JOHANNESBURG – Businesses are forever seeking new opportunities to expand – a characteristic key to entrepreneurial success.
However, where there are opportunities, there are also fraudsters looking for a quick scam.
While experience has taught veteran businesses how to steer clear of these scams, warning signs may not be as clear for first-time entrepreneurs.
With this in mind, here are some of the most common signs that your opportunity might just be a scam.
Returns: A return much bigger than the market equivalents is one of the first signs that the opportunities may not be genuine.
Another red flag is if you are required to invest and encouraged to draw in more investors to the scheme or opportunity.
These are signs of a pyramid scheme and are best avoided at all costs.
Payments: Embezzlers often rope unsuspecting businesses into their schemes through new partnerships or agreements.
The arrangements are often used to transfer money, launder it, and return it to a personal bank account with a muddled transactional trail.
Getting your business caught up in such a scheme can lead to its closure and criminal prosecution.
Ensure due diligence and have any new contracts thoroughly scrutinised. Review your bank statements and books at least once a month, and if money is going to or from a source that you are not familiar with, ask questions and get clear answers to protect your business from shady dealings.
Employees: Internal fraud can be a businessender and fraudsters within your business can steal millions if vendoring is not done through the official channels.
The fraudsters often bypass normal checkpoints to set up deals with unscrupulous vendors by going over the heads of management and pocketing the cash.
Make sure that you have the right policies in place that allow for all business deals to require the approval of multiple managers.
Invoices must also be approved by more than one individual in the finance department.
Check your books and confirm the bank account numbers that your payments are made to and from.
Franchising: If you are approached by a company that is offering you an opportunity to become a franchisee, ask the right questions and get to know their business.
Consult an expert or relevant industry body and do not make any decisions hastily.
Scam artists are, by nature, extremely creative therefore keeping an eye out for these common red flags is a great start to steering clear of business scams.
Ben Bierman is a managing director at Business Partners Limited