Leadership Insight: 5 ways fraudsters have businesses in their sights

Every year, thousands of small businesses find themselves targets of fraudulent or deceptive sales practices. The Better Business Bureau (BBB) reports that small business scams have become more prevalent, with scammers going to great lengths to persuade businesses to purchase bogus online directory advertising or pay invalid invoices.

It’s very easy to duplicate letterhead and logos so that they look real. It’s equally simple to create phony websites, business checks, or acquire important details such as your name, title, address, and other business information.

To protect your business, it’s important to stay informed about common scams, learn how to identify them, and report them when you see them. Often, avoiding a scam is only a matter of identifying suspicious situations and asking the right questions.

There are five common business scams:

1. Phony invoices. Businesses receive fake invoices demanding payment for products or services never ordered or received. Sometimes, phony invoices are disguised as solicitations. If you look closely, you’ll see fine print that identifies the bill as an actual solicitation for business. Generally, the amount is small enough to not initially raise a red flag.
2. Stolen identities. Fraudsters set up a fake website and “hijack” your company name and address. They may also use brand hijacking — the blatant copying and misuse of company logos and website content — to impersonate a business and deceive unsuspecting customers.
3. Business email compromises. Company personnel with payment authority receive an email that impersonates the CEO or an outside business, asking for payment or noting the necessity to transfer money. Scammers trick the unsuspecting employees and executives and persuade them to wire large amounts of money.
4. Directory scams. Commonly, the scammer will call the business claiming they want to update the company’s information for an online directory or the scammer might erroneously state he or she is with the Yellow Pages. The business is later billed hundreds of dollars for listing services it didn’t agree to, or for ads never displayed in the Yellow Pages.
5. Overpayment scams. The scammer expresses interest in goods that a business is selling, then proceeds to send a check that exceeds the cost of the item and requests that the target wire the difference after the check has been deposited. The check will bounce, leaving the victim to pay the entire amount.

To protect your business, the BBB offers five tips:

1. Keep good records. Keep documentation of all orders and purchases. This will help you to detect bogus accounts and invoices. Limit the number of employees that are authorized to place orders or pay invoices and establish a multiperson approval process for transactions above a certain dollar threshold.
2. Confirm identities of business dealings. Make sure the billing business is one you’re familiar with. If not, check its record at BBB.org.
3. Never provide personal or financial information to strangers over the phone. Don’t give out information about your business unless you know what it will be used for.
4. Spread the word. If your employees know about the scam, they’re more likely to spot it.
5. File a report at BBB’s Scam Tracker (bbb.org/scamtracker).

Lisa Schiller, director of investigations and media relations for the Better Business Bureau Serving Wisconsin, works closely with Madison-based Tiffany Bernhardt Schultz, Southwest Wisconsin regional director of the BBB Serving Wisconsin.

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