Preventing Kickback Schemes in Your Chosen Chinese Factory
Asian people love to give gifts to other people. It is an act embedded in their culture, specifically in Oriental and Southeast regions. Since time immemorial, gifts were exchanged as a sign of long-term connection and relationships. However, in the modern world where legalities and formal approvals are present, this should be avoided to not let the kickback culture enter your source of income.
In simple terms, kickbacks are any illegally received payment to someone who is involved in a transaction (usually a middleman) so that the process will continue with no problems at all. These acts are usually done by sinister employers of a certain company or factory to trick unsuspecting businessmen into giving them financial properties. In any case, kickbacks should have no entryway to your transactions, as they will cause more problems than harm in the long run.
Why Kickbacks are bad
To explain why kickbacks should always be prevented, here are 5 major concepts that you should know.
Kickbacks may result in faster service, but it creates distrust
Middlemen or employers from a Chinese factory might suggest monetary gifts to speed up the transactions that you have with them. Such transactions can range from production, delivery, modification, or even returns. While one might think that kickbacks or bribery are a surefire way to make the process more efficient, this is a false mentality that should be corrected.
Kickbacks may benefit you in the short term, but they will create a great divide between your business and your chosen company. For example, the middleman who asked for kickback may reroute all communications coming from the head office so that he gets the information first. This will result in more possibilities of kickbacks in the future, leaving you unaware of the whole scheme.
Aside from broken company to factory relationships, the emergence of kickbacks will always result in long-term losses. If you think about it, your first kickback might seem like a small portion of what you will earn. However, once more kickbacks are requested just to proceed to the next step of production processes, you will notice that your losses will compound and pile up quickly. Thus, negative growth for your company will occur.
If you were to choose between a clean, slow-paced production and a kickback-centered, fast-paced one, you should always choose the factory that has no bribery involved. Yes, your current sales rate may be affected, but the long-term relationship and healthy connection with your chosen production plant will yield great benefits. On the other hand, the dirty processes will end up more cluttered, and you might even lose specific strengths that your business once had.
Quality Control Issues
Another thing that kickbacks can result in is bad quality products. You see, once kickback culture is present, it extends from production to delivery. The worst case is that your chosen factory might even participate in bribing the assigned quality assurance body so that defective goods can be approved when they should not be in the first place. This will add up to losses on your part as well as lots of RTS (Return to seller) situations on your goods.
Also, having a middleman that resorts to kickback are a very alarming red flag. It only means that the factory has zero to low internal control of their employees, and that management is not firm on its policies. Also, the company might even have inefficient bidding and procurement systems that are not properly managed by the higher-ups. Once you hear that certain people in your chosen factory tend to take advantage of others, then it is better to steer clear of them.
Even if you like it or not, kickback culture can be assimilated and copied into your company. Once you see the benefits that it brings, there is a large chance for you to be blinded and follow suit as you might think that it will create bigger profits. At first, you might imagine that it’s fine since most companies are doing it, but it will just be an internal virus that can grow uncontrollably as time passes by. As early as now, you must make sure that all internal systems and procedures are clean so that kickback culture will not penetrate your systems.
How to lessen the chance of being tricked
The temptation of kickbacks may be strong, but businesses will always have a fighting chance against it. Here are some major steps that you can do to ensure that you are well-protected against such fraud.
Carefully Review Contracts
One major way to avoid being trapped in the cycle of bribery and kickbacks is to always review bids and contracts. From the draft down to the last phase, you must make sure that everything is done according to goodwill and intention.
If taking extra steps to ensure this is needed, then you must not shy away from such actions. For example, you can choose to arrange a meeting with the Chief Officers of the factory to make sure that you are getting your money’s worth. This can even be a way to confirm that they are interested in building a proper relationship with you in the future.
Auditing is another way to lessen the chance of being tricked. This is divided into three main parts, auditing before, during, and after the contract signing. In the before phase, you can make sure that bid documents are complete, well-documented, and approved by those who are with proper authority. Also, proper visibility of concerned individuals should be observed especially upon the reception of sealed paperwork.
In the during phase, you can choose to crosscheck between other businesses whether they received similar offers. Lastly, it is beneficial if you were to contact third-party companies or even stakeholders for a second opinion especially regarding pricing and services.
Reach for the Highest Authority
The lower you go into a factory’s power pyramid, the more likely it is for you to encounter fraudsters. Thus, the first step in ensuring that you are negotiating properly is to confirm that the person you are talking to has the qualifications to answer your questions. Do not hesitate in asking for information about people who are in higher hierarchies so that you will know if you are talking to someone reliable or not. In the end, this will be a good chance to clear uncertainties on future routes that you will take.
Checking company policies such as Gratuities is very important. Gratuities policy refers to the legality of any factory employee to receive gifts above a certain threshold. Your factory should be aware that there is a limit to the gifts that can be given to anyone in the whole process.
It is also good to know if your factory executes this policy not only to the regular employees but also to those who are in higher positions. This way, it will be easier to gauge whether they are a just and righteous organization or not.
Best Ways to Avoid
Kickback culture is not needed if a factory or company can manage employees at a micro and macro level. To do this, good internal systems and assessments must be in place to avoid such problems from popping up out of nowhere. Thus, one of the best ways to avoid kickbacks is to never engage with a Chinese Factory that is known to foster these types of deeds. While this might seem like an easy task, it is very difficult to do.
Researching with partners
To confirm which companies have a bad reputation in terms of bribery and internal corruption, there is a need for good research and background checking. While this act can be done on a solo basis, it is better to partner with another service provider who does this job efficiently and masterfully. The said service provider must be able to give consistent and factual reports especially in the Chinese Industry landscape where information is the key to success. Never hesitate in seeking help from others, as they can provide great value to all your endeavors.
The solution: Verifyfull
Verifyfull is a company that can provide your needs in assessing and auditing a company’s tendency to do kickbacks. We are an expert verifier and background checker of different Chinese companies, and we will greatly benefit you especially if you have limited ways of contacting Chinese soil.
Verifyfull aids many different companies and brands to ensure that they only get the best in the best in manufacturing. Others can even consider us as their eagle-eye in the Chinese business industry as we can give accurate details no matter what company we are searching for.
Our service is built-in integrity and passion, and we are transparent in all our works. We can easily help you avoid sinking into kickback traps and temptations.
If you have any queries regarding what we do, you can contact us on this site or our official mailbox. We will be more than happy to attend to your needs.