What You Need to Know to Avoid a New Customer Defrauding You

 Credit fraud is a common problem for many businesses in Kenya. A customer will place a large order with no intent to pay for it, and unless your credit department is diligent in their credit analysis of potential customers, they may get away with it.

Here are some red flags that a new customer may be attempting to defraud your company:

1. After placing a relatively small first order and paying for it on time, a new customer may then place a very large order. This should certainly raise a red flag: the customer’s first order, and timely payment, may have been a ploy to gain your company’s trust in order to place the 2nd, larger order.
2. Placing orders over the phone. This may be an attempt to avoid leaving a paper-trail of the order. Always require physical order forms when accepting orders from customers, especially new ones.
3. Using a name that is similar to a well-known, large company. Always be weary when dealing with these types of businesses; they may have chosen a similar name hoping you won’t notice the difference or that you’ll assume they’re affiliated with the respected company.
4. If you find information on a new customer’s credit application that can’t be confirmed, this should also raise a red flag. Research further into the information and note any discrepancies, and of course, always carefully review any new customer’s credit application before extending any credit to them.
5. Check if the customer’s orders are irregular? This can also be a problem with existing customers – a new owner may have purchased your customer’s business to take advantage of their established credit history in order to avoid detection when attempting to defraud you.
6. Take caution on customers that are not based in your location. While not all companies ordering out of town are attempting to defraud their suppliers, it is rare for a fraud intent company to place orders in the locality they’re established in.

If your company has already been affected by fraud, you should escalate the account over to legal or a collection agency for skip tracing and debt collection.