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Protecting Your Business Credit Lines

Jun 24, 2008
If you run a small business chances are you've established some credit lines with local vendors. Places such as hardware stores, printing shops, and gas stations. And if you have a business that has employees you may be in a position of having to trust other people to use those credit lines on your behalf.

Often businesses have employees such as delivery drivers, or runners. People that are trusted to pick up tools or materials that are needed to help produce the products that your business manufacturers. This is especially true if you own a carpentry shop, plumbing company or other such business. You often need things but you're the boss. You don't have the time to be running out to the store every time someone in your shop needs something.

So what do you do? You send someone or you ask your delivery driver to make a stop. And unless you want to give that person a check or cash every time you need something you'll have already established some sort of credit line. The problem occurs because of the fact that these employees eventually become known at the places they stop. You're not going to receive a call from the hardware store every time they stop there for something.

Typically the business you establish the credit line with will have the person picking up the item sign an invoice to acknowledge the purchase for their records and then give a second copy to the customer. If that customer is your driver then it becomes their responsibility to give you that copy so you can pay the bill when it comes due. Over time as the person doing your shopping becomes known to your suppliers the opportunity for abuse manifests itself.

Often what happens is a purchase is made. One you did not authorize. But the supplier has no way of knowing that. They give your employee what they ask for and an invoice. The invoice will find its way into the trash. Eventually you will receive a statement that will include that missing invoice. You might wonder about but you'll probably assume it was misplaced. So you call the vendor and ask for another copy.

This is your chance to check and see if something is going on that shouldn't be. Check the invoice for unusual information. Things like the date the purchase was made and if included on the invoice what time did they make the purchase? Was the purchase made during normal business hours or was it after. Often such fraudulent purchases are made on a weekend. People that abuse your trust many times will try to do things after hours and tell the vendor about having to work late.

To try and avoid the problem to begin with there are steps you can take. Most vendors keep a card of authorized signors from your company. That way if you spot a signature you do not recognize the vendor can be held responsible for allowing the purchase. It will still be your responsibility to handle the employee and their conduct. You can also make it clear to your employees that you do check all the statements and invoices from your vendors. This shouldn't be done in a threatening way just as a statement of fact so that they will be discouraged from doing something they shouldn't. Also you can ask the vendor to send copies of all invoices to you so that you can verify all purchases.

Most employees would never consider abusing the trust given them by an employer but there are always some that feel they can get one over on the boss. Or they may feel slighted by something you did. Such as not giving them a raise they believe they deserve. The point of course is that it does happen but it can be prevented before it happens. And if an employee does go so far as to commit such an act they can be found out about.
About the Author
Cash Miller is an experienced entrepreneur and speaker who has spent over a decade as a small business owner. His years of experience in small business cover a variety of topics. If you are looking for more small business help please check out http://www.smallbusinessdelivered.com
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