Learn to Spot Scams Before They Fool You

Learn to Spot Scams Before They Fool You

By Alice Bredin

Criminals seeking to cheat business owners are continually working on new schemes to separate entrepreneurs from their money. A study by credit score provider Experian estimated that these scams cost U.S. small businesses more than $50 billion1 each year.

The variety and sophistication of these frauds can mean that businesses working hard to save money—via energy efficiency, strict budgeting and penny pinching—lose huge sums. Being aware of how criminals operate can help keep your money-saving efforts from being undone.

Read below to learn about four common types of scams so you can avoid losing hard-earned money.

Fake utility bills
The scam: A business receives an email that seems to be from their utility company, claiming that the business owes hundreds of dollars in overdue bills. Some of the scam emails are simple text, while others use logos and letterhead from real utility companies including Pacific Gas and Electric (PG&E). When the business owner clicks on a link to view the bill, one of two things may happen: They will be directed to a site and told to enter login information, which allows scammers to steal passwords and other data. Another approach is to include a virus with an email that a business owner will download, thereby providing access to private information.

Protecting your business: Examine all emails closely. If you see any differences from your normal bill, such as the wrong address or account number, delete it right away. Never click a link in a suspicious email, from any source. Call your utility's customer service department to check up on the status of your bill. Report suspicious emails to the power company or federal law enforcement. You can email PG&E’s security department at CorporateSecurity@pge.com, and federal agencies can be reached at www.stopfraud.gov/.

Bogus IRS phone calls
The scam: This phone scheme targets businesses of all kinds, but recent immigrants may be particularly vulnerable. In this scenario, a business owner receives a call from a person claiming to be an agent of the IRS, demanding an immediate wire payment to the government for back taxes. Owners are threatened with arrest or deportation if they fail to comply. Scammers often research a business thoroughly before calling so they can mention convincing details, and they may even “spoof” the caller ID so the call appears to be coming from an IRS phone number. Scammers have also used other government agencies as their cover—for example, claiming to be an immigration official demanding a visa application fee.

Protecting your business:The IRS typically sends initial communication by mail, and the agency states on its site that it “never demands immediate payment over the phone2.” Anyone who asks for payment by wire or prepaid debit card should also arouse your suspicion because the IRS states that it does not require payments to be made through these means. Another sign of a scam is a “federal agent” who threatens to make arrests, since this is not typical. If you do receive a call from someone claiming to be a government representative, ask them to send you any claim by mail.

Green Dot scams
The scam: A caller rings up the business and demands immediate payment of some fee—sometimes a visa application fee, sometimes back taxes, sometimes overdue utility bills. The business owner is threatened with dire consequences, such as having their power cut off, if they don’t comply immediately. They’re then instructed to go to a local business and purchase a “Green Dot MoneyPak” card for cash in the amount of the fee. Green Dot cards are a brand of pre-paid debit card. Scammers value them for their anonymity: All you need to transfer money to and from the card is the security code on the back. The business owner puts money on the card, and then they’re asked to email that security code or recite it over the phone. The scammer can then immediately take the money off the card and put it into another account.

Protecting your business: Be suspicious of any caller who demands immediate payment; utility companies and government agencies do not require payment through Green Dot cards. If you receive a suspicious call from a utility company, for example, verify the information by calling your utility company’s customer service line. Report suspicious calls to your utility company’s security department. For PG&E, that number is 1-800-743-5000.

Customer overpayments
The scam:A potential customer places an order for one of a company’s most expensive items. Shortly after, a cashier’s check or money order arrives to cover the purchase—but it’s made out for more than the item is worth. The scammer then calls or emails the business, apologizes for the error, and asks the business owner to wire them the difference between the overpayment and the cost of the item. Often in these scams, the check appears to clear initially before being rejected by a distant bank. By then, the victim has wired the “overpayment” directly to the scammer, and that money is lost.

Protecting your business:While customers may sometimes legitimately overpay, pay special attention to any overpayment. If you receive a large overpayment, take the check to your local bank branch in person and get a banker to verify it before depositing it. Never wire funds to a customer, since wired funds cannot be recouped. Any refunds due to a customer who paid by check should be paid via check.

Charges to renew your listings
The scam:A business receives a call or a letter informing them that it’s time to renew a listing and pay a fee for a directory such as the Yellow Pages or a corporate registry. The scam often starts with a cold call asking an employee to “confirm” various details necessary for the listing. Scammers may point to an existing business listing in a free directory to prove that the business has already agreed to appear in the book or webpage; from there, it’s easier for the criminal to make the case that the business needs to pay some type of subscription fee.

Protecting your business: It’s possible that your business does belong to a paid directory service, but verify this fact before making any payments. Refer to past payments and research the listing to make sure it truly is a fee-based directory. Improve your ability to identify fraud by funneling all payments made by your company through one person who uses invoice or purchase numbers for tracking. This type of system will enable you to quickly determine if an invoice is legitimate.

While you’re protecting your business’s finances, learn about other ways to boost your bottom line by downloading PG&E’s "25 Money-Saving Tips for Businesses".

 

Sources:
  1. Experian, “Identifying Small-Business Fraud.”
  2. IRS, “Tax Scams, Consumer Alerts.”

Learn to Spot Scams Before They Fool You
  • SMB Blog Author
    Alice Bredin
    Alice Bredin is an internationally renowned small business expert and author. Small business owners worldwide have relied on her books and columns to improve their productivity and success. She is a former small business commentator for public radio's Marketplace program and has helped shape small business policies through her testimony to the Senate Committee on Small Business & Entrepreneurship. Alice is president of Bredin, Inc., a B2B marketing agency that helps the Fortune 500 sell to small and midsize businesses.
 

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