Image of a business owner discussing fraud with an associate.

Dealing with Business Scams

Updated April 3, 2016 . AmFam Team

It’s key to know how business scams can throw your business off course. Take a look at these important tips on avoiding — and dealing with — business fraud. Get in the know before you or your employees are find yourself the target of a scam.

As a business owner, you wear many hats. You’re doing your best to keep your clients happy, find new customers, market your business across many channels, all the while keeping your eyes open for opportunity and growth. It’s a lot to do. Important as these tasks are, business owners need to be mindful that not all contacts — or employees — have their business’ best interests in mind.

Dealing with business scams today seems to be part of running a successful company. And knowing how to avoid fraud could save your business thousands of dollars if you know what to look for and how to respond if something happens. More than just managing their business, owners are facing new challenges like carefully monitoring cash, inventory, financial data and customer information. Take a look at some of the more popular types of business scams. You may find you’ve got a lot to learn about identity theft and financial fraud.

Scam Artists, Financial Information and Digital Fraud

With so much financial data available and your customers' personal information stored on servers, scam artists are mining for data with a whole host of tactics. New digital fraud techniques often build on previously successful efforts that targeted financial information and customer personal data.

Spear phishing. Gaining popularity is an email-based scam that spoofs a contact’s email, text message number or pop-up message identity. These types of data mining scams that target unwitting employees succeed when an employee replies — and includes requested social security numbers or other sensitive information without giving it a second thought.

Online banking fraud. Business owners should pay close attention to all transactions — specifically online money transfers. Requests from suppliers to send money directly from your account to theirs may seem convenient, but be sure to follow up with a phone call and verify the bank’s contact information before sending funds. It’s also a good idea to work with your financial institution and set standards that will halt transactions if suspect activity is observed.

Changes in invoice terms. This type of false invoicing is a focused spear-phishing campaign, where thieves pose as genuine, known suppliers informing your business of falsified invoicing terms. They’ll request that future checks and payments be sent to a different address or that online payment methods have changed, usually including a new link to apply payments. Fraudsters will set up a post office box to receive business checks or seek business’ credit card data via that link which takes the unsuspecting to a duplicate website — capturing that data, and later exploiting it.

Payroll fraud. This is a big one for small businesses. If you’ve got another employee managing payroll, have their work audited by an outside firm or assign several trusted employees rotate through the task.

Be wary of credit monitoring services. Unsolicited calls to monitor your credit may actually be scammers seeking to steal your business’ private information. Work with reputable groups only, and stay on top of your business’ credit rating to be sure your identity hasn’t been compromised.

Frauds and Scams That Target Small Businesses

Protect your reputation and your bottom line by reading up on other ways fraudsters, scam artists and ill-willed employees prey on vulnerable businesses.

Cash theft. Brick-and-mortar storefronts continue to face “skimming” issues with workers taking cash from the register and nightly deposits. Owners are left with the difficult task of contacting law enforcement on their employees if a theft is uncovered. To combat skimming, assign two or three employees to switch between the jobs of depositing and auditing cash flow. Have them deliver detailed deposit reports to you on a regular basis that you can audit their data against bank statements.

The online directory scam. In this case, a salesperson may contact you to update your entry in an online business directory. They’ll say they can boost your presence online and ask for payment to do so. But before you decide to make this investment, do your homework and get more information. Check the name of the company on the Better Business Bureau’s "Research a Business website (Opens in a new tab)" to help ensure you’re not getting scammed.

The deliberate over-payment game. This “customer” could try to scheme against you by ordering expensive goods from your business, overpaying by check and then requesting the difference be wired back after the check has been deposited – saying it was all an honest mistake. However, their check will bounce and you’re then out the goods and the money.

Increase Business Security With Focused Training

All too frequently, by the time your business learns that funds are missing or data’s been mishandled it’s too late. Training your staff on how businesses are being exploited can help protect your finances and social media reputation. Here are a few ideas to get your staff up to speed on scammers:

Train your staff. Discuss the way fraudsters are exploiting vulnerabilities with your team so they’re aware of what to look out for. Getting them on board will help lend you extra eyes on any potentially sketchy activity. Leverage online security-based training courses to round-out their awareness and keep up to date on defending your employees against the latest scams.

Verify information. Always make sure the salespeople you’re dealing with check out. Get their full business name, address and phone number, and require a written contract or purchase order for all transactions.

Inspect all invoices. It’s important you get a trustworthy set of eyes on all bills and invoices your business processes. Entrust a small group of trusted employees to approve purchases for you. Encourage them to thoroughly investigate any unexpected or unfamiliar invoices and have them audit one another's work.

Require proposals in writing. Document all company buying with a purchase order number and keep a list of regular vendors on hand — it’ll help protect your business against scammers who claim you previously used their services and are seeking payment. And requiring vendors to specifically reference a purchase order number can help to stop scammers in their tracks.

With the potential for fraud to break a small business, there’s so much at stake — so take action. Because business owners need strong and continued protection against fraud, we offer a wide array of commercial policies designed to cover your business and its assets. And our business personal property plans can help protect the finances of your storefront business as well. Contact your American Family Insurance agent (Opens in a new tab) today to learn about this and other important coverages that can help keep you focused on running your business.

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