Five common scams targeting SMEs

While scams and fraudulent crimes can affect any kind of business, small businesses are often the most susceptible as they can be perceived as easy targets for tax, credit or investment scams.

Small businesses usually have lower levels of security than that of larger corporations, and with scams becoming more and more sophisticated, it is important to always be vigilant and know what steps to take to protect your business.

Last year, there were nearly 800,000 fraudulent transactions related to cheques, debit and credit cards in Australia totaling $211 million, according to the Australian Payments Clearing Association.

These scams can range from anything as simple as false invoices or office supplies that were never ordered, to more complex overpayment scans and investment scheme scams.

In order to save your business from unnecessary emotional and financial losses, here are five common scams targeting SMEs that can be avoided.

  • Tax refund scams
  • Overpayment scams
  • Unauthorised advertising scams
  • Investment scheme scams
  • Office supply scams

Tax refund scams

A tax refund scam, one of the most popular scams targeting SMEs, usually occurs at the start of a new financial year, particularly during October before the end of the lodgement period, according to the ATO.

Scammers often pretend to be from the ATO, a government agency, bank or private law firm stating that you or your business have overpaid your tax or bank fees and that they need your personal details in order to refund the money.

Scammers have a variety of methods ranging from phone calls and emails to letters, text messages, fake advertisements and websites. Some may even have some information on your business.

"Once scammers have your personal information they can steal your identity and commit fraud against you, with potentially serious consequences for you, such as the theft of all your funds," said Tax Commissioner Michael D'Ascenzo.

If any correspondence seems suspicious, it probably is and you should never provide details or make upfront payments without first making official contact with the agency first. You can report the scam to the ATO by forwarding the scam email to them or calling their client contact centre- the ATO works with a number of law enforcement agencies.

Overpayment scams

An overpayment scam involves scammers pretending to buy goods or services from you but will send you a fake cheque or money order for an amount more than the price of the goods. They will then ask for a refund of the overpayment before you realise the cheque has bounced or is fake, according to

Unauthorised advertising scams

Most of the time, small businesses do not have a big finance department and it often consists of one person, making these businesses more susceptible to directory entry or advertising scams than larger companies. This type of scam involves fake invoices sent for a listing or advertisement in a business directory for which you did not authorise or request, according to the ACCC.

Sometimes the invoice will come in the form of a renewal notice and "may sound like a free entry but charges can be hidden in the fine print, resulting in demands for payment later," states the ACCC.

Investment scheme scams

When you hear the words 'tax-free wealth, 'recession-proof' or 'investment in the thoroughbred racing industry' from a telemarketer, most likely you are being targeted for an investment scheme scam. According to the ACCC, these scams are sports betting schemes or betting software offers "in disguise and are nothing more than gambling".

While it is important to note that not all investment opportunities or seminars are scams, you should always be suspicious when being asked to invest large amounts of money into what you think poses a high risk. Do not be pressured into signing a deal without consulting a trusted third party first.

Office supply scams

Many small businesses are so consumed with day-to-day operations that they simply sign invoices for goods they may not have ordered or received, and this ranges from paper and printing supplies to advertising.

The ACCC's ScamWatch website warns that you may even get a phone call from a person pretending to be your regular supplier and that the goods received are a special offer or for a limited time only.

This may result in your business being charged high prices for bad quality supplies or worse, being locked into a yearly subscription contract that you cannot break. No matter how busy you are, ensure that your finance department checks all invoices against the goods received.

Other common types of scams can also include:

  • Being charged for an internet domain name that is similar to your business but does not match up exactly;
  • Unsolicited faxes offering directory entries and catalogues that charge exorbitant fees for sending a fax back in response; and
  • Green scams, whereby scammers offer fake rebates or energy-efficient initiatives that your business will have to pay for.

The general rule to avoid being scammed is to avoid giving out personal details about your business when in doubt unless you know exactly what the information will be used for. You should also ensure that your accounts and financial or inventory records are up to date, organised and accurate in order to better detect fake invoices.

To ensure that your customers and suppliers are legitimate, Dun & Bradstreet's Identi-Check service allows your business to verify your customers and comply with Anti-Money Laundering laws.

Learn more about fraud prevention here.

Next week's article  will discuss banking and credit card fraud, as well as fax back scams.

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