10 Business Scams Every Entrepreneur Should Be Aware Of!
Scams like these affect businesses every day. A small investment of time in getting employees fully up to speed with the threats could pay massive dividends. These scams thrive firstly on human beings’ natural propensity to trust and be helpful, or innocence, naivety or, ‘blissful’ ignorance. The first of these is worth preserving but only by adding simple business safeguards to protect against fraudsters.
1. Phone fraud
Scammers are becoming increasingly skilful at phoning companies up and tricking financial details out of unwary staff that enable them to siphon funds from victim organisations. Called Phishing when carried out via email, the telephone equivalent is known as Vishing and is a rapidly growing problem for UK SMEs. The point being a fraudster will have done some research on the target and sound plausible.
How to avoid it: The best way to protect your business is by educating staff on the dangers. If asked to provide financial information over the phone, they should end the call, report it, verify who they’ve been talking to and whether there is any legitimate reason for sharing the requested information. Only then should they call back on a trusted telephone number (using a different phone) and ask to speak to the original caller.
2. Invoice fraud
Another surprisingly low-tech fraud that is currently rampant, at its most basic level, invoice fraud simply involves scammers sending and chasing up invoices for products or services never supplied. It can get more sophisticated, however, with scammer often aware of actual supplier relationships and able to dupe staff into altering payment details so that legitimate payments are diverted. This will typically go undetected until the real supplier contacts your accounts department to chase payment.
How to avoid it: The key to protecting yourself from invoice fraud is to ensure staff always query the need and authorisation for any goods or services provided, and that payment details are never altered solely on the basis of a phone call, letter, or email request. Having two signatories for invoice payment (as long as both don’t think the other is checking) is a simple recommendation.
3. Corporate identity fraud
For a problem that has affected an estimated 100,000 SMEs to date, corporate identity fraud is a surprisingly little understood threat. The scammers simply contact Companies House and alter details such as the names of directors and the registered address, They then apply for debit or credit cards or to order goods online in the victim company’s name.
4. The overpayment scam
In overpayment scams, the scammer expresses interests in expensive goods that a business is selling. The scammer then proceeds to send over a check that exceeds the cost of the item and requests that the victim wire the difference after the check has been deposited into an account. Eventually, the realistic-appearing check will bounce, leaving the victim to pay the entire amount.
How to avoid it: Always make sure to get all information from your customer, including full name, address and telephone number. Avoid wiring funds for any reason—this request should automatically raise red flags.
5. The vanity scam
A vanity scam preys on one very gullible aspect of humans—their pride. This scam is listed as one of the top con jobs targeting small businesses. In a vanity scam, a business is contacted about winning an award and asked to pay the partial or full amount of the cost of receiving the award. However, these are bogus organizations that often continue to charge the cardholder yearly “membership fees.”
How to avoid it: Always research the organization calling to offer the award. A simple online search will yield several complaints and warnings.
6. Phishing scams
Phishing scams appear to be legitimate e-mails to the viewer, but are fraudulent messages that usually download viruses into the victim’s computer when the e-mail is opened or links within the e-mail are clicked. These viruses capture personal information, such as bank details, Social Security numbers and credit card accounts. Phishing is a huge threat to businesses because of the vast amount of important information stored on computers.
How to avoid it: Scan the e-mail carefully and look out for grammar mistakes and other inconsistencies. Hover your cursor over the links without clicking and you will be able to see the address. Most new Internet browsers are equipped with anti-fishing software, so be sure that your system is up-to-date and protected.
7. The TTY scam
During a TTY scam, callers can remain anonymous and type messages to an operator, who relays the message to the caller’s recipient. This is perfect for scammers, because operators cannot disclose where the call is coming from. The scammer proceeds to request an expensive and large item from the business, pays with a stolen credit card and requests a check for the large shipping fees that the scammer agrees to pay for in advance.
How to avoid it: Ask the person to verify the card verification code and provide the customer service number that is printed on the back of all credit cards. Inform the caller that you will verify the information with the bank.
8. The “who’s who” scam
Also known as “false billing,” these scammers contact businesses requesting to update the company’s information in a directory. Usually, they claim they are from the Yellow Pages. During the conversation, the scammer records the phone call and later bills the company for being listed in the directory or for placing ads never purchased, providing doctored recordings as evidence. When the company refuses to pay, the scammer threatens legal action, usually resulting in the company cutting a check to stop the hounding.
How to avoid it: Make sure your employees are aware about this type of scam and only allow a limited number of employees to deal with business transactions. Most important, don’t let hounding lead to your forfeit if you aren’t completely sure you are being charged fairly. Report sketchy companies to the Better Business Bureau.
9. The fax-back scam
This scam can be easy to fall for because all you have to do is fax a paper back. In fax-back scams, an unsolicited fax comes in offering amazing deals and discounts on office supplies, landscaping, directories—just about anything. All the business owner has to do is fax back his or her request to a premium number, which charges the company a few dollars per minute for a fax that will take a while to go through.
How to avoid it: If you’re interested in the offer listed in an unsolicited fax, research the details. The fax-back premium rate service number is 190. Keep in mind the age-old adage, if it’s too good to be true, it usually is.
10. “Friendship” fraud
The moral of the story is to never hire anyone solely based upon friendship, family, obligation, or feelings of sympathy. Build a culture of accountability, measure results, and make sure everyone knows that you are looking at their performance. Then, hire based on talent, and pay for that talent to perform at a high level of accountability and integrity.
