The overlooked factor

A business can legitimately sell its outstanding invoices for a percentage of their face value to receive money quickly to expedite cash flow. The process allows nearly $3 trillion in transactions per year worldwide. However, invoice factoring is vulnerable to fraudsters. This case shows red flags and susceptibilities.

Gary Todd Smith had a problem. The Fayetteville, North Carolina, firm that he managed was losing money — fast. For four decades, Smith Advertising (which Smith’s father, Gary Truman Smith had created), had been prosperous. But profits for the business, which also had a branch in Sarasota, Florida, began to decrease in the mid-2000s partly because of the principals’ excessive salaries and then the financial crisis.