Magazine article Business Credit

Uninvited Visitors

Magazine article Business Credit

Uninvited Visitors

Article excerpt

Who can ever forget their first kiss? How about the first time you drove the family car? The birth of a child? These events will always remain in our memories. In the minds of you credit professionals, another memory lingers that may not be so pleasant. It can bring tears to your eyes when it resurfaces in your data bank. It's the memory of your first experience with fraud.

Bad Memories

Who can forget? A credit application shows up in your basket. You check the references. The guy pays on discount. His bank gives him glowing references, and he buys an enormous volume from each reference. The outside reports and his accompanying financial statements show prompt payments and financial soundness. There are so many reasons to say "yes".

The order ships on open terms. You don't take notice of the order aging a few days because you sold to a good company. When you finally make the call, you expect a reasonable excuse for this late payment. After all, the bill could have been lost; the guy could have been billed incorrectly; he simply could have misunderstood the due date.

But, the call doesn't go through. The telephone has been disconnected. There is no forwarding number. You try to contact the references for reassurance. Guess what? Their telephones have been disconnected, too. Your salesman is asked to follow up. The only thing he can find is one of Mr. I.M. Fraud's business cards-a vacancy sign on the door of an empty warehouse. Now you can see the light. This was a bustout-a fraud. The guy never intended to pay. Your product has been sold. You are a victim.

Know Your ABCs

This occurrence is all to frequent. The bottom line is that the fraudulent operator is out there, waiting to take advantage of unsuspecting companies. He will wine and dine you by providing all the information a credit professional could ask for. But as credit professionals, it's our job to recognize him before he puts one over on us. Once you know his signature, it's as easy as ABC to pick him out of the crowd.

Over the years, I've noticed the following patterns.

A=Application. The credit application will usually contain unknown or misleading references. Upon calling these references, I've found that answering services usually have been employed to screen most calls. I've also found that most references are in the same geographic area. Unaudited and unsolicited financials usually accompany these applications, and the ratio analyses reflect exceptional results for small start-up companies in highly competitive markets. …

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