After the soaring level of identity frauds in the form of the long and short firm, businesses have been warned to be wary of this scam doing the rounds. As the name implies, long firm scam happens after the development of the business, say after the business has developed a very good credit history and goodwill, on the other hand, short firm fraud happens when the business has only been in operation for a few months. However, the intent of both firms is the same, they are after your cash and their promises are never fulfilled.
Imitating the name and details of a legitimate business, say a dormant company, the conmen will increase their order level, take delivery of the stock and disappear. With a view to opening accounts and
obtaining goods on credit, fraudsters sometimes initiate their tricks at trade shows as well. Seeing that, their intent is only money, they may try to deceive you with their own strategies, be aware!
In order to protect yourself from long and short firm scams, directors of a reputed business advisory firm should tighten up client-vetting procedures, not just clients, but it also includes suppliers, distributors and every third-party people. Fraudsters will set up a business and makeup that they are a bonafide trader who will pay accounts on demand and escape.
Reduce the chances of becoming a victim, by simply putting a few safety measures in place. For example, ask for part payment in advance, make part deliveries, and ask for surety. If the previous payment is on hold, then be cautious of supplying additional orders. Make sure the sales and credit control functions act as a go-between on a regular basis. Having personally attended at the premises, if your business representative is of the opinion that the administrator appears skeptical, have a word with experts and supply only on a cash basis, if at all! Some of the other things to be aware of:
- Always show caution with newly-formed firms
- Get more details about the directors/partners
- Get details of their associated partners in trade and learn more about their credibility.
- Know how long have they been in business
- Get details of their present and past business addresses and the duration they have traded from that particular address.
- Know whether the premise is owned or leased and whether they are occupied, if it's leased, try to find out the lease tenure because crooks occupy their business premises when they are expecting a delivery.
- Always authenticate background knowledge, previous trade and confirm reliability.
- It is imperative to know if the premise is being used mainly as a delivery point.
Report the scam
Fight against these types of scams by reporting it to the local authorities and to the FTC, such that you can help others from falling into a false sense of security. In addition, reporting can get your money back or at least protect yourself from further unfair treatment.