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Got a new creditor? Do these three things before you pay him to ensure it's not a scam

by , 24 October 2014
It's almost impossible to run a business these days without using credit in some way. After all, you may have necessary expenses and not have the money to pay for them.

But because of how heavily most business owners rely on credit, it's easy for fraud to slip in.

That's why you should never just pay everyone on your creditors list, especially if they're new.

Rather, do these three things first to ensure it's not a scam...

 

Do these three things before you pay a new creditor to avoid scams

 
1. Check to see who authorised this creditor
 
If it's possible for an employee to get into your company's finances, he could add a fake creditor to the list and add his own banking details.
 
If you think it's someone one of your managers bought something from, you may just pay it. DON'T!
 
Check to see who authorised that creditor so you can spot this kind of fraud before it robs you blind.
 
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2. Verify the creditor is a real goods or services provider
 
You need to ensure the creditor's company is real because if, for example, he demands you pay a deposit before you get his goods or services, you could make a financial loss. If you pay that deposit and the company isn't real, he'll simply disappear with your money. 
 
Ask for the company's registration documents and then follow up with the body they registered with. 
 
3. Verify their banking details
 
If you don't check your creditor's banking details are right, you could end up paying anyone. If someone changes the details of an account you and your creditor could end up with a problem. 
 
For more information on creditor controls, check out the Practical Accountancy Loose Leaf Service.
 

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