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Commercial Fraud - Manage the Symptoms and Avoid Catching a Cold

Dec 16, 2007
As with all ills, prevention is better than cure as they say, and commercial fraud is no exception. Like most crimes though, commercial fraud is viewed as something that happens to someone else.

Unfortunately, the reality is it is often far closer to home than most people realise and, while ignorance may be bliss, it is also a sure fire way to leave your company wide open to abuse.

Fortunately, there are plenty of telltale signs to look out for that should help to trigger those alarm bells. The key, like any good Ruth Rendell murder mystery, is recognising these early and taking action.

It's important to remember that most fraud is committed because your suppliers are under financial pressure, so if you have a group of key suppliers, it is wise to review their trading status on a regular basis; quality issues, late deliveries and CCJ's could mean cash flow problems, while changes in key personnel or different professional advisers could be a sign of asset-strippers moving in.

It is now possible to carry out in-depth credit checks on individuals and businesses, including trading histories and links to previous businesses. Digging a little deeper into the wealth of information that is available could reveal fraudulent connections before you engage in a trading relationship with them.

Look out too for sales of stolen property or double retention of title from suppliers down the line as these could pose a very real threat, as are substandard goods or parallel and grey imports.

Other indicators of potential fraud include constant verification of a debt from a third party, being pushed for early payment; delays in filing accounts or a change of year-end. And if you get a big payment from a company you don't recognise, think twice about banking it, as the signatories may well be using it to get a legal cheque reissued by you to wash out or cover up their fraudulent invoicing. Finally, if a supplier asks you to verify a balance that doesn't exist, beware, the end may be nigh for them.

Don't get too downhearted. Commercial fraud is still the exception rather than the rule but vigilance is the key. It may seem a drag but investing time researching the credentials of your trading partners, staying alert, and looking out for signs of trouble, could save you a lot of heartache and bother in the long run!
About the Author
John Mce writes for Hilton-Baird who offer free independent business financeadvice and has helped over 2,000 UK businesses raise extra capital.
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