Scams are a sad fact of life for everyone – small business owners included. While larger businesses often have specific anti-fraud measures in place, small businesses may lack the necessary resources or systems to guard against scams.
Common scams targeting small businesses
Here are some of the common scams that small business owners can face, and how you can avoid them.
- Franchise fraud – Franchising can be a relatively low-risk pathway into entrepreneurship. However, sometimes, a franchise opportunity can seem too good to be true – and often is. Check out our post on spotting a franchise scam.
- Invoice scams – Opportunistic scammers will sometimes send fake invoices for common business items like website hosting or office supplies, often in amounts that may not immediately make you suspicious.
- Fake charity solicitation – Small businesses are often approached to make a donation to a charity or cause. While many of these are legitimate, there are some scammers out there who misrepresent themselves and their cause. Some pretend to be connected to familiar organizations such as the local police.
- Tech support scams – These scammers target you with a fake pop-up, or a phone call advising you about problems on your network or computer. Then, while pretending to be “tech support,” they will remotely connect to your computer or perform a fake scan that will reveal problems that don’t really exist. They will ask for money or gift cards, or attempt to look through your computer files and internet login information.
- Phishing – This type of scam often appears legitimate. For example, an email from what appears to be Microsoft, or a local utility company. However, clicking on any links or replying to the emails could open your system up to hackers, malware, or spyware. They may also ask for personal information such as credit card details, bank account info, usernames, and passwords.
- Directory listing scams – This scam starts out innocuously enough, with a call or email asking you to confirm your business’ info in a directory listing you have either already purchased, or is free. Then, once you confirm, you are sent a large invoice for appearing in the directory. The scammer takes your confirmation of company info as agreement to appear in this fraudulent directory.
- Equipment purchase scam – Targeting smaller entrepreneurs such as freelancers, this scam starts off with a promising offer of work. The scammer will say that certain equipment or supplies are needed, and will send you a cheque in order to purchase them. Then, the cheque bounces. Or, they will claim you will be reimbursed – but that never happens.
The Government of Canada has some information about these small business scams and more. Additionally, this blog post features scams commonly targeting freelancers, including work-from-home scams.
How to protect against small business scams
Here are some ways you can protect your business against scams and fraud.
- Remember that legitimate sources will never harass, intimidate, pressure, or bully you, or tell you that you can’t discuss the issue with other people. They will also not request payment through gift cards, or by having you connect your computer to theirs remotely.
- If you get a phone call or message from someone claiming to be from an official organization, hang up and call that organization directly to verify.
- Do your research. Be thorough, double-check everything, and get advice from trusted colleagues or professional advisors.
- Make sure your records are complete and thorough, so you can easily verify any purchases made.
- Thoroughly verify any vendors and potential business partners, through sources you know you can trust.
- Never provide personal or sensitive business information to people you don’t know.
- Never click on links in emails and messages, open attachments, or download anything unless you are 100% positive you trust the source. Don’t forget that even websites and email addresses appearing legitimate may be a clever spoof.
- Listen to your instincts! If something sounds so amazing that you can’t believe everyone isn’t doing it, there’s probably a very good reason for that.
- Ensure your employees are trained in safe payment procedures, and limit the amount of people who have authority to make payments on behalf of the business. Have strong approval processes in place when it comes to payments.
- Don’t make payments over the phone unless it’s to someone you know and trust.
- Keep all your devices up to date, with virus protection software and firewalls.
- Ensure all sensitive business information is kept in a secure place.
- Use strong passwords.
Scammers are highly skilled at manipulation, telling people what they want to hear and exploiting vulnerable moments. Many people who would otherwise see the red flags a mile away can fall victim of a scam if the conditions are right. You can report fraud and cybercrime at the Canadian Anti-Fraud Centre. And don’t forget, the entrepreneurship community is all in this together – so make sure you spread the word if you suspect your small business has been targeted in a scam.