As a small business with walk-in traffic, you are the perfect target for fraud. It can be difficult to determine which walk-in salesperson is legitimate and which vendors are just out to fraudulently take your money and run. Follow these simple steps to keep your money and business safe from fraud:
1) Get it in writing. Most vendors who walk into a business with a fraudulent scheme don’t have the skills or computer access to type up a formal bid. They will also likely not have any professional brochures or a business card. If they say they don’t have these items right then, but pressure you to take the deal of the century anyway, just smile and tell them you’ll be happy to consider it once they have submitted a formal bid for the project.
2) Ask for proof of insurance. Fraudulent vendors trying to steal your money will probably not carry Workers Compensation and General Liability Insurance. If you accept the bid, you must get a copy of their proof of insurance prior to the vendor starting the job. For additional protection, call the insurance company listed on the document and verify that the insurance is still valid.
3) Check references. Ask for two or three references who can vouch for the vendor. Be careful; a fraudulent vendor may have friends or family willing to pose as fake references. To reduce your risk of fraud, ask specific questions about the project, such as the start date, what the project entailed and the amount the reference paid for the project. If any of these items seem to be off, be cautious.
4) Keep your money. Fraudulent vendors will often ask for money up front to buy material and pay for labor and gas. Stable businesses have enough operating capital to finish the project, with the exception of large, planned expenses that the business owner will purchase directly from the provider, not the vendor.
5) Pay when you are satisfied. Fraudulent vendors are pros at getting small businesses to pay the second the job is done. Buy yourself some time and let the vendor know that each job has to be inspected and then processed for payment. Best practice is to wait at least two or three days to pay, just in case problems with the job surface.
6) Beware of drama. If a vendor wants you to give him work because his wife left, his child is sick, his rent is due, his car is about to be repossessed, someone stole something from him or he has to pay court costs, simply smile and say, “I’m sorry, we don’t have any projects right now.” Don’t give the vendor a tour of your operation, don’t ask for a bid and don’t share any information with the fraudulent vendor at all. He is likely a thief as well as a fraud and could come back later that night and steal from you.