Losses from fraud and theft will cost American businesses billions of dollars this year. This can be especially hard on smaller businesses like yours.
Statistics show more than 50 percent of all new businesses fail within the first two years, partially due to fraud and theft. In your line of work, they're more commonly referred to as skip accounts, or customers who are extended credit and then fail to pay the balance. Unfortunately, there is no set persona for those who skip out on their accounts. They can be regular customers who just can't afford to pay their bill, or others who may be moving out of town and see this as an easy way to bail on their tool debt.
There are also highly organized career criminals who regularly prey on unaware victims. Fraudsters can turn huge profits by opening multiple credit accounts, charging as much as possible, and then selling these brand new items at local swap meets, flea markets or on-line auctions.
Overhead costs from rising gas prices and increased competition take enough toll on your margins without having to worry about a "customer" stealing from your business. So here are some simple steps you can take to help prevent yourself from becoming a victim of fraud:
- Make photocopies of your customers' driver's licenses.
- Take digital photographs of your customers and maintain a photo database. This trick facilitates customer identification for those who may later skip out on debts or write bad checks.
- Run credit checks on customers or companies, or both, before you grant them credit.
- Talk to other distributors in the area to see if they've had trouble with customers making payments. If a customer is new to the area, ask who he used to buy from and contact those former sellers to get a feel for that person's payment history.
- Request and verify several business and personal references for your customers on credit.
Acceptance Of Checks From New Customers
In order to protect yourself from losses due to bad checks, a list of rules has been developed that could have a big impact on your success. Many of these rules apply at the moment you accept your customer's payment. State statutes, local requirements and simple practicality also influence what can or cannot be done to recover losses due to these bad checks or credit fraud.
Many local law enforcement agencies have Bad Check Enforcement Programs that assist businesses to recover losses. If you receive an "insufficient funds" or "account closed" notice, you can access these programs to try to track down your money.
When you accept a check from a new customer, I recommend you follow the steps represented by this acronym—SANDI—which is commonly used by financial institutions and crime prevention specialists.
S—Double Check the Signature
Watch your customer sign the check: Pre-signed checks can be trouble. Then, compare the signature with a valid photo ID that contains the person's signature—a state-issued driver's license is best. Also, write down a driver's license number or Social Security Number. Military IDs are also good IDs to obtain if possible.
A—Compare The Amounts
If the amount written in numerals and the amount written in words don't match, the bank can't accept it. Carefully read both versions of the amount, and if they don't match, don't accept the check.
N—Check The Number
It's a fact that most bad checks are written from new accounts. Be especially wary of checks that seem to come from these accounts: Look for checks with numbers in the low hundreds or low thousands.
D—Today's Date
Post-dated checks cannot be a part of your program; make sure the date on your customer's check matches the date you accept it.
I—Complete ID
It is essential for you to get as much identification as possible. A Social Security Number is preferred, but at a minimum, you MUST require the following data from your customers:
- A name.
- An address (a street address is best).
- A city, state and zip code.
- Phone numbers—for both the home and cell. If a customer says he only uses one, double check with his employer or obtain his closest relative's phone number as well. Also, double check to make certain he doesn't provide the shop's number or another bogus phone number before you leave the shop.
- A copy of a driver's license, Social Security card or military ID.
Cutting corners in the beginning may make it seem like you offer exceptional customer service, but it really just exposes you to more potential for unnecessary losses. Take a close look at your current procedures and verification processes, and consider the implementation of these steps into your standard routine.
With modern technology and the proliferation of identity theft, you need to know with whom you are dealing, but you also do not want to offend a good customer or imply you don't trust them. Many people may not be comfortable enough to give out their Social Security Numbers, so be sure to articulate your application process, which is designed to protect them as well as your business.
If, despite your best efforts, you become a victim of fraud, follow up with a report of the incident to your local law enforcement agency. You may also need to involve a small claims or civil court in order to recover your loss, or you may write it off.
The minimal expenses you may incur with small claims court should help send a clear message to others:You do not tolerate this type of criminal behavior, and you are willing to go the distance to prosecute and recover your stolen funds.
One on-line solution to help prevent these unfortunate circumstances from happening is the skip account prevention service offered by SkipCheck.com. The company works exclusively with mobile tool distribution businesses to help prevent fraud from happening. The site allows users to report skip accounts, locate past skip accounts, search a skip account database, as well as post messages to other participating mobile tool distributors.
SkipCheck.com maintains a real-time database, which is continually updated with current skip account information reported by participating mobile tool distributors. All services are fully compliant with the Fair Credit Reporting Act and allow mobile tool dealers to share skip account information in regard to potential fraud or theft losses. These partnerships help identify and eliminate losses before they become an issue.
William Desy is a state-licensed private investigator, certified fraud examiner, certified fraud specialist and loss prevention consultant. He provides these services to small and medium-sized businesses. More information about SkipCheck can be found at www.skipcheck.com.
