Preventing Collections and Fraud Before They Happen

Delinquent credit accounts are one of the biggest drags on the cashflow of a small business. The situation gets even worse when those accounts are the result of a fraud that has been perpetrated against your business.

In order to protect your business, you want to make sure that you are doing everything in your power to prevent any type of fraud well before it happens. You also want to be on the lookout for any customers that might be starting to fall behind on their accounts prior to the problem coming to the surface.

Here are some great tips for preventing collection and fraud before they happen:

Avoid Taking Checks

One of the easiest ways to pull off a fraudulent transaction is by writing a bad check. Accepting checks as a form of payment leaves your business open to a long list of possible exposures. In order to best protect yourself, you should avoid taking checks altogether.

Have Standard Procedures

Another popular tactic of criminals creating fraudulent credit accounts is to request higher than reasonable credit limits. This can be avoided by having standard procedures in place to handle both the amount of credit you offer, and the repayment terms available.

Pull Credit Reports and Verify Identification 

Fraudulent credit transactions can also be conducted using fake identities. You should make a habit of pulling credit reports and verifying identification for anyone you are considering extending credit to.

Make sure they have a long history of upstanding credit. It is much easier to collect past due accounts when you are sure that the identity and credit history are accurate.

Check References

While just about everyone asks for references, actually calling those references is not nearly as common. Be the exception here. Check up on the people you are about to extend credit to, because a little extra effort now might save you a ton of aggravation down the road.

Invoice Regularly

There are also times when honest credit accounts become fraudulent after months or even years of normal behavior. In order to best protect yourself in these instances, make sure you are invoicing regularly and receiving appropriate payments.

Involve Your Accounting Department

Your accounting department can be a huge help in identifying possible fraudulent accounts faster than almost any other area of your company. Keep them involved in the process of screening and monitoring potential problems and reward them for the red flags they raise.

Reconcile Accounts Regularly

You want to know about things like bad checks and failed payment transfers as soon as possible. That means that you should be having someone reconcile your bank accounts as often as possible, preferably daily. Time is money, and every day you waste not knowing about a problem is more time for the criminals to get away.

Have a Collection Agency to Consult With

Establishing a working arrangement with a debt collectors agency is a great way to make sure that you have someone you can consult about a situation anytime you need some advice. This agency can be an indispensable ally if you find yourself dealing with a fraudulent transaction.

If you are willing to put in a little extra effort on the front end, you can prevent a great deal of these types of situations before they happen.

By |2017-05-10T13:26:10+00:00April 8th, 2015|Blog|0 Comments

About the Author:

Graduated from University of Utah - business degree 1990. Served in US Army as an interrogator / linguist, then as a tactical intelligence officer - Military Intelligence 1986-1990. Managed Western US sales operations for NY based collection agency 1990-1992. Founded Direct Recovery Associates, Inc. 1992-present