Small Business Scams: How To Avoid Fraud

10 ways that scammers will try to sink your business

By Oliver Milman
Thursday, 22 March 2012

feature-scam-90You may think that you are too savvy for your business to become the victim of a scam, but new figures show that instances of fraud are surprisingly widespread.


The Australian Competition and Consumer Commission received 83,150 reports of scams from small businesses and consumers in 2011, resulting in losses of $85 million


This figure is up 35% on the previous year, with half of Australian small businesses estimated to have fallen foul of confidence tricksters and hackers.


Unexpectedly, the number of online scams has decreased, with fraudsters switching their attention to text messages and email.


So, what are the scams that you need to keep an eye out for? We’ve outlined the 10 scams that are causing most grief to businesses today.



1. Advance fee/upfront payment scams


It’s not exactly new or innovative, but the tactic of getting businesses and individuals to pay upfront fees in return for a promise of future work that never takes place is the leading type of scam in Australia.


The ACCC says that more than 30,000 scams of this nature were reported last year, accounting for a whopping 36% of all fraud activity.


Businesses usually ask for upfront payment entirely innocently, but if someone is offering you work in return for your own money being stumped up to “cover costs”, be wary.


“Remember there are no get-rich-quick schemes,” the ACCC advises. “The only people who make money are the scammers. Exercise extreme caution when offered investment opportunities, especially if you receive an unsolicited email and/or call.”



2. Computer hacking scams


Sadly, it’s not just high profile hackers such as the Anonymous group that cause havoc to businesses’ IT systems.


Even a relatively novice scammer can strip you of your personal details, contacts and bank details by getting access to your computer.


Having the correct security measures in place, as well as proper back-ups if information is wiped, is essential, but also watch out for people who want remote access to your computer for some spurious reason.


There were more than 19,000 of these scams last year, representing 23.4% of the total number.



3. Lottery and sweepstake scams


You can’t win a lottery unless you buy a ticket. Unfortunately, this rather basic fact seems to have escaped many Australians, with more than 7000 of them falling foul of lottery scams last year.


The premise is simple. Scammers claiming to be from a body such as the International Lotto Commission or Spanish moneypots Loteria Primitiva and El Gordo will tell you that you’ve won a sizeable sum of money, only to ask for your details to process the winnings. Don’t do it.



4. Banking and online account scams


Banking scams take many forms – sometimes, fraudsters will use Spyware technology to access your details or take the trouble to clone or “skim” your credit card.


The lesson is simple – don’t give your details out freely and always check who has access to your credit cards and online banking. There were 5430 of these scams reported last year.



5. Online auction and shopping scams


With the rise of online shopping in Australia, the scammers have swooped. More than 5000 people were dudded by eCommerce rorts last year.


Fraudsters often offer a product at a very low price, just to get your credit card details. Or they will rig an auction, such as on eBay, so that you are left paying over the odds for a product that never arrives.


Only make purchases from trusted sites and be wary of unsolicited offers and demands for immediate payment. Conversely, if your business sells online, strive to reassure customers that you won’t run off with their money.



6. Account deactivation text messages


Phishing is a popular scam that involves emails, calls or text messages with the purpose of obtaining financial information. Once you’re hooked, it can cost you thousands.


An increasingly popular tactic is the sending of text messages to mobile phone users, informing them that their bank account has been deactivated. Victims are then encouraged to call the number provided and provide their details for “confirmation.”



7. Health inspector visit


Even if you run the cleanest restaurant or shop in town, the visit of a health inspector can be a rather nervy experience.


No surprise, then, that several scammers have been reported for posing as health officials, citing fake complaints about your business. They will then visit your premises with the sole intention of gaining your details and ripping you off.



8. The fake Yellow Pages rep


Similar to the health inspector, the fake Yellow Pages rep will attempt to gain your confidence in return for your personal information.


Using Yellow Pages’ logo and a fake registration form, the scammers will try to sell you advertising space in the publication. If you hand your money over, you will never see them, or your ad, again.



9. Dodgy email receipts


An increasingly popular email scam is the lure of the download. An email will arrive seemingly from a large retailer, supplier or business associate, with a receipt attached.


Typically, this will be a zip file that will contain a virus, keystroke logger or malware when you download it. Don’t casually open such documents – check exactly who has sent the receipt and whether they are genuine.



10. The census con


Every time a census is announced, unscrupulous types will pose as government officials in order to get your personal data.


Remember that the census doesn’t require your bank details or any other sensitive information, so don’t be fooled.


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I take great exception to item 1 (upfront payment for services) to be described as a scam. After years of the "joy of chasing money" and the stress that brought, I simply will not work without money up front.

At all times there must be money in my bank account that will cover a minimum of 1 month's work in advance in relation to a current contract.

This way I can concentrate on winning clients and providing for them, without wasting even a moment's time or any energy whatsoever reminding about or chasing money.

If a prospective client cannot pay up front, they clearly do not have the resources to engage my services, so it's a good way to screen out those whom I'd probably end up chasing for payment. There is an added bonus here in that I have a higher quality client group which is eminently more satisfying to work with.

This is not a scam, this is a sane and sensible control of cashflow, which in turn leads to better and more respectful relationships with a better class of client.
ChristineSutherland , March 23, 2012
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