How to Avoid Being Swindled

Have you ever been taken to the cleaners by a crook? If you’ve moved beyond your business training wheels, the answer is most likely “yes.” Shysters, charlatans, or whatever you might call them that I can’t in this blog, they’re flat-out criminals.

Recently, we acquired a new customer. It was a nice big project and the future looked bright. They passed all the proper credit checks with flying colors and they seemed like good people. But when the client addressed a check to us to cover their postage, we faced a dilemma.

We would have (and in retrospect, should have) stuck to our policy that all postage checks be written directly to the USPS, but the check came just one day before the mail date. We didn’t want to delay the mail drop for this new customer, especially since when we already had the money in our hands. So, we made an exception to our rule.

We deposited their check and wrote another, on our own account, to the USPS to cover the postage. We lived to regret that decision a week later when the client’s check bounced.

That’s when the alarm went off—we had been taken! We learned we had no chance at collecting the postage money, or the money for the print job. These scumbags have apparently played this game time and again on many of us. (We found that out later through our friends at the Great Lakes Graphics Association).

The good criminals are good—they spend their lives honing their skills. They know how to falsify references, make you feel good about working hard to win the business, and they know how to disappear the moment you realize their snake oil. They don’t think like you and I, and they don’t play by the same rules. They enjoy their ill-gotten gains on a daily basis. They enjoy today because they’re not in jail—they’ll deal with their problems of tomorrow when tomorrow turns into today.

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A third-generation printer, Dustin LeFebvre delivers his vision for Specialty Print Communications as EVP, Marketing through strategy, planning and new product development. With a rich background ranging from sales and marketing to operations, quality control and procurement, Dustin takes a wide-angle approach to SPC

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Comments
  • Christopher

    Great Article Dustin! Dealt with many of them over the years. Unfortunately, this industry breeds them quite effectively. Maybe we should create on online database of these people/criminals so we can check before on-boarding a new client.

    As you mentioned, trust the golden gut. It’s amazing how often it’s dead on!
    Chris

  • Lisa Bickford

    I would add to the list of warning signs: People with an overly energetic spirit – I can’t explain it exactly, but over the years I have found that people who are SO EXCITED often are covering up some sort of short-coming – often in the bank department. As you said, it’s just a gut feeling.

    @Christopher – sign me up when you start that database!

  • Joe Rego

    One way to root out the scam artists is to require a significant down payment *with order* on the first job, not just the postage. Also, you can call the bank that their check is drawn on and inquire if there are sufficient funds in their account. If their bank won’t divulge this information (although they should), ask the branch manager at your bank to inquire for you.

  • Shirley A Burns

    Send a follow-up mailing to the same mailing list letting them know what a corrupt and untrustworthy company they are, apologizing for having supported them, and encouraging them to go to BBB with any concerns.

    [I know you wouldn’t do that, but thought it might be a bit cathartic to consider it :-)]

  • Shig

    Dustin,
    From my experience, there are limits to what you can do to really clarify by making questions to your new customers. Sometimes, your customers will not show you all the information (they will say that is because you are also their new supplier) but I am sure you would have to make a tough decision to start the biz or not, taking into account your rival competitors.
    I don’t know about your industry norm and the alternative payment conditions in the US, but let me give you my opinion.

    First of all, regarding payment terms.
    One option is not to take credit risk for first time customers. All over the world, everybody knows that checks in any country bears the credit risk of getting bounced. For first time customers and unless you well know their names and financials like Dow Chemical, have them pay you in advance payment and I mean, through bank transfer or in cash. And if you are in fact taking that credit risk, your biz volume (credit exposure) should be kept low for new customers. Or as someone has mentioned, you can ask them to pay some in down payment or as follows; For example, depending on case by case, 20% upon concluding purchase order, 20% upon commencing your work, the rest before making delivery. Or get a bank reference or bank guarantee.

    Secondly, regarding checking the credit risk profile.
    First thing and most importantly, have you visited the customer or did somebody check customer’s domicile and operation on behalf of you? How’s customer’s business and operation doing? You will notice many things just from doing this. In many fraud cases, customers are simply paper companies with sometimes no registration.

    Regarding checking new customers by sources, company registration including names of directors, shareholders, articles of association, year of establishment, recent 3 periods of financials, past litigations, group companies, bank records, mortgage and collateral situation, current suppliers and customers, etc shall be checked. Just examples.

    Some may be checked in public sources, while you may want to contact your local credit agency or contact Duns and Bradstreet to see what they can do for you.

    But my recommendation is for you to visit and see for yourself. Even a thin, credit agency report should cost you USD 100-200. And this is only supplementary information. US may be vast, but if it is going to be your long-term customer, you should put time and cost into it.(continuing)

  • Shig

    Dear Dustin,
    From my experience, there are limits to what you can do by making questions to your new customers. Sometimes, your customers will not show you all the information (they will say that is because you are also their new supplier) but I am sure you would have to make a tough decision to start the biz or not, taking into account your rival competitors.
    I don’t know about your industry norm and the alternative payment conditions in the US, but let me give you my opinion.

    First of all, regarding payment terms.
    One option is not to take credit risk for first time customers. All over the world, everybody knows that checks in any country bear the credit risk of getting bounced. For first time customers and unless you well know their names and financials like Dow Chemical, have them pay you in advance payment and I mean, through bank funds transfer or in cash. And if you are in fact taking that credit risk, your biz volume (credit exposure) should be kept low for new customers. Or as someone has mentioned, you can ask them to pay some in down payment or as follows; For example, depending on case by case, 20% upon concluding purchase order, 20% upon commencing your work, the rest before making delivery. Or get a bank reference or bank guarantee.

    Secondly, regarding checking the credit risk profile.
    First thing and most importantly, have you visited the customer or did somebody check customer’s domicile and operation on behalf of you? How’s customer’s business and operation doing? You will notice most just from doing this. In many fraud cases, customers are simply paper companies with sometimes no registration.

    Regarding checking new customers by sources, company registration including names of directors, shareholders, articles of association, year of establishment, recent 3 periods of financials, past litigations, group companies, bank records, mortgage and collateral situation, current suppliers and customers, etc shall be checked.

    Some may be checked in public sources, while you may want to contact your local credit agency or contact Duns and Bradstreet to see what they can offer you.

  • Shig

    (continued)
    But my recommendation is for you to visit and see for yourself. Even a thin, credit agency report should cost you USD 100-200. And this is only supplementary information. US may be vast, but especially if it is going to be your long-term customer, you should put time and cost into it.

    Just for your reference, I don’t recommend any business no matter where around the world unless business PIC visits customer face to face. If business PIC whine visiting is too costly compared with profit from that business, then I ask to simply quit it from the start. Exception may be small amount L/C payment terms (a payment term guaranteed by bank).
    Also, know your contract risk as well. If you are asking some vendor to do part of your job, you will end up off-taking and not being able to sell.

    Even in a developed country like the US, as you mention there are limits to what you can do AFTER fraud or bankrupt has occurred. Thus, it is necessary to concentrate BEFORE making credit exposure to your customer and sending orders to your vendors (suppliers).

    Please remember that in credit risk management, facts and what you see must be weighed more than spoken words.

    However, if your business is so profitable and if each credit exposure is so spread and small that you are able to neglect them, then that’s different story…

    Hope the above helps your concern.