Small Business Scams
06/14/2023
Small Business Scams
In 2018, the Better Business Bureau (BBB) reported that nearly two thirds of small businesses reported being targeted by scammers in the last three years. While a business of any size can be the target of a scam, small businesses are often pursued because they don’t have the same level of cyber security and established accounting processes as bigger corporations. Our best tip for avoiding small business scams is to remain informed!
The Federal Trade Commission has many resources for businesses to help them identify and avoid scams. Scams frequently follow this trajectory:
- Scammers will contact someone within your organization (accounting personnel are especially vulnerable). Contact usually begins with a phone call or email.
- The scammer will then try to act like a trusted source. This could be through impersonation of a vendor you are already familiar with or impersonating a company with a positive reputation in the community.
- The scammer will then ask you for increasingly sensitive information. They often create a sense of urgency or fear in their victims to get this information. They will ask for financial information to “speed up the process” in getting you the goods and services they are trying to sell (and more than likely don’t actually have!).
- Scammers will use this information to steal money or sell it to those who want to.
To avoid small business scams, it is recommended that businesses employ certain preventative measures. These include keeping good records, having procedures for employees to verify invoices and payment methods, asking employees to question Caller ID names, securing any files or passwords, and requiring employees to research potential new vendors.
While the list of potential small business scams is extensive, the list below will get you started in staying informed about the most popular scams.
Business Email Compromise – This scam usually begins with email phishing and targets the people in your organization who pay the bills. The FBI reports that this type of scam has more losses than any other type of fraud (ftc.gov). Usually, a scammer will pose as a trusted source and ask the financial officer to wire money, send gift cards, or give personal information.
Phony Invoices – Phony invoices are just how they sound. A scammer will send a fake invoice and demand payment. However, the fine print on the invoice will reveal that the bill is merely a solicitation. These bills are often for office supplies, website hosting, and directory listings and the amount of the bill is designed to not raise red flags.
Directory Scams – In directory scams, con artists will fool a business into paying for a listing that either does not exist or does exist but is not distributed to the promised clientele. Businesses are then billed hundreds of dollars.
Stolen Identity – Stolen identity scams happen when scammers pretend to be you. They will spoof your website or logo and attempt to sell your product or service. Obviously, the customer will never receive the paid for item and you will be the recipient of bad reviews and a tarnished reputation.
Vanity Award Scams – Vanity award scams target business owners through email campaigns. The owner will click the provided link to claim the award, only to find they must pay hundreds of dollars to do so.
Overpayment Scams – In these scams, a person you are doing business with will send you a check for more than they owe. They will then ask you to wire the difference back to them. However, once you do so, the original check bounces and you are responsible for the full amount (including the amount you wired them).
Brand Building or Reputation Fixing – These scams happen when a business is contacted by a third party who promises to fix negative reviews online or put the business in directories. These scammers usually charge a high price for a service that is never rendered.
Businesses should always be leery of unsolicited contact. The BBB estimates that small businesses are defrauded of $7 billion a year (bbb.org). If you suspect you have been the victim of a small business scam, visit FTC.gov and report a complaint to FTC.gov/complaint.
Sources:
https://www.bbb.org/article/business/19932-bbb-warning-businesses-dont-fall-for-that-scam
https://www.ftc.gov/business-guidance/resources/scams-your-small-business-guide-business
https://www.aarp.org/money/scams-fraud/info-2020/small-business.html