Detecting Fraud: Basic Checks You Should Do Before Extending Business Credit

CMA offers many resources to help your company in detecting fraud.

With the recent rise in bankruptcies, it is more important than ever before to have a handle on business to business (B2B) risk management in order to be detecting fraud on your potential (and existing) customers. More and more fraudulent companies are emerging, as business lines are being blurred from start-up manufacturers operating from a garage, e-commerce “e-tailers” businesses that may or may not be legitimate. Because of this, it’s tough for credit managers and risk management professionals to tell the good companies from the “bad” ones.

So what’s a credit professional to do? Here are several activities you can do before you decide to extend B2B credit.

  • Validate their address. With Google maps, you can tell more about the location of a business than ever before. Does their address come up on Google maps? Does the satellite view (photo) show that they’re a residence or a business? Are they located in an area where it would be impossible to do business (i.e., a forest)? Answering these location questions ahead of time could alert you to red flags of fraud before you take them on as a client.
  • Make them fill out a credit application and check and confirm their credit references. When you call their list of references, are they companies who’ve done businesses with them recently? Are the phone numbers of their references valid? Are the numbers for all companies mobile phone numbers, leading to the conclusion that these are individual numbers not businesses? Are the references related to the potential client? If any of this data they provide sounds fishy, it could be another red flag. If you need help with your credit application, CMA has a number of resources, including webinar archives that you can use. The credit application is one of your best ways of detecting fraud.
  • Visit the customer’s website. There are many red flags that can be gained by visiting the site, including poor design, phone numbers not matching those given in the references, broken image links and other items that can cause you to question the validity of the business.
  • Utilize your Industry Credit Groups. Utilize the knowledge of your fellow industry credit managers by bringing up any suspicious companies during your Industry Credit Group meetings. As we see repeatedly in Credit Group meetings, fraudulent companies tend to go to multiple companies in a particular industry until they get what they need. Additionally, anscers RFIs and alerts can help you on an as-needed basis, and CMA members get unlimited access to these alerts and RFIs.
  • Use credit reports and decisioning data to help. CMA provides access to reports from the major reporting agencies and also offers the CMA Trade Credit Report, which aggregates information about small to medium sized businesses that is not typically provided to the major credit reporting bureaus. And better yet, CMA members who contribute their A/R information receive 10 free CMA reports per year.
  • If you’re in the construction industry, consider using THE Construction Credit Report, providing access to public record data; title search (with live links to actual documents) on mechanics lien filing/release; notice of completion; notice of Lis Pendens (action/discharge); tax lien or judgment; active trade lines; credit analysis and score; collection agency and factoring company activities; and links to state Registrars Of Contractors. For more information on this unique report, click here.

If you consider doing these tasks before deciding to extend credit, you’ll help eliminate obvious fraud from occurring, protecting your company’s most valuable resource, its accounts receivable.

What processes does your company have in place to help in detecting fraud? We’d love to get your input!

Does your credit department need a Tune-up? By Michael W. Fenner, CBA

As August winds down and your teams are returning from their summer vacations hopefully, things are returning back to normal. This may now give you the opportunity to review the services you currently use in your credit departments today.

As our vehicles need tune-ups so do our credit departments from time to time. As an example, are you taking advantage of your industry credit group (ICG)? Is there not a specific ICG for you and you would like to start one? Is your current collection agency “getting it done for you”? Do you have the need to file preliminary notices in your industry? Would you like to get started and or continue on with your professional credit certification? How about adding an additional credit report to your credit approval process? What can the business insolvency service do for you? Do you even know CMA offers payment services and deduction management? You may be looking for an association to do it all for you, replace an existing service and or supplement the current services you use today. Either way Credit Management Association is here for YOU!

Below is a quick look at what Credit Management Association has to offer:

  • Industry Credit Groups – With 60 current groups’ network and share factual information timely and get responses promptly with other group members so you can make educated decisions with your new accounts and or your current A/R.
  • Business Insolvency – Let CMA help your customers with other alternatives other than filing for bankruptcy with less publicity, cost and time.
  • AGA Collections – AGA offers nationwide service, reasonable rates, excellent communication and they collect the money too.
  • Business Credit Reports – They offer the AnscersX commercial report, NACM national trade report, as well as DNBi, Equifax and Experian. Additionally, they offer consumer reports and international reports as well.
  • Construction Forms Filing – Accurate and cost effective construction forms filing in all 50 states.
  • Education (Professional Development) – quite a few options from the CreditScape fall summit, online courses, live and recorded webinars, and the ability to get your Professional Credit Certification all in one place.
  • Payment Services – Through United TranzActions…check guarantee, ACH processing (including Canada), online bill pay, credit card merchant services, virtual lockbox and more.
  • Deduction Management – With IBA Solutions expertise they will be able to assist you with your deduction and A/R management.

Add the Anscers website to stay on top of all of your services and now have it all. You can’t go wrong. Please take a few minutes to logon to the CMA website to see all that is available to you http://creditmanagementassociation.org/ look under the services tab to get details for the bullet points above.

Please remember we need you to support “your” credit association when you can and as always “thank you” for your support and I encourage you to send in any ideas to improve your credit association. Let me know your thoughts. I’d love to hear your feedback.

Michael W. Fenner, CBA, is the Credit Management Association Chairman and Regional Credit Manager for Beacon Roofing Supply. He can be reached at 714-321-8187, or mfenner@becn.com.

Years of Credit and Collection Knowledge is a Phone Call Away

Did you know that the CMA staff has dozens of years of credit and collections knowledge that is available for free to members? If you haven’t called CMA lately, you should call the association’s experts to ask your questions about the construction services industry and construction forms filing (702-259-2622); credit reports and all of the options you have that are available by a non-brand-specific salesperson (818-972-5300); insolvency services which can help distressed companies with out-of-court reorganization and liquidation efforts (818-972-5319), and Industry Credit Groups, led by Larry Convoy (818-972-5323).

Additionally, CMA’s Business Development Staff can help address many of your other needs. We invite you to call your reps  (818-972-5300).

For more information on how Credit Management Association can help fulfill your company’s credit and collection needs, we invite you to call us.