Wisconsin BBB Warns Businesses to Watch Out for Small Business Scams

Consumers aren’t the only victims of fraud.  Every year, thousands of small businesses find themselves targets of fraudulent or deceptive sales practices.

There are numerous scams that target small businesses—from phony invoicesfor unordered products or services, fake directory advertising, to false claims of government requirements needing you to send money.

Small business scams are becoming more prevalent, with scammers going to great lengths to persuade businesses that the invoices they are sending or the offers for service are sincere and valid.  When, in fact, it’s very easy to duplicate letterhead and logos so that they look real.  It’s equally simple to create phony websites or business checks as well as acquiring your name, title, address and other business information through business listings, articles, ads and business websites. 

“We continually see various scams against small businesses, and they seem to be increasing”, says Ran Hoth, CEO/president of the Wisconsin BBB.  “Within the first several weeks of the new year, we were able to identify and publicize several, involving phony invoices, directories and a false government requirement notification and payment request, aimed specifically at small businesses throughout the country.”

The Better Business Bureau reminds businesses to protect themselves by learning what to look out for.  Often, it’s only a matter of identifying suspicious situations and asking the right questions.

 Some of the common small business scams include: 

Phony invoices.  Businesses receive fake invoices demanding payment for product or services never ordered or received.  Sometimes, phony invoices are disguised as solicitations.  Often, 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. 

Office supply scams.  Businesses may receive an unexpected telephone call first.  Sometimes an advance call is made to find out what brand of supplies or equipment the business uses.  On the return call, the caller claims to represent a reputable company with which the firm often does business.  The caller may state that surplus merchandise is available at a reduced price due to a cancellation or over-order by another purchaser.  Don’t be fooled. 

Directory Scams.  A problem that has plagued businesses for decades involves deceptive sales for directories.  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 is with the Yellow Pages.  The business is later billed hundreds of dollars for listing services they didn’t agree to or for ads they thought would be displayed in the Yellow Pages telephone book.

Stolen identity.  Here, scammers pretend to be a legitimate company for the purposes of ripping off consumers.  When it comes to stolen identity, the company doesn’t necessarily lose money, but their reputation is potentially tarnished as angry customers who were ripped off by the scammers think the real company is responsible.  They may set up a fake website and “hijack” your company address.

Business opportunities.  Many small business owners are approached to invest in other business opportunities.  Promoters may even claim that the venture will increase customer traffic flow into the current business or that little effort is required to collect high profits.  Before jumping into business collaboration, make sure you know the value of the product and its true costs.  Always make sure to check out the business at bbb.org. 

Charity pitches.  Most businesses are regularly asked to donate funds to needy causes, from requests to support the neighborhood’s latest fundraising project to appeals for sizeable charitable contributions.  While many requests are legitimate, every year small businesses become victims of fraudulent or deceptive charitable solicitation schemes.  Make sure to check out the charity at give.org. 

Coupon books.  Small business operators are often approached to participate in coupon book promotions.  The business offers discounts or extras in the coupon books that are sold by promoters to consumers.  Problems occur if the promoters change the terms of the coupons to make them more attractive to buyers, when the books are oversold or when books are primarily distributed outside the firm’s normal business area. Make sure the coupon book is being promoted by someone you trust, and that the terms and conditions are clearly spelled out. 

Fax back scams.   Businesses will receive an unsolicited fax, usually offering a great deal on a product or a trip.  They often require that you send a fax back or call a toll-free number.  Be careful.  The high costs when you reply are often not disclosed, and you can be charged several dollars if you fax back. 

Overpayment scams.  Be extremely cautious if a customer overpays using a check or credit card and then asks you to wire transfer extra money back to them or to a third party. 

 The BBB offers these tips to help small businesses protect themselves: 

• Keep good records.  Keep documentation of all orders and purchases. This will help you to detect bogus accounts and invoices.
• Never provide personal information or financial details to anyone over the phone that you don’t know.
• Make sure that the business billing you is a business you are familiar with and normally do business with.  If not, question it.  Get the name of the person you speak with, the company name, address, phone and website. 
• Do not give out information about your business to anyone, unless you know what the information will be used for.
• If solicited for a product, service or donation, always ask for an offer or for further information in writing.  Also, ask for references, so you may verify with other businesses what their experience is and how long they’ve been doing business with the soliciting company.
• Set clear procedures for the verification, payment and management of all accounts and invoices. Limit the number of employees that are authorized to place orders or pay invoices.
• Install computer protection software and a firewall.
• Don’t click on links inside unsolicited e-mails.  They could spread malicious software or viruses.
• Check a company on bbb.org.  If you feel you have been scammed, report the scam or file a complaint.  Let others in your industry know of the scheme you’ve come across. 

For an online version of this story, click here.

For more information or further inquiries, please contact the Wisconsin BBB at www.wisconsin.bbb.org or 414-847-6000 (metro Milwaukee), 920-734-4352 (Appleton), 608-268-2221 (Madison) or 1-800-273-1002 (elsewhere in Wisconsin).

 About BBB

For 100 years, Better Business Bureau has been helping consumers find businesses, brands and charities they can trust. In 2011, consumers turned to BBB more than 100 million times for Business Reviews on more than 4 million companies and Charity Reports on 11,000 charities, all available for free at www.bbb.org. The Council of Better Business Bureaus is the umbrella organization for 113 local, independent BBBs across the United States and Canada, as well as home to its national programs on dispute resolution and industry self-regulation.

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