The transportation industry has been experiencing an unsettling rise in fraudulent activities, posing severe risks for businesses, especially those involved in trucking. In a recent episode of the Trucking Risk and Insurance Podcast, hosted by Chris Harris alongside Johnny, guest expert Jennifer Lockett delved into this issue, offering insights and practical advice for businesses to protect themselves against these threats.
Understanding Factoring in Transportation
Factoring plays a pivotal role in the transportation industry, particularly for startups and businesses seeking to improve cash flow. Jennifer Lockett, an experienced operations manager from Altline, explains that factoring is a commercial financing option backed by accounts receivable. Unlike traditional loans, factoring doesn’t heavily weigh a company’s credit rating, making it an excellent choice for burgeoning businesses in need of steady cash flow.
The Rising Threat of Fraud
Fraud within the transportation sector has surged, especially during the recent economic downturn. Identity theft, collusion between carriers and brokers, and double brokering fraud are becoming increasingly common. Jennifer recounts real-life scenarios showcasing how criminals manipulate information to swindle legitimate businesses.
One significant tactic involves criminals altering carrier information with the Federal Motor Carrier Safety Administration (FMCSA). They change contact details, posing as legitimate carriers, and initiate fraudulent transactions.
Tips to Protect Your Business
Jennifer offers crucial advice for trucking business owners looking to shield themselves from deceit:
1. **Vigilant Monitoring**: Regularly check FMCSA records for your business to ensure no unauthorized changes are made to your contact information.
2. **Email and Communication Verification**: Always verify that email domains match official business websites. Be wary of email addresses that divert from standard formats, particularly those ending in non-professional domains like .com, .org, or .hotmail.
3. **Multiple Verification Points**: When dealing with brokers, conduct verifications with different contacts within the organization. This reduces the likelihood of falling victim to collusive activities.
4. **React Swiftly**: If fraud is suspected, act quickly. Inform shippers and receivers immediately to stop payments to fraudulent brokers or carriers.
The Burden of Increased Workload
The rise in fraudulent activities places a substantial burden on factoring companies, increasing their workload with the necessity for enhanced verification processes and prolonged follow-ups. While this might imply the need to adjust pricing models, Jennifer notes that such changes are not always straightforward in the current business climate.
Navigating Collusion and Double Brokering
Collusion creates a complex challenge, where carriers and insiders from brokers or shippers collaborate to present fraudulent loads. Rightful carriers must remain vigilant against such threats to maintain their financial stability and reputation.
Moreover, the industry faces issues of double brokering, where original carriers inadvertently work with fraudulent brokers, not realizing they were duped. Swift communication with logistics parties is essential to resolve such issues expediently.
Supporting Business Growth
Despite potential threats, factoring remains a crucial lifeline for trucking businesses, offering not just financial support, but also back-office assistance. By managing invoices and collections, factoring companies enable small business owners to focus on expansion and operations without distraction from administrative burdens.
Conclusion
As the transportation sector grapples with increasing instances of fraud, vigilance and informed strategies become integral for safeguarding business interests. The insights shared by Jennifer Lockett underline the importance of proactive measures in preventing identity theft and fraud, ensuring the continued success and security of trucking businesses. For those interested in learning more about protecting their enterprises through factoring, additional resources and contact information for Jennifer Lockett and Altline are available below.
By remaining alert and implementing preventive practices, transportation business owners can fortify their defenses against the ever-present risks of fraud.