Small businesses and scams: What you need to know

Published On : 10/25/2016

By Greg Thomas, Director at Mi Ventures

Fraud affects 1 in 4 small businesses every year, and in 2015, fraud losses to SMEs were estimated at £18.9 billion[1].Compared to bigger companies, small businesses are more likely to be a target of fraudsters as they do not have many resources available to them. The effects of fraud can hamper SME growth, employment, reputation and confidence, making prevention and effective fraud detection controls a must.

Businesses are prime targets for scammers as they are perceived to have larger bank balances and credit facilities with many suppliers.Greg Thomas, director at Mi Ventures, has worked with start-ups and small businesses for many years. Here, he offers advice to SMEs on what to look out for, and how to guard against fraud.

What are some of the scams to be aware of?

Business Identity Theft

This is where a business’s identity is stolen or cloned and can also include their website being hacked.  Transactions are then made in that businesses name.  If you think about the amount of information that can be found on the internet it is not hard to see how a business could have their identity stolen.

Companies House Late Filing Calls

Bogus callers will ask Limited Companies for a fee in order to stop them from being liable for any further fines owing to the late filing of annual returns. Companies House never make calls demanding payment.

Directory Scams

Phone scams offering a business a prominent place in a local or national business directory for a fee are prevalent. The business owner is just required to pay a couple of hundred pounds over the phone. Of course there is no such directory and the bogus caller has taken money and bank details from the business.

HMRC phishing emails and texts

These emails and texts are sent out randomly purporting to be from HMRC and informing the business owner that they are due a tax refund are very common.  They are designed to get the business owner to supply their personal bank details.

There have even been reports of bogus callers at businesses or homes offering free tax advice where the individual tries to extract personal or bank details.  

Invoice Fraud

Fraudulent companies can easily find out what suppliers a business uses and will use this information to send out fake invoices or call finance departments requesting payment for goods and services that a business never ordered or received.

Loan Fee Fraud

This type of scam is when the victim is contacted and asked to pay a fee for a business loan application that they have made.  Of course if they haven’t applied for a loan then they won’t fall victim to this scheme but the fraudster works on the basis that some of the people he or she calls will recently have applied for a business loan and they will trick their victims into disclosing the name of the loan scheme that they have just applied for and will then be told that there is a fee for setting up that loan. These scams are ultimately aimed at taking the victims money or their identity. 

Request for payment for unnecessary services

Start-ups and small businesses are often confused and overwhelmed when it comes to keeping up with insurances and licenses that they are required to purchase. Bogus calls, emails and texts will often target businesses and prey on their confusion.

Small businesses can check with their local authority or their trade body directly or their professional business advisor to find out what is required to be fully compliant.

How can I protect my business from being a victim of fraud?

1. Know who your customers really are, including your suppliers.  Remember to carry out enquiries or credit checks before offering credit or taking on a large contract with someone you don’t know very well.
2. Install updates as soon as they become available on PC’s, tablet or smartphones as these updates often include important security updates that will protect against viruses and cyber crime.
3. Remember that email sent from addresses can easily be spoofed and if something sounds too good to be true it usually is.  Businesses should look out for emails sent to ‘Dear Customer’ or a similar generic greeting as usually if the email is genuine it will be personalised.  If the email asks for bank or personal details and the recipient isn’t expecting it, they should treat it with caution.
4. Never pay over the phone by bank transfer. By adopting this simple rule, businesses can protect themselves against many of the current scams out there. And if the request for payment is genuine there will be other ways in which to make the payment.
5. Review what information about the business is publicly available and decide if it really needs to be in the public domain.  Businesses should review their own website content and think about what it might be giving away to potential fraudsters.

As a small business owner/manager it is vital that you share information on scams with your employees as you won’t always be the one picking up the phone, opening the post or the emails sent to your business. Scammers also target during the summer holidays when small businesses might have their resources stretched owing to the school holiday period. If a business uses temporary staff during this period, owners must ensure that their staff are briefed on the most common types of scams.

To reduce the chances of falling victim to scams, small business owners can sign up to receive alerts from organisations such as Action Fraud Alert. Limited companies can sign up for protection under the PROOF scheme from Companies House.

If a small business owner suspects that they are a victim of a scam they should not hesitate in reporting it to Action Fraud

[1] Action Fraud: http://www.actionfraud.police.uk/small-businesses-know-your-business

Wanda Rich

Wanda Rich has been the Editor-in-Chief of Global Banking & Finance Review since 2011, playing a pivotal role in shaping the publication’s content and direction. Under her leadership, the magazine has expanded its global reach and established itself as a trusted source of information and analysis across various financial sectors. She is known for conducting exclusive interviews with industry leaders and oversees the Global Banking & Finance Awards, which recognize innovation and leadership in finance. In addition to Global Banking & Finance Review, Wanda also serves as editor for numerous other platforms, including Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.