There are a number of actions you can take to research your potential business partner whom you have met on the internet, so that you can reduce the risk of being subject to a fraudulent transaction or business misunderstanding. The following will offer you some tips of avoiding being cheated by your partner.

 

Always confirm if the address, phone number and email address given to you by your trading partner belongs to the same company.

 

Background checks from independent third-party sources include a search for legal registration and credit reports. In many countries the existence of a company and its legal status is a matter of public record. If you cannot have independent access to your partner's registration information, ask your partner to provide you with a Certificate of Good Standing issued by the companies registry of his country or state/province. You can also gain further knowledge about your partner by ordering a credit history report from a local credit agency. Credit history reports contain information about the partner's business history in their relationships with banks and other trading partners.

 

Whenever possible, meet your business partner in person and visit his company's facilities. While the internet offers you a wealth of information on your potential partner which enables you to make an initial assessment, there is no substitute for face-to-face contact.

 

As a buyer, order a sample before committing to a purchase order to be sure that the product meets your expectations. As a seller, request payment for a sample and/or payment for shipping costs before you send out the sample, especially if your product has a high resale value.

 

If you are a buyer, you can protect yourself against poor quality by ordering a pre-shipment inspection of the products. You can demand the inspection as a condition to payment.

 

If you are a seller and have not been doing business with your partner for very long, avoid selling your products on open-account (in which case you are extending credit to your buyer). Instead ask your buyer to open a letter of credit.

 

If you are a buyer, sometimes a supplier may ask you for a deposit (usually 30%) before he accepts the order. While this is not unusual between long-standing trading partners, if you are doing business with the supplier for the first time, make sure you have done sufficient background checks on the supplier before you agree to the deposit, or ask for a different form of payment, such as a letter of credit. If the seller seems more focused on payment than any other issue, or indicates that cash payment must be made urgently, more caution should be given to the transaction. Be extra cautious when the seller asks you to send money to an account whose real owner cannot be traced.

 

Pay close attention to shipping or contact addresses located in regions with high reported incidences of online fraud.