I don’t know why, but the human mind is naturally drawn to the idea that ‘it won’t happen to me‘.

Car accidents are someone else’s problem, someone else will get the disease and we convince ourselves that a plane will never crash whilst we are onboard. As a result, we take cheap insurance (if any) and hope for the best. And so it is with business fraud. Companies continue to assume that their business is secure and that their experience in trading will allow them to recognise a potential crime before it happens.

But this is something that tricksters and conmen the world over work with, more so than ever before. As our world grows smaller, we are more likely to do business with people we have never met, or do business in places where honesty is not ranked as highly as in societies like our own.

Whilst we often think of online or business fraud as someone scamming money from a personal bank account by hacking into the family Xbox connection, this is a common misconception. More often than you think, vendors and suppliers are the ones who steal.

The Kroll Annual Global Fraud Report states that ‘vendor or procurement fraud accounted for 23 percent’ of all business theft, and that suppliers were involved in 43 per cent of cases where multi-perpetrator fraud had been reported.

Whilst firms based in more stable economies might think that this is a only problem for emerging markets, the statistics prove that we must all take great care in who we trade with. The Kroll report has also outlined that ‘Even though the overall prevalence of fraud has decreased in Europe, the percentage of companies affected by at least one fraud, is 63%’.

So how can you avoid being a victim? Firstly, you need to be aware of how it happens, so let’s take a look at a list of the most common B2B fraud methods.

Fake invoice scam.

This tactic plays on the idea of an “assumed sale”, where an invoice or bill is sent requesting payment to an unsuspecting target, possibly for a very small amount.

The invoice appears credible, with a professional layout and on high-quality paper, and being of such low value that it may initially be paid without question.

Payment of the invoice places the bogus company on a vendors’ list, meaning that later larger invoices are more likely to be paid before the fraud is noticed. This scam often impersonates a legitimate business, and at a quick glance, the paper you receive can often be mistaken for a bill for legitimate purchases, making detection even harder.

Sub-standard produce scam.

Promised a certain grade of product, you sign a deal to purchase, but it is only when the product is delivered that you realise your purchase is sub-standard. By the time you find out, you are in a weakened bargaining position and time pressures mean you can no longer back out of the deal.

Directory scam.

You agree to pay to have your firm promoted in a business directory, only to find out that the directory does not exist or that it has such a poor readership that you feel that you have been scammed.

Office supply scam.

This scam involves one or more unsolicited phone calls to a targeted business. The goal of the first call is to gather information on your company, such as your name, names of your colleagues, a corporate mailing address or type of office equipment used. A second or third phone call is placed to a colleague and the caller uses the acquired information to imply an existing business relationship. Thus, your colleague is misled and then is drawn into agreeing to accept shipment of supplies that were never ordered in the first place.

When the supplies are delivered, typically paper, ink toner and various commonly-used office supplies, you realize that they are not what you thought you were getting. They are of poor quality and cost as much as 10 times above the market rate. If you try to send the box back, you find that their mailing address does not accept deliveries.

When you refuse to pay the invoice, you receive countless aggressive collections calls threatening to report you to credit agencies and local business associations to damage your reputation. If you do pay, the problem can get worse as the scammers continue attempts to get even more money from you.

Of course the list is endless, and new methods are being thought up all the time. In fact, it is more than likely that you will be a victim of B2B fraud or that someone will attempt to defraud you at sometime in your career.

So what measures can you take to stop it? Well, here are some suggestions.

1. Stick with who and what you know. The temptation is always to stick to a trusted contact with whom you have done business with before, even if his prices, products or service is not the best, it reduces the chances of bad business.
2. Do your research. Find out all you can about your potential business partner. Google the company concerned. LinkedIn profiles are a crucial source of information. Ask your friends and business associates if they have heard of the company you wish to deal with.
3. Hire a vetting agent or private agency to do the research for you. Contracting out your research may not be the cheapest option, but can help you avoid a ruinous deal.
4. Use a secure portal, such as Spotchemi. An online marketplace where you can make trades is not only convenient, but also has the added benefit of working as a members club. Only firms that are registered can use the portal, and to be accepted by the company running the portal requires having a good credit rating as established by renowned experts such as COFACE, Dun & Bradstreet, Bisnode, TCM Group etc.

Whilst there can be no certain way to remove all risk, the smarter businessman will always factor the cost of that risk in on any deal he makes. Sometimes he may calculate that whilst one company is more expensive than another, the security of dealing with a known supplier outweighs the benefits offered elsewhere. Similarly, using a secure trading portal can also remove the risk of fraud or bad business, despite any fees that may be incurred.

No one wants their business to be defrauded or to do business with a bad business. But if you do not take one (or more) or the four measures listed above, then you are already doing bad business.