Small businesses are often the target of scams, particularly newer businesses, as they are often viewed as more vulnerable. While recent events have proven that this is not always the case, the perception that small businesses are an easy target is prevalent- especially among less sophisticated scammers, unable to pull off a Target style data breach.
Knowledge is power. In order to protect yourself and your business assets against the threat of possible scammers, you should first be aware of the most popular scams aimed at small businesses. Here are the six of the most common small business scams and how to avoid them.
The Overpaying Customer
While a customer overpaying for an item may not immediately set off alarm bells, this scam entails just that- overpayment of goods or services. This overpayment is typically addressed immediately, asking for a refund of the amount overpaid. Often, the overpayment amount is to self-correct significant and paid with a stolen check or credit card, leaving the unsuspecting business owner out much more than just merchandise.
If you do not conduct business online, this scam may not be a primary concern- but scammers are often highly skilled. In order to protect yourself, be cautious. Refund to the original payment card and do not refund purchases made via check until the check has cleared the bank (a week to 10 days to be sure). Also, get any and all information from your customers, such as name, address, and phone numbers for billing verification. Above all, avoid wiring funds, as this request alone is suspicious.
The False Billing Scam
With this scam, a business is contacted and asked to update company and contact information. Typically, the scammer claims to be with a directory service- such as the Yellow Pages. A few weeks later, the business receives a bill for inclusion in the directory or for advertisements placed in the directory. As proof, doctored phone transcripts may be provided. Once you refuse to pay, the scammer begins to harass you, sometimes threatening legal action, hoping you will send them a check to put an end to the incessant calls.
The easiest way to protect your business is to inform all employees of this possibility and limit the amount of people with authority to discuss business transactions. If you are a victim of this type of scam, do not pay ransom. Alert the Better Business Bureau and fight back.
The Security Breach
As data mining becomes the norm, businesses big and small store a great deal of customer information on their network. This information can be as simple as name and address or include stored payment information or other personal information, such as date of birth. While your business may use this information for convenience and promotional information, scammers use and sell this information on the black market.
To protect yourself against this type of scam, always make sure your security information is up to date and monitored. The more sensitive the information you have, the more sophisticated your security measures should be. It’s best to be proactive as a security breach could cost you in lost sales and legal action.
The Mass Marketing Scam
Many scams fall under this category, but a common mass marketing scam involves a scammer pretending to be an office supply company. Your business is contacted about ordering supplies at a discounted rate. Typically, the scammers pose as your current supplier in order to establish trust. You pay for the supplies, but you never actually receive them. A variation of this scam is the offer of a small business loan that requires an advancement fee- leaving you without the loan or fee.
If you receive a phone call from business, familiar or otherwise, that is offering products or services, do not agree to anything without first researching the company. Offer to call back. If they insist and tell you it’s a one-time offer, walk away. High-pressure sales techniques are common, but a legitimate business will understand your hesitation. Very few deals are truly a “one time” event. Offer to take their name and extension and call them back directly later that day after you’ve verified the company and information.
The Vanity Scam
This scam preys upon your sense of pride. Your business is contacted regarding an award won. The only requirement is that you pay in order to receive it. In some cases, the award may be in the form of inclusion in a professional association that charges a yearly or monthly membership fee.
When someone contacts you regarding an award or membership in a professional association, do your research. Often, an online search will yield a wealth of information, revealing complaints and warnings.
The Phishing Scam
While no one is immune to phishing scams, many are specifically targeting toward small business owners. Some of the most popular are those claiming to be from a government agency. It may be the IRS, alerting you of an audit or the BBB, alerting you of a complaint. In both situations, you are asked to provide personal information in order to address the complaint.
Avoid clicking on any links within an email and take a quick look at the sender’s email address. While grammatical errors or personal email addresses are red flags, some phishing emails can be quite sophisticated and convincing. Instead of responding to an email, contact the IRS or BBB yourself, directly.
Protecting yourself against scammers is important to ensuring business success and profitability. While there are companies that specialize in fraud protection, such as eConsumerServices, it is obviously more cost effective to be proactive. Being aware of some of the most common small business scams is critical. Keep all software and security up to date and educate employees about potential threats. Report scam phone calls. Arm yourself and your employees with the information needed to keep scammers at bay.
Have you or your business ever been the victim of a scam?