Have you done your Due Dilligence?

I’ve met more Personal Protective Equipment (PPE) and medical supply brokers in the past month than I ever thought humanly possible. It seems that while a year ago ever second person was a Solar Engineer from the university of Google they’ve now completed degrees in Medical Import/Export and are set to be the next Covid-19 millionaires – and I wish them Godspeed and the very best of luck with that.

It does however concern me deeply that their Google Degrees did not include a simple topic like “due diligence” when dealing with new suppliers/ volume clients. One would hope that this would be considered brokerage skill number 1, but this isn’t the case. The plethora of scam websites raking in the money daily is sufficient evidence of this.

Let’s talk about Due Diligence in this context for a moment just to clarify what Google may have left out of this rather important topic.

When dealing with any new supplier or client, it is customary to perform a DD. Sometimes this is in the form of a client application form including terms and conditions of trade while in other circumstances it is seen as a discrete background verification before numbers are discussed in detail.

The types of information that any legitimate client or supplier would expect to be asked for includes:

Vat registration number, CK / PTY Ltd Registration document, copies of the directors identity documents and confirmation of banking details. These are really fundamentals and barely scratch the surface.

Beyond this, one may also obviously require the companies physical address, telephone numbers.

Now the work begins. It’s all driven by logic really. The first step is to confirm 100% that the company is registered, the VAT number is valid and that the directors Identifications match the CIPC records. Why is the VAT number relevant? Well if they don’t have one, they have not transacted above a turnover of R1million per year. Depending on the size of your order/sale this will guide you on how long the company has been around and the type of numbers they deal in. NOBODY offering you 10 million N95 masks with a value of R30mil plus will not be vat registered. That’s just a preposterous concept that it would be their first trade at that value and would be high risk.

You want to satisfy yourself that the domain name (www.bizname.co.za) is actually legitimate and been around for a reasonable time. If the domain name was only registered in April/May of this year you should consider this a warning sign unless it’s a bona-fide new company and you’re happy with that.

The phone numbers you’re corresponding with them over should trace back to the correct names of the people you’re dealing with and be verifiable. Any landline numbers should be authenticated and lead back directly to the address of the business. The physical address of the business also needs to be confirmed – is the business actually there?

These are all basics. The majority of “PPE website” offerings fail before reaching the third step of a due diligence. ONLY once the above are confirmed and verified should pricing be discussed, stock availability and of course discussions around the certification of the stock, escrow for payment etc. THEN the discussions around irrevocable everything’s can proceed as per usual. A separate due diligence should be performed on the stock and by your representative in person. Video and photographic proof of goods is as powerful and useful as a photograph of a pile of cash.

Where companies are unable to perform their own Due Diligence, there are many specialists in the prevention of Fraud that will gladly assist at a fee – do be sure to select a CFE (Certified Fraud Examiner) for this task to ensure that you receive a high standard of work and that it is backed by the strongest of codes of ethics.

In these rather turbulent times of buy/sell based on panic purchasing one cannot be too cautious and it is as easy to waste valuable time as it is to waste valuable money. Do not enable scammers by engaging with them and sharing pricing and trade terminology – quantify your client/prospect properly before getting down to business and your transaction should flow smoothly.