So now you’re an owner with viable revenue streams generated from you business’s products or services. You may have been smart in business planning and evaluation (see “Home Business Startup”) and were also able to avoid certain easy money business startup schemes (see “Business Startup Scams”)

However, once you’re an owner, there may be a whole new set of scams threatening the well-being of your business. Generally, they work when there is a certain level of ignorance in management and operations, or when people have failed to protect information or engage in proper accounting.

Phony Invoices

You company keeps getting sent invoices for various services like being included in a business directory in which you never registered, or internet or web hosting services you never started. The fraudulent company may also claim the purchase was authorized by someone in your firm. The hope is that you will just pay the amount due without scrutiny.

There are easy ways to curtail phony invoices. You can assign all purchasing or accounts receivable and payable activities to one person who can document all transactions.

Solid accounting procedures will prevent unnecessary payments. Besides, if you are still a small or microbusiness, and you are unaware of accounts receivable or payable, you may have a larger problem with management.

Business Identity Theft

Business identity theft works in the same way as personal identity theft (see related budgeting-help.com articles for more information). In essence, available business credit is stolen and used for fraudulent purchases.

By protecting your business’s financial information in hardcopy, computer, and web form, you may be able to prevent business identity theft. Shredding sensitive documents, limiting access to files on paper and computer, and having firewalls or network protections are all procedures to increase information confidentiality.

Credit Card Scams

As a business owner, you want to provide your customers with the least resistance to paying for your products or services. However, if someone makes a product purchase or pays for services with a stolen or fraudulently-obtained credit card, your business may suffer a loss due to charge backs by the credit card company. Indirectly, you are also victimized by credit card fraud or personal identity theft.

Charge backs are a part of business (even when the actual credit card holder decides to stop payment for your products or services), but there are a few step that can be taken to ensure that the person holding the credit card is likely to be the owner. You should always ask for corresponding identification and ensure signature matches between identification and cards. Considering the range of activities that can be engaged to obtain a credit card fraudulently (see “How Identity Theft Occurs” for more information), you may not be able to prevent every instance of credit card fraud, but you are at least minimizing it in your own way.

Now that you are aware of how you may be targeted, you can take measures to prevent these types of scams. Ultimately, many of these fraudulent activities can be avoided through protection of business information, and close scrutiny of transactions, whether from customers, or as part of accounts payable.

References

Susan Ward. The Phony Invoice Business Scam
FTC Business Alert. Business Directory Scams Try to “Give You the Business”
Susan Ward. The 5 Most Common Business Scams And How To Avoid Them