Young Entrepreneurs – Protect Yourself and Your Future

A few very important and unknown or overlooked aspects of business…

This post comes about as I was having dinner last evening with a distributor, partner and occasionally a competitor – all one in the same. It was so interesting and even amusing to exchange stories of similar experiences as we are in the same industry with a close business model, of roughly the same age and size. Some of these topics should serve as warnings and things to prepare for if you plan on starting a business, particularly an online business catering to more than just a local customer base.

Checking account fraud prevention. I can’t imagine it will be too long (certainly shouldn’t be) before actual printed checks become a thing of the past. In the meantime, you need to be prepared and protect yourself from fraud. While this may not pertain to all businesses, the crack in the armor stems from extending wire transfer as a means of payment for customers though that isn’t an exclusive source for this fraud tactic. Maybe they prepare customers now, but when I got started, no one at the bank every had this conversation with me until it was too late and the police, FBI and Secret Service had to get involved.

  • The tip: Setup an account at your bank that is Deposit Only and use that account if you are going to accept a wire transfer.  Have a separate operating account to write your checks from.
  • The other tip: Use a service called Positive Pay which requires you to be more proactive in working with your bank, but prevents any check from clearing your account if you have not previously informed the bank of the payee, the check number and the amount.
  • The reason: Once someone has your company name, address, checking account and bank routing number, they have enough information to print or order blank checks that draw from your checking account. This happened to me as well as my friend that I was dining with last evening. Prior to us using the above two tips, we had a couple of sprees where hundreds, perhaps thousands of checks were written using our account number and distributed all over the place. We had people calling daily who had sold their Harley, their car, their guitar and even their time and expertise in exchange for a fraudulent check written and drawn on our account. Unfortunately for the victims, the sellers of goods and services, these bad checks were rejected at the bank but usually not before they had been scammed out of their goods.

Credit card fraud control and prevention. I certainly don’t need to explain what this is or even the multitude of angles people choose to execute their fraudulent activities, but there are a couple of definitive ways to protect yourself and they work regardless of tactic chosen by the thief. It would have been nice to have been warned about this back in 2004, before it cost me more than $100k.

  1. If you are shipping physical goods, make sure you are shipping to the billing address or have your customer call and list an alternate shipping address on their card with the card issuing bank.
  2. Make sure that you get the phone number off of the back of the credit card and the name of the bank that issued the credit card. It is your responsibility to call that bank and make sure the card is valid as is the shipping address. Using credit card processing address verification is a good start, but it is not good enough to protect yourself.
  3. Look out for telltale signs of fraud. One we see often is customers calling late on a Friday that need the product delivered the next morning. Price is no object to them, nor the expense of Saturday delivery. Most people can wait until Monday, you’d be wise (usually) to drag your feet and process the order the following week or insist on a wire transfer vs. a credit card.

Asset and operations surveillance and monitoring. This one is pretty simple and straightforward. You’ve built your business and despite the perceived big brother effect that comes along with cameras in the work place, if you have expensive goods that someone might want to steal, put them under surveillance or you may as well leave your door unlocked. It’s also a good idea to monitor the outside of your business and not just the inside as a ski mask might hide the face, but it doesn’t hide a license plate.

Planning near and long term. So you built your business and things are booming right along. You have a business plan but are bogged down with day to day activities and just keeping things afloat. Planning your current activities and projects is critical to getting things done and working efficiently, but don’t put your head in the sand for too long. You need to make sure that you take some time to get away and revisit or revise your long term goals. It is easy to ignore when scrambling to make ends meet, grow the business, keep customers happy and try to have some sort of life on top of it. Plan for the long term as if all of your customers are going away and your marketplace is drying up. What would you do if what you did or sold suddenly became obsolete? Find some other baskets and plan to move your eggs around from time to time. I’m not suggesting you stop what you are doing now, just that your eyes need to be open and you shouldn’t assume anything.

Merchant Processor Reserves – Retailers Beware!

Watch out for Reserves being held back by your Merchant Processor.

For years we were using Chase Paymentech to process our credit cards for online sales. They received hundreds of thousands in profits from fees charged to us as we pushed through more than $10,000,000 per year in transactions. With an incredibly low charge-back rating (<.01%) and a consistent and positive relationship, Chase Paymentech somehow thought it would be a good idea to put the squeeze on their best customers and withhold up to $200,000 of our working capital.

I understand protecting yourselves, but this is completely unnecessary, insulting and inconvenient to our business. We are not a high risk merchant, we are selling VoIP hardware B2B.

Our average credit card sale is about $750 and our annual charge-backs are few and far between with only one or two per month (out of 1,500+ transactions) and usually because the customer does not recognize the name on their statement.

Why would a company (Chase) making so much off a good customer want to take unjustified steps that potentially upset the cash-flow and balance of said customer? Is it really just “policy” or is this an opportunity to solve some of their internal cash flow needs?

I know we are not the only one being subjected to this and it is a shame as for other companies, this could be a death sentence. There are other processors out there that do not carry reserves (higher rates though), so I would make sure you have Plan B in your back pocket if you are a retailer taking credit cards.

Needless to say, we switched to another processor that doesn’t (or isn’t) holding any Reserves. Thanks Chase, well done!  We’ll do fine without you.

Why should I care what Benjamin Sayers has to say?

Why should you care what Ben Sayers has to say?

He isn’t a well known writer, not an economist, he isn’t in politics and apparently doesn’t have much writing experience. He also isn’t that golfer from the UK.

Whether you read my content or not is entirely up to you, but I can offer this one thing. I won’t write about anything that I haven’t thought about it for a very long time, nor topics that do not affect a larger body of people than just me and those around me.

Benjamin P. Sayers is: (in no particular order other than perhaps chronologically)

  • A proud Canadian citizen living and working in the US since 1976 (I was three then)
  • The son of two very smart parent, one a Philosophy and Ethics Professor and the other a Geriatric Nurse Practitioner
  • A product of growing up on a Christian college in a town of 500 people, surrounded by rural New York townships
  • Like plenty of other Entrepreneurs, a college drop out
  • As such, I (Ben Sayers) am an Entrepreneur and have been since I was a child
  • A self-taught businessman, systems administrator and software developer, capable of learning just about anything as needed
  • A husband since 1997, she was my boss in 1991 and apparently still is
  • A father of three fantastic boys, all unique, gifted, well mannered and venturing into a promising future going wherever they choose
  • A budding social networker and master of my own “domain”

Among other things, I intend to write about my experiences as an entrepreneur and CEO, various political and business opinions, our Economy in the USA, vetting new ideas, talking about things that had an impact on me or my colleagues and plenty of other stuff I’m sure.

I’m not just writing this for my own pleasure and to occupy my time, I am putting these things out there because I truly want to hear what you have to say whether it is positive or negative. Tell me I’m wrong, it certainly won’t be the first time, nor the first time I have improved as a result of someone’s honesty. If you’d prefer to send an email or contact me by some other means, try bsayers -at- sayerstech.com or on LinkedIn.

Thanks!

Ben