Has your business ever encountered the customer that appears too good to be true ?

Take this common scenario – you are in a business which regularly supplies customers with goods. You have a new customer and when placing the first order that customer offers to pay upfront, almost immediately and even perhaps before being invoiced. That’s a customer any business would like, right ?

Of course, in a way, yes, but this kind of customer can end up being the customer that has a plan to induce you into a false sense of trust, to drop your guard, and then to exploit you.

What can and all too often does happen with these kinds of customers is that they follow a pattern – they are the dream customer that always pays immediately for a number of orders. Gradually, the orders become bigger and bigger and they continue to be right on the money, literally.

Then, all of a sudden, a few particularly large orders are placed and that’s when the customer turns – they either place 1 very big order or they ask for short term credit terms – the goods are delivered and then no money is paid. They either disappear or, if operating via a corporate entity, it ceases to trade and your business is left without payment.

You have been duped, in all probability, lulled into a false sense of security, and quite possibly, on the strength of your initial dealings with the business, you didn’t carry out credit checks, corporate checks, or where your business sells abroad or has high value orders, you didn’t carry out background research and reputation checks.

Most unethical or fraudulent activity is fundamentally based on psychology and human nature – humans want to trust other humans and to be liked, and when we feel we can trust someone, we can all too easily drop our guard, and that’s when the fraudster will pounce, taking advantage of human nature. The above scenario is exactly the modus operandi used by Bernie Madoff and other Ponzi scheme fraudsters. You put money into their scheme and they initially pay out like clockwork, doing exactly what they say they will do, until, bang, one day, it all stops. Because it all seemed to be so good, investors increasingly didn’t bother making checks about Madoff or what was really happening. Madoff reached a position where he was trusted by default, that’s the key point.

The only way to avoid situations such as the above is by way of constant reminder but most importantly, by having the right policies and procedures in place and being rigidly consistent in applying them. No matter how big or lucrative a new customer or client may be, no matter whether they pay you on time every time for a consistent period of time, this should not defray your business from it’s preventative checks and processes. Better still is to check all new customers and clients for historical warning signs, because, as the old adage goes, past performance is the best indicator of future performance.


If you are dealing with a potentially important, high value or prestige new customer, whether UK based or internationally, get in touch with us to find out how we can help you avoid being financially exposed or defrauded in the future.
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