 Commercial crime committed against Canadian companies, churches and non-profit organizations is a growing problem. This two-part article on business fraud concludes a multi-series look at Fraud Prevention Month in Canada. How can your corporation or charitable group avoid being victimized by con artists targetting Canadian businesses? Learn how these scams work, and target-harden your organization by training your staff to stop fraudsters dead in their tracks.
Continued from "Unwanted office supplies, bogus directory advertising and phony website registrars all steal your business dollar"
After the Phony Invoice Arrives
Scam artists spend significant time and energy on collection efforts.
They send as many invoices as it takes to get your money. Invoices
often are stamped "Past Due." In extreme cases, they'll resort to real
or bogus collection agencies and threats of legal action.
An organization that pays for unordered goods or services also may be
targeted for additional scams. This practice is called "reloading." For
example, the seller may send a second shipment of "back ordered"
merchandise and another bill, or bills for service upgrades. Additional
invoices follow as long as you continue to pay. The con artist also may
sell your organization's name to other scam operators, or move to
another bogus operation and target you with a new scheme.
The Brush-Off
When organizations complain that they didn't order the merchandise or
services or that the price is too high, the scam seller reacts in some
predictable ways:
* Bullying. The seller argues if you express any
uncertainty about whether the supplies or services were ever ordered:
"They were ordered. We have a recording of Mr. Jones. If you don't pay,
we can take you to court."
* Negotiating. Here,
the seller agrees to accept a lower price. After all, the goods and
services are so grossly overpriced that almost anything the seller gets
is profit. If you complain about price, the seller may say, "You were
charged what? They must not have given you the discount for ...." The
seller then tries to negotiate "a better deal." Sometimes, the seller
appeals for sympathy: "We really need the business. I'll let you have
it for...."
* Charging for returned merchandise.
The seller claims you can return merchandise if you pay a "restocking
fee." In fact, the fee is often more than the goods are worth.
Similarly, the seller may try to get you to pay shipping charges to
return the items.
Protect Your Organization
You can protect your organization from paying for unordered goods and services. Here's how:
1. Know your rights. If you receive supplies or
bills for services you didn't order, don't pay, and don't return the
unordered merchandise. You may treat unordered merchandise as a gift.
By law, it's illegal for a seller to send you bills or dunning notices
for unordered merchandise, or ask you to return it - even if the seller
offers to pay for shipping. Further, if the seller sends you items that
differ from your order in brand name, type, quantity, size, or quality
- without your prior express agreement - you may treat the
substitutions as unordered merchandise. Unordered services are treated
the same way. However, first consider the possibility that the seller
made an honest mistake.
2. Assign designated buyers and document your purchases. For
each order, the designated employee should issue a purchase order -
electronic or written - to the supplier with an authorized signature
and a purchase order number. The order form should instruct the
supplier to note the purchase order number on the invoice and bill of
lading. The buyer should send a copy of every purchase order to your
accounts payable department. Keep blank order forms secure.
3. Check your documentation before paying bills. When
merchandise arrives, the receiving employee should verify that it
matches the shipper's bill of lading - paying special attention to
brands and quantity - and your purchase order. Refuse merchandise that
doesn't. If everything's in order, the employee should send a copy of
the bill of lading to your accounts payable department. Bills for
services should be reconciled the same way. A supplier should not be
paid unless the invoice has the correct purchase order number and the
information on the invoice, the purchase order and the bill of lading
match.
4. Train your staff. Train everyone in how to
respond to telemarketers. Advise employees who are not authorized to
order supplies and services to say, "I'm not authorized to place
orders. If you want to sell us something, you must speak to
______________ and get a purchase order."
Buy from people you know and trust. Authorized employees should be
skeptical of "cold" or unsolicited calls and feel comfortable saying
"no" to high-pressure sales tactics. Legitimate companies don't
pressure you to make a snap decision. Finally, consider asking new
suppliers to send a catalog first.
Quick Tips: This type of scam preys on new or temporary
employees who don't know who your regular business suppliers are, or
companies that pay bills without confirming the order. Make sure your
company has centralized accounts payable procedures to confirm all
invoices. Train your employees to watch for invoices for products or
services not requested.
This article concludes our multi-part
series during Fraud Prevention Month. I hope all Canadians can avoid
con artists and manipulative fraudsters by becoming better educated
about the multitude of scams, frauds, swindles, tricks, shams and other
quackery perpetrated in Canada. Here's a recap of March's articles:
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