Small business scams

Wednesday 24 August 2011

Updated 28 February 2012

Scams that target small businesses come in a number of forms, and can leave your business vulnerable and exposed to a variety of threats.

Scammers will often go to great lengths to convince businesses that their offer or request is legitimate. Many scams succeed because they look like the real thing or try to take advantage of a busy office environment.

The best defence to protecting your business is by being aware of the most common scams targeting businesses, and knowing what to do if you’re targeted by a scam.

Tips to ensure your business is protected

Remember these golden rules to help protect your business from scammers:

• If you become aware of a scam, let other people and your industry association know about it.
• Keep your filing and accounting systems well organised – this will make it easier for you to detect bogus accounts and invoices.
• Don’t give out personal information or banking details to anybody you don’t know and trust.
• Make sure the business that’s billing you is the one you normally deal with. Also ask for the person’s name that you’re speaking to and which organisation they represent.
• Don’t agree to offers or deals straight away – always ask for the offer in writing and consider getting independent advice if the deal involves money, time or a long term commitment.
• Ensure that you have clear procedures for verifying, paying and managing accounts and invoices.
• Limit the number of people authorised to place orders or pay invoices for your business.
• Install reputable computer protection software and a firewall, and keep them up to date.

6 common scams targeting small businesses

Government grant information scams

Businesses should be aware of organisations charging money for freely available information regarding government grants. The websites which offer these services are becoming more and more sophisticated, making it harder for businesses to recognise when a service isn’t actually supported by government. They use domain names that appear legitimate, or imply they are related to the government by including .gov, even though they are a .com.

• Tip: make sure to take note of the domain name of a website, and ensure they are related to government.
• Tip: do not provide your personal information, or pay money to a website claiming to provide government grant information.

Tax refund scams

This is one of the most common scams targeting small businesses. The scammer will typically pretend to be from a government agency, bank or private law firm claiming you are entitled to reclaim your overpaid tax or bank fees. They may also tell you that the refund is taxable and you will have to pay the tax amount before receiving the refund or that you have to pay a fee to receive your money. The scammer might try to trick you by appearing to have personal information about you.

The scammer is after your personal information and also your money. They usually ask you to confirm your personal details, or claim you need to pay an upfront payment to get your refund.

• Tip: do not provide or confirm your personal details, or give money to someone unless you made the contact or you know them.
• Tip: be wary if you are contacted by someone claiming to be from the government or a financial institution.
• Tip: if you aren’t sure a business or organisation is legitimate, you can check to see if they are registered on ABN Lookup.
• Tip: if you are approached by an agency that claims they are a charitable organisation, check to see if they are a deductible gift recipient (DGR). DGR’s are an entity or fund that can receive tax deductible gifts.

Overpayment scams

This sort of scam involves scammers making contact to purchase goods and services from you. They then send you a payment by cheque, money order or credit card for far more than the agreed price. The scammer then asks you to refund the overpayment or to pay the scammer’s ‘freight company’.

The scammer is hoping you will transfer the refund or pay for ‘freight’ before you discover that their cheque has bounced or that their money order or credit cards were phony.

• Tip: be wary if you are overpaid for products.
• Tip: limit the number of credit card accounts that your business uses.
• Tip: be wary of complicated or unlikely orders.

Directory entry or unauthorised advertising scam

This scam involves a scammer sending you an invoice by post, fax or email for a listing or advertisement in a magazine, journal or business register which you didn’t authorise or request.

Scammers will send a proposal for a subscription, disguised as an invoice or ‘renewal notice’ for an entry on a questionable website or in a questionable trade directory. Often these businesses are based overseas. It may sound like a ‘free’ entry, but charges can be hidden in the fine print, resulting in demands for payment later.

Another common scam is calling a business to confirm details of a pre-booked advertisement or to ask if you would like a ‘free trial’ – it’s only later that you find your business has actually been charged for the unauthorised advertisement.

• Tip: if you receive a request to confirm details of an advertisement, check your own records to see whether your business made this booking.
• Tip: be aware that a scammer may quote a genuine entry or advertisement that you have placed already in a different publication or directory to convince you to pay.
• Tip: if you receive an offer for a free trial, check for any hidden terms.

Office supply scam

This scam involves you receiving and being charged for goods that you did not order. These scams often involve goods or services that you regularly order: paper, printing supplies, maintenance supplies or advertising. You might receive a phone call from someone claiming to be your ‘regular supplier’, telling you that the offer is a ‘special’ or available ‘for a limited time only’. If you agree to buy any of these supplies that are offered to you, they will often be overpriced and bad quality.

• Tip: if the caller claims that your business has ordered or authorised something and you don’t think it sounds right, ask for proof by requesting the order number or getting them to send the order to you in writing.
• Tip: check that goods have actually been ordered and delivered before paying an invoice; and that you are happy with the quality.

Website domain name scam

Under this scam you’ll be sent either an unsolicited invoice or email for an internet domain name registration usually very similar to your own business domain name. Or you’ll be sent a renewal notice for your actual domain name. The notice could be from a business that supplies domain names trying to trick you into signing up to their service or it could be from a scammer trying to take your money.

• Tip: If you have a registered domain name and receive a renewal notice, check that it matches your current domain name exactly – look for small differences such as ‘.com.au’ instead of ‘.net.au’. Remember, even if the core business name is the same, it could be a completely new domain name.

What to do if you become aware of, or are a victim of a scam

If you spot a scam or have been scammed, you can contact a number of Australian Government agencies for advice or to make a report. By reporting the scam to the appropriate government agency, you can help them identify scammers and warn other businesses about the scam.

To find out which government agency is best placed to assist you, visit the Report a scam page on the SCAMwatch website.

The Australian Competition and Consumer Commission’s (ACCC’s) Small Business Scams Fact Sheet (PDF 0.13MB) also provides tips to help protect your business from scams. You can also call the ACCC Small Business Helpline on 1300 302 021.