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Get to grips with bad debt and fraud before you fall victim

If you’re an IT distributor or reseller, the things that can unfairly damage your bottom line are fraud and debt. Okay, you probably have insurance policies that relieve the pain, but the costs of these will increase after you make claims, putting even more pressure on your already tight margins.

Identity fraud is probably the most common way of extracting goods from you without paying for them. With high value and small sizes, hardware such as smartphones, tablets, laptops and hard drives can be put in a car boot or van and sold in pub car parks.

We had an instance not so long ago when one of our representatives called on a prospect just after being warned of a new company hijack fraud doing the rounds of the IT community. To the prospect’s horror, his company had recently authorised the supply of a £45k order to the very same company. He stopped the shipment just as it was about to leave the depot.

Sadly, it’s not difficult at the moment to impersonate a company by changing the company and director details in Companies House records. And it’s not hard to ‘borrow’ premises to take delivery of goods, probably by using the same fake credentials. By the time anyone comes looking, the protagonists are long gone.

The free Protected Online Filing (PROOF) service from Companies House will certainly help companies to protect their filings from unauthorised changes but it’s also likely that fraudsters will turn to ‘phishing’ attacks to get hold of login credentials.

Companies House is only one source of business information. Without a credit reference agency (CRA), it’s hard for individual companies to relentlessly make all the checks they’d like on any individual company. Imagine trying to keep on top of court records, corporate reports and media coverage, to name but three. Good CRAs, on the other hand, spend their lives collecting, collating and maintaining information from hundreds of sources in order to arrive at their credit ratings. If this were all they did, then they would still all be equal and the one offering the best deal would prevail.

Some, however, believe in collecting intelligence directly from people in the industries they serve. They speak to the players, major and minor, on a regular basis. They enhance their conventionally collected, checked and consolidated material with live intelligence about changes in companies’ payment habits and other difficulties. This industry-specific and continuously updated intelligence gives their customers a much richer view of their business partners and customers.

You need to ask yourself a number of questions about your existing or prospective CRA: “Does the CRA meet with industry insiders on a regular basis?”; “Does it have an intimate understanding of your industry?”; and “Does it offer you access, not just to live company information, but to a network of your peers?” The first two questions need to be address obliquely in order to get an answer. Either ask your peers for their views on their own CRAs or ask an open question like, “Apart from the traditional methods of information collection, how do you get live and meaningful intelligence about companies in our sector?” Such a question demands answers and you can keep drilling down until you feel confident. Or not.

With regard to networks, whether or not they have one for your sector (it’s better if they do), events such as the quarterly Distributor and Reseller Credit Forum (DRF), run by Forums International, is a great way to meet and develop relationships with other credit professionals, from resellers and distributors in your industry and, if you’re prepared to stay overnight, you can catch up with industry peers over dinner and in the bar the evening beforehand.

Credit Forums exists for you to share knowledge and experiences, to develop and enhance best and new practice in credit and risk management, to improve skill levels and provide access to a network of like-minded professionals and relevant industry experts.

It’s probably becoming clear by now that your fraud and debt challenges can only be tackled through high quality business intelligence. It also has to be real-time and available to you at the drop of a hat. Are you confident that you can call your CRA analyst and get a good answer to, “What do you know about company x?” If you have any qualms, perhaps it’s time to start looking around. Hopefully the suggestions in this article will help point you in the right direction.

Good luck.

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