Small-Business Scams to Watch Out For
Small businesses are at an increased risk for fraud, research has found. According to a study conducted by Javelin Strategy and Research, small-business owners experience fraud at a rate that is double the rate of non-business owners. Some of these scams dupe small-business owners because they are wrapped up in offers of money-saving deals that can help stretch a budget a little further. In the course of finding the best deals, however, you want to avoid any cleverly disguised scams.
Here are four common small-business scams to watch out for:
- Fake Invoices — As we’ve noted before, con artists know that small-business owners tend to deal with lots of vendors. They may try to take advantage of this by slipping you an invoice or a renewal notice for a product or a service that you’ve never received. To avoid these phony bills, set up a system for comparing all incoming invoices to your records (of work completed or goods received) before you make any payments. Keep track of what you’ve paid, too. If you receive a suspicious invoice, report it to your state’s attorney general.
- Fake Directory Listings — Businesses used to pay to be listed in the phone book and other printed directories, a practice that now extends to web-based directories. Scammers often target small businesses by submitting invoices or making phone solicitations for bogus directory listings that seem real. Before agreeing to any listing or paying for it, research the directory online. The National Consumers League offers a few tips to help spot fraudulent directory invoices, too.
- Office Supplies — Office-supply scams have been around for years, with the subjects of the scam ranging from toner cartridges to reams of paper. There are variations on the scam, but generally it involves a phone call from someone claiming to be your regular supplier or an "authorized reseller" asking for information about the company's equipment, names of purchasing personnel, or types of office supplies normally ordered. Once this information has been obtained, the company then proceeds to ship overpriced supplies of poor quality to the company and invoices you accordingly. If you have doubts about a caller, hang up and call the vendor from which you originally ordered products. Suspicious calls can be reported to the Federal Trade Commission under the Telemarketing Sales Rule.
- Fake Sources of Funding — As lenders have tightened restrictions on small-business lending, scammers have found ways to take advantage of cash-strapped businesses. This trick involves convincing small-business owners to pay fees up front for grants that never come through. The Small Business Administration is a reliable resource for finding legit funding opportunities.
- Identity Theft — Identity theft can create years of headaches for small-business owners, just as it does for individuals. In fact, one study found that small-business owners succumb to identity theft at 1.5 times the rate of other adults
. Small-business identity theft typically occurs when someone acts on behalf of your business to secure lines of credit. The SBA provides some great tips to help small-business owners protect themselves and monitor for identity theft.
By keeping an eye on your credit score and putting practices in place to track invoices and payments, you can protect your small business against potentially costly scams.