Xmas Cons - Avoiding Fraudulent B2B Trading

Many businesses involved in the retail and supply sectors find the run up to the festive period can be the businest and potentially most profitable time of the year.  But it can also be one of the most difficult times of year to keep a healthy cash flow as it's not only legitimate businesses that are gearing up for a bumper holiday period; fraudsters are also busily laying the foundations for a variety of Christmas cons that could leave many already struggling companies out in the cold come January.

It isn’t just retailers that need to be vigilant

When people think of business fraud, they tend to focus on retail businesses who deal with the general public, but B2B suppliers also need to remain vigilant, especially those who supply high value, portable goods such as office supplies, consumer electronics, IT equipment and even meat & poultry suppliers!

Fraudulent business to business transactions are steadily on the rise as fraudsters realise that operating via a limited company offers another layer of defence against police investigations and any recovery action by victims.

Prevention is better than a cure

As with many of the idioms you no doubt heard in childhood, this simple advice is vitally important in fraud prevention in a business.  Ensuring your credit control and sales staff are knowledgeable about the dangers of risky trading is paramount to avoid becoming the victim of business fraud this festive season.

Unfortunately it’s impossible to provide a full list of the ways a fraudster may target your business, but below are a few examples of suspicious trading that should set alarm bells ringing. Remember as the countdown below gets closer to Xmas, the more scammers will be looking to take urgent delivery of the goods...

5 Classic Warning Signs

  1. Credit applications from newly incorporated companies

If a company has only recently been formed and its credit report shows little or nothing in the way of financial information, consider denying or at least severely limiting credit to a nominal level.

  1. Mythical References

As a follow-on to point one above, always independently check any supplied credit references very carefully.  Scammers often use the names and addresses of established companies to provide the illusion of respectability.  Avoid any reference that is only accompanied by mobile numbers and disposable email addresses (such as Hotmail, Yahoo! etc).

Don’t rely on supplied contact details; research each referee individually and always seek to confirm legitimacy.  Does the email address match the website? Is the telephone answered in a professional way? Is the named referee at the company in a management position?

  1. Requests for large raises in credit limits

A classic scammers' ploy is to open a low-limit credit account in the months leading up to the Christmas period and order small quantities of goods that are paid for on time.  The scammer then asks for the limit to be radically increased to supply an unusually large order.

Think carefully about unilaterally increasing credit limits in the months before Christmas, especially if the customer in question has a low or zero credit rating.

  1. Sales to companies registered in tax havens

Whilst many SMEs now supply goods across the world, businesses should be very wary of enquiries from companies based in known tax havens such as the Seychelles, the Channel Isles and the Cayman Islands.  Whilst some businesses will have (semi) legitimate reasons for operating out of these countries, the lack of financial oversight makes them very attractive to fraudsters.

It is now possible to incorporate a Limited company in one of these countries online for as little as £200.  As such any application from a company registered in one of these countries should be treated with extreme suspicion.

  1. Credit Applications from “charities” or Community Interest Companies

Christmas is a time for giving and many charities and CICs will legitimately be seeking support from local and national businesses.  Scammers know this and will often purport to represent a new charitable or community interest group, often with the promise of funding being supplied at a point in the near future.

Do not be fooled by charitable and philanthropic “aims”; ensure that the business making the application is legitimate and credit worthy.  Under no circumstances should goods be supplied on the basis of future funding, no matter how legitimate the promissory note looks.

Won’t get fooled again

We regularly talk to business owners who have learnt about the dangers of fraudulent trading the hard way, through losing considerable sums to scammers who target small businesses.

Make sure your company remains vigilant for suspected scams in the run-up to Christmas and if you have any doubts over the validity of an existing or potential new customer contact us on 01772 454505 for a free, no obligation, customer health check. Or if you are new to business click here to find out how you can get 99 Experian credit reports for just £99.

Over 150 Years Of Industry Experience

Our modest but highly skilled team has a combined total of over 150 years of experience in commercial credit management and B2B debt collection. From independent IT contractors to major film and TV publishers, Safe Collections has the knowledge and experience you need to get paid quickly and cost effectively.

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