale sign is the 1000 percent return. Some bogus coaching and consulting companies “falsely promise amazing results and exclusive market research for people who pay their fees,” reports the Federal Trade Commission (FTC) in its booklet Scams and Your Small Business. “They also may lure you in with low initial costs, only to ask for thousands of dollars later. In reality, the scammers leave budding entrepreneurs without the help they sought and with thousands of dollars of debt.”

Copelan offers this suggestion: when dealing with a company for the first time, pay with a credit card. “Credit cards are a great way to pay for purchases from a new vendor, because even though you run the risk of getting your credit card hacked, there are also some protections in making credit card purchases.

“We’ve seen many instances when a consumer or business has lost money to a scammer and there is simply no way to get the money back unless a credit card was used,” he says. “Illegitimate charges on a credit card can be reversed. A legitimate offer is just as good tomorrow as it is today, so a new business relationship should never be rushed into.”

Other methods include making use of fraud detection tools, such as Experian’s National Fraud Database. Banking and credit transactions should be carefully and regularly monitored, and accounts should never be entrusted to a single person without supervision.

Finally, Mark A. Amendola, a litigation attorney with the firm of Martyn & Associates BB #:145864 in Cleveland, OH, recommends educating employees about the most common scams and types of fraud and how to recognize and prevent them.

This is a multi-part feature adapted from a Credit & Finance article in the May/June 2020 issue of Produce Blueprints.

Richard Smoley, editor for Blue Book Services, Inc., has more than 40 years of experience in magazine writing and editing, and is the former managing editor of California Farmer magazine. A graduate of Harvard and Oxford universities, he has published 11 books.