Protecting your company from small business scams

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From finances to marketing, being a small business owner means you’ll have to know the ins and outs of your company. Whether it’s keeping track of your monthly expenses or your business website, a good owner will keep tabs on what is affecting his or her business.

But what happens if you receive a invoice that has the title Yellow Pages and says you owe hundreds of dollars for a business listing? What you may not know is that the invoice is fake and the entire thing is a scam.

It’s known as the Directory Listing Scam. According to the Federal Trade Commission, it’s one of many common scams that targets small business owners. Here are the red flags the FTC says you should be aware of:

The Directory Listing Scam – In this scheme, scammers will send out an invoice or letter claiming to “verify” or “confirm” a company’s contact information for its listing in a business directory. However, there’s no existing listing — and maybe not even a real business directory — but the employee who picked up the phone doesn’t know that. Persuasive double-talkers bulldoze the employee into saying yes. Later, if the company complains it didn’t agree to the listing, the fraudsters may play back a tape of the call (which might have been doctored) as “proof.”

Next, the scammers send urgent invoices for hundreds of dollars. The invoices might even include the “walking fingers” logo and the Yellow Pages name. In many cases, the person paying the bills will simply cut a check, not realizing that the company never agreed to pay the hefty fee for the directory. When a business disregards the invoice, the scammers ante up their efforts by making collection calls and sending collection notices, piling on late fees and other penalties. The fraudsters sometimes even threaten to ruin the credit of the company or its owners and employees, to take them to court, or to refer the debt to a debt collector.

If companies stand firm in their refusal to pay for services they didn’t authorize, the scammer may try to smooth things over by offering a phony discount. Or they may agree to cancel the listing going forward to stop any new bills. By this point, many companies pay up just to stop the hounding. However, more fake invoices will likely be on the way from either the same scam artist or from others who have bought their contact information for a new scheme.

Sometimes the first contact with the fraudster is through an advertisement sent by mail, fax, or email that asks the company to “verify” or “confirm” its contact information for a free listing service or a free social networking page. Fine print on the advertisement, however, may say that by returning the mailer or responding to the fax, the company is agreeing to an expensive business directory listing.

The URL Hustle – In the scheme, owners receive a message saying their web address will expire if they don’t renew it.

Since the invoice emphasizes that time is of the essence, some businesses pay first and ask questions later. Of course, the invoice isn’t from the entities that really handle things like that. It’s from a fraudster, banking on the fact that companies with a web presence will be too busy to investigate. In a variation on that scam, fraudsters send letters warning businesses that they’ll lose their trademarks if they don’t pay a fee immediately or that they owe money for additional registration services.

The Supply Swindle – Here’s the situation. You have supplies show up at the door. Not knowing who ordered them, an employee pays for them assuming a colleague must have OKed the buy. The box could contain unordered merchandise or maybe it’s empty. Or a con artists may call, falsely claiming to verify an existing order. The next step: tricking an unsuspecting employee into saying yes. That triggers high-pressure threats if the business refuse to pay.  Either way, the company is left holding the bill.

How to protect your business

  • Train your staff – Educate your employees on what red flags they should be aware of with each scam. That includes anybody who is involved in the day-to-day operations of your business.
  • Inspect your invoices – Depending on the size and nature of your business, consider implementing a purchase order system to make sure you’re paying only legitimate expenses. At a minimum, designate a small group of employees with authority to approve purchases and pay the bills. Train your employees to send all inquiries to this group. Compile a list of the companies you typically use for directory services, supplies, and other recurring expenses. Don’t pay for products or services you’re not sure you ordered.
  • Verify to clarify – If you get a message that looks to be from a bank, credit card company, or government agency, investigate before responding. Using a phone number you know to be legit, contact the office directly to ask if the inquiry is on the up and up. Furthermore, many business directory scam artists are headquartered in Canada or in other foreign countries, but use post office boxes or mail drops to make it look like they are in the United States. Before paying, check to see if the company has a BBB Business Profile at bbb.org.
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