Avoiding the Top Five Business Scams

Avoiding the Top Five Business Scams

Posted on July 28, 2009

Scam artists have become more adept at exploiting the weaknesses of small businesses.  While some of these business scams are golden oldies, they're still putting money into the scammer's pocket - effectively taking it out of the pockets of many small business owners.  The best defense against these is awareness and vigilance.

Here are five of the most common small business scams and how to avoid them:

1.  Advance Fee Loan Scam

Whether it's offered in a newspaper ad, on the internet, or by e-mail, this scam offers money at reasonable rates - if you send them money.  They may say they need the money for insurance purposes or to get the money across the border.  Whatever the reason, you'll never see that money again.

How to Avoid This Scam:  Be aware that it is illegal in both to ask for money upfront for a loan.  If you're asked to pay anything before you've received an agreed-on loan, walk away.

2.  Fraudulent Billing Scams

Your business receives an invoice for goods or services that you didn't buy.  The hope of the scammers that are sending these out is that your business will just pay up.

How to Avoid This Scam:  Examine your invoice carefully.  Educate your staff about phony invoices.  Set up your payables system so that at least two people must authorize any payments.

3.  Business Identity Theft

Identity theft itself is the fastest-growing fraud in North America.  Just as someone can steal your personal identity, your business's identity can be stolen.  Once it's stolen, scammers can use your business name and financial information to open a bank account and run up expenses.

How to Avoid This Scam:  Take steps to protect your business data.  Shred all your discarded paper, including anything that has your business name on it.  Be careful when responding to e-mail asking you to do such things as verify your account.

4.  Work-at-Home Scams

Preying on people who want to have home-based businesses, these scams offer the opportunity to "make big bucks" working at home.  The scam is simple; you buy the information or the materials you supposedly need.  Rather than being the key to make money, what you receive is useless.

How to Avoid This Scam:  Don't bite.  You never have to send money to get information about legitimate business opportunities.

5. Credit Card Scams

Fraudulent use of credit cards is also on the rise.  In the standard scam, someone will call and place an order.  The business processes the order, but later is informed that the credit card was stolen and the amount of the transaction will be charged back to the business's account.

How to Avoid This Scam:  Always use diligence to ensure that orders are legitimate.  Be particularly leery of overseas callers, new callers placing large orders and / or callers requesting rush shipping.  If you are suspicious, ask the customer for the name of the credit card's issuing bank and it toll-free number, which is printed on the back of all credit cards.