Small business fraud is a costly growing trend. Whether committed by employees, vendors or unknown individuals, the need to protect your business from fraud is an unpleasant fact of life for the small business owner. As per the 2022 Occupational Fraud Report from the Association of Certified Fraud Examiners, a fraudulent incident can result in a loss of $8,300 per month on average and may persist for up to 12 months before being discovered.
Running a business is a challenge for most small business owners. Throw the risk of fraud into the mix, and the challenge rises to a new level. If your organization becomes a target of scammers, it can negatively impact both your reputation and financial performance. To safeguard against this, it's crucial to familiarize yourself with the indications of business-focused scams. Educate your colleagues and staff on how to recognize these signs so that they can avoid falling prey to such fraudulent schemes.
Common business scam
Fraudsters often send counterfeit invoices for commonly used products and services, such as office supplies or web hosting, in the hope that the person responsible for paying the invoices will overlook the deception due to a busy schedule. In some instances, employees may even receive and settle bills that appear genuine without first verifying their authenticity.
It is essential to scrutinize every invoice and payment should only be made if the items were indeed ordered and received. Make sure to communicate this to your staff. Keep an eye out for solicitations disguised as invoices, where the fine print may ask you to sign up for expensive subscriptions or services. Also, be cautious of requests for updated business contact information, as some mailers or faxes may ask you to verify or update information for a directory listing. Signing such a document may bind you to pay for a new, overpriced listing.
Phishing and SMS phishing
Phishing scams aim to obtain sensitive business information. SMS phishing, also known as "smishing," uses misleading text messages to trick people into divulging personal or financial data. These scams may resemble genuine emails or texts, but clicking on the link could download a virus that seizes personal information or opens a form requesting bank account or credit card details.
Be cautious of uninvited messages; avoid clicking links. Hover over links with your cursor to verify the actual address. Discard emails asking for unspecified information such as passwords or account numbers. Ensure that your computer has adequate firewall and protection software.
Social media hacking
Hackers can exploit social media platforms to launch digital attacks and steal personal data or seize control of your social media account. This is known as social media hacking.
Adjust social media privacy settings, assign unique passwords, and enable two-factor authentication. Be cautious of phishing scams that ask for personal or account information or request you to verify your account by clicking a link.
Utility company imposter scams
Fraudsters may pose as gas, electric, or water company representatives, threatening to cut off or interrupt service. They aim to intimidate you into thinking that an overdue bill must be settled right away, frequently via wire transfer, reloadable card, or gift card. These scammers often choose their timing strategically, such as before a restaurant's busy dinner hours, to generate a sense of urgency.
Watch for fake disconnection threats. Utility firms must give advance notice and don't disconnect outside business hours. Check account status online or by calling the customer service number listed on the bill.
Business identity theft
Business identity theft occurs when fraudsters impersonate owners, officers, or employees to unlawfully obtain cash, credit, and loans, leaving the targeted business with debts. Thieves gain access to bank accounts, credit cards, and confidential information such as the TIN and owners' personal data. They establish credit lines or acquire loans based on the business's identity and creditworthiness. Restoring financial stability, credit profile, and reputation requires significant time and resources once the scam is uncovered.
It is essential to safeguard confidential company data with the same level of care as your sensitive personal data. Conduct periodic checks of your business records to detect any fraudulent or erroneous filings made on behalf of your business. Monitor your company's credit reports regularly for any unauthorized activity and consider strengthening your account security to restrict access only to authorized individuals.
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Embezzlement
Employee embezzlement can be a genuine concern in businesses. Any discrepancies in bill payments or bookkeeping should be thoroughly investigated. If your small business has employees with significant access to financial operations, such as handling accounting or payment processing, it is crucial to implement safeguards to maintain financial integrity.
Avoid being scammed
Unfortunately, people constantly devise new and imaginative ways to steal or cheat, so the task of identifying and dealing with potential problems is an ongoing process.
- Train your employees. The most effective protection is an educated workforce. Educate employees on the nature of scams and encourage them to communicate with their colleagues if they suspect any fraudulent activity.
- Be tech-savvy. Be cautious of scammers who use fake caller ID information or create realistic-looking websites and email addresses to trick you. Always pause and think before sharing personal information or clicking on links.
- Maintain a secure website. To improve cybersecurity, use Secure Sockets Layer (SSL) on your website, install a firewall, anti-virus, malware, and spyware detection software, and regularly back up data to ensure business continuity during a cyber attack.
- Don't feel pressured. Scammers frequently employ aggressive tactics and urge you to take swift action to prevent you from verifying their statements.
