How to Avoid Small Business Scams & Not Be the Next Statistic
John F. Dennehy Jr., CPA, PC

How to Avoid Small Business Scams & Not Be the Next Statistic

We get it — growing your small business and seeing it to success is paramount. However, taking shortcuts or cutting corners will hardly ever net the returns your small business deserves. Even worse, falling victim to scams and nefarious activities can totally derail small businesses.

As such, it's imperative for you to be able to identify small business scams and avoid them. Fortunately, you have a number of resources through the Federal Trade Commission, Better Business Bureau, and Small Business Administration.

At the same time, the team at John F. Dennehy CPA can work closely with your small business to offer guidance and help detect scams targeting small businesses. Let's take a closer look at some of the top scams we've seen that are designed to target small businesses and how you can avoid being the next victim.

Bank Account Takeover

Bank account takeover is one of the most common and dangerous scams designed to target businesses of all sizes, especially small businesses. Large and small businesses across the U.S. have suffered substantial losses from electronic crimes through the banking systems.

Simply put, a bank account takeover is a malicious type of business identity theft where criminals access and take over the bank account of your small business. Access to the account is usually gained by stealing employee passwords, sensitive information, and other valid credentials via phishing scams. 

Phishing scams are explained in more detail below. Once inside, the cybercriminals can initiate ACH transactions to wire money to financial accounts they have complete control over. that are managed by the thieves.

Protect Your Business's Bank Information & Assets

While business bank account take over is a real hazard for small businesses, there are several ways you can protect sensitive information and your business. It starts with having a strong partnership with your local bank, credit union, or financial institution. Here are five actionable steps you can use to stop scam artists in their tracks and prevent an unauthorized wire transfer.

Partner with Your Bank

As we mentioned, your local bank, credit union, or financial institution is your first line of defense. Make sure to partner with your financial institution to understand the security measures they have in place to protect your financial information and money.

Many financial institutions may offer the ability to establish notifications on triggering events, such as when a wire transfer or large withdrawal is initiated. This way, you can know as soon as someone attempts to wire money from your account.

Secure Your Online Environment

In many instances, bank account takeover starts with your network. It's imperative to protect your cyber environment just as you do at your physical location. Here are a few bonus tips:

  • Require everyone on the network to use complex passwords
  • Require everyone to change passwords regularly
  • Ensure the virus protection and security software is up to date
  • Ensure the operating system is up to date
  • Encrypt any sensitive information or data
  • Never use unprotected internet connections

Watch Out for Suspicious Activity

Train employees to watch out for unexplained network activity, pop ups, and suspicious emails. If you do notice an increase in activity, consider contacting your bank to stop all online activity and remove any system that may be compromised. 

At the same time, if your business receives funds from untraceable payment methods, it could be a red flag that requires immediate attention.

Prevent Unauthorized Business Transactions

Speak with your banker about the available programs the financial institution offers to protect you from business scams and unauthorized transactions. For example, Positive Pay along with other services can be a powerful defense against those looking to steal sensitive information and money. 

These services offer multi-person approval processes, device authentication, callbacks, and batch limits to help you avoid scams.

Make Sure You Understand Your Part of the Partnership

While protecting your bank information starts with your bank, it ends with small business operators and staff. And there are certain steps and protocols you must have in place to hold up your end of the deal.  

Your bank account agreement will outline the business security measures your business should take. Failure to do so could cause your business to be legally liable for  falling victim to business scams and bank account takeovers.

Your Small Business May Be Susceptible to Phishing Scams Targeting Small Businesses

Phishing scams targeting small businesses are a big deal. Phishing scams are malicious attempts by hackers to gain access to confidential information or financial information. In most instances, phishing takes the form of small business email compromise scams.

To conduct the phishing scams, bad actors will pose as a trusted source and attempt to "phish" or "fish" for vital business information from employees by using some type of bait. The names of the employees can be easily gained through directory listings or from social media.

Example 1: Small Business Email Compromise Scams

One example of a small business email compromise scam is when someone in your employee directory listings receives an email from a seemingly trusted retailer or office supply provider. The offer or bait is for them to access a free coupon for clicking on a seemingly harmless link. 

Once the employee clicks on the link, a business email compromise occurs because the hacker will attempt to gain sensitive information or install malicious software on your network.

Example 2: Small Business Email Compromise Scams

Another example of common scams associated with the business email is when an authority figure of the company, chief financial officer, or business owner's email address is spoofed by a scammer. 

The nefarious individual will request very confidential information about the business or the employees. At first glance, the email communication may look as if it's from a legitimate company. And this tends to lull employees into a false sense of security.

How to Prevent These Types of Common Scams?

To avoid these types of common scams, small businesses must establish best practices and protocols, specifically for handling emails. More so, small businesses must educate their employees on how to handle emails. 

A few common tips small businesses and their employees can use to prevent infiltration are explained below.

Avoid Engaging with Emails from Unknown Sources

Never reply to or click on links from unknown sources. Many fraud scams use proven techniques to encourage employees to click links and complete forms on fake websites.

Detecting Bogus Email Accounts

Teach employees how to detect bogus accounts by focusing on the details of the email address. If everything checks out, the employee should verify any request with a conversation.

Verify Unusual Requests

If employees receive an email with an unusual request, employees should place a phone call or meeting with the chief financial officer, business owner, or authority figure to verify the request.

Office Supply Scams Targeting Small Businesses

A third popular scam involves office supplies. With office supply scams, a nefarious individual will email or call to remind you of the need to reorder office supplies. 

Two popular types of office supplies used in this type of small business scam are paper and copier toner. If you or your team are tricked into ordering these office supplies, you will do so at an exorbitant rate. 

A variation of this scam is to send office supplies and fake invoices for products you've never ordered. And then the vendor will harass you to pay the fake invoices or phony invoices.

How to Avoid the Office Supply Small Business Scam?

For starters, make sure your staff is informed of this small business scam. You can also work with vendors for small businesses to establish procedures that require a purchase order and a signature. 

Anytime you receive a request for payment, make sure to train your employees to verify invoices. And if you ever receive products for your business you didn't order followed by phony invoices, the Federal Trade Commission says you have the right to keep any unordered merchandise as a free gift. 

In many instances, fraudsters will pose as a government agency or as legitimate companies to initiate this scam.

Contact with John F. Dennehy CPA to Add a Layer of Protection Against Common Scams

Unfortunately, fraudsters will not stop or take a break from attempting to steal sensitive information and money from your business. However, you don't have to be their next big payday, and the team at John F. Dennehy can help.

We regularly partner with small businesses to consult and implement financial safeguards to protect them from scams. For example, we can work closely with you to create audit trails to monitor payment procedures, including how you pay bills. We also regularly establish checks and balances to control the movement of money to prevent overpayment scams.

In the end, a solid accounting system is an excellent foundation for preventing fraud and avoiding issues in the future.

Contact John F. Dennehy today to learn more.

About the Author John F. Dennehy Jr., CPA, PC

We at John F. Dennehy CPA are a team of certified public accountants who service clients throughout Long Island. The services that we provide are comprehensive, and we can resolve multiple accounting needs for a client.

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