Fraud is always with us – and hard times increase the temptation for customers, suppliers or staff to steal – but small business tend to think they are too small, and know their staff, their customers, and their suppliers too well to fall victim to it.
Sadly, nobody knows anybody that well - and it’s small businesses rather than large ones that tend to attract potential predators, because large companies are hyper-aware of their vulnerability to fraud and theft, run very tight systems, have prospective employees professionally vetted, and keep a close eye on the activities of the employees they’ve already got.
Things to be aware of:
Some suppliers will under-deliver goods and over-charge for delivery if they think they can get away with it. Deliveries need to be checked carefully BEFORE the Delivery Note is signed.
Some customers will claim under-deliveries of stock when the delivery was actually correct. Delivery personnel should always be sure to get signed Delivery Notes and, as signatures are often illegible, Delivery Notes should demand that the person who signs the Note add his or her name in capitals together with his or her position with the Company.
Some customers will simply disappear without paying - but they will only be able to do so if the supplier hasn’t done it’s homework before agreeing to give credit and delivering goods. Fraudsters quite often set up off-the-shelf limited companies with the intention of using those companies to obtain goods for which they have no intention of paying. Addresses are often empty factory premises – and there are, alas, plenty of those to chose from. Neighbouring businesses have no reason to question ‘new arrivals’ – particularly if the place looks busy and occupied and goods are going in and, of course, going out again. Many newly set up off-the-shelf limited companies are quite genuine – but that doesn’t necessarily mean that they are a good credit risk. Cash with order is the only safe way to deal with companies that have no trading history – and you should NEVER give credit to anyone who can only give you a mobile telephone number. We’ve all become so used to using mobile telephone numbers that we’ve stopped thinking about what they really are – mobile and (ultimately) disposable. Don’t think that people haven’t fallen foul of that. They have.
Employees tend to steal goods or cash. There should be no opportunity for anyone to do either, but a determined thief can always find a loophole somewhere. Two thirds of all employee fraud is motivated by debt or gambling problems, but greed or need are obviously also factors. Review your bonus structure and pay attention to staff morale: people tend to rationalise that their performance is worth more than they’re getting, or that their job is so unsatisfactory that they’re entitled to get something extra out of it. Investigate departments that have a high staff turnover: it’s easier for an employee to look for another job than to blow the whistle on fellow employees whom they suspect of stealing. Monitor the car park, and look carefully at the ‘toys’ people have. It’s stupid to flaunt one’s ill-gotten gains, but people do it all the time. Consider whether the salary you are paying would really support the Blackberry, the Rolex, the vehicle in the car park, or the exotic holidays.
Pay attention to ‘whistle-blowing’ letters; always take them seriously, and look carefully at the claims made. One percent of the time they’re spiteful rubbish. Ninety-nine times out of a hundred they’re a red flag that indicates that something is seriously wrong somewhere and that it’s time to start turning over stones and looking at what’s going on underneath them. It’s particularly important at the moment NOT to ignore whistle-blowing letters. They tend to be rare when times are bad because people are afraid of rocking the boat and are therefore more willing to turn a blind eye until they can distance themselves from the problem by getting another job – which is why, of course, you should be wary of high staff turnover in particular areas.
Credit management isn’t just about getting in money from customers. Fraud and theft by customers, suppliers and staff is on the increase. It’s unpleasant to have to keep a watchful eye on everyone around you and pay attention (as you should!) to what your employees obviously do or do not have. It’s unpleasant to have to monitor the relationship that exists between your sales team and your customers and take careful note of year end sales team behaviour, and post year end issue of credit notes - but you should.
Professional fraudsters are looking for a quick in and out. They’re easy to avoid if you’re careful, and they’re a fast one-time loss if you’re not. Customers, suppliers and staff work under the ‘sight-line’. They aren’t easy to spot unless you’re actively looking – and they can bleed you slowly to death if you’re not looking. Begin looking.
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