Billing schemes come in all different shapes and sizes but one thing remains constant: small businesses are a primary target.
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Unlike their larger brethren, small businesses typically have limited segregation of duties and limited internal controls, making them more vulnerable to scammers.
“Large businesses mandate compliance that employees have to abide by, but small businesses don’t,” says Julie A. Mucha-Aydlott, a certified fraud examiner and accountant. “Small businesses are left in the dust and left defending themselves.”
According to Mucha-Aydlott, the average cost of fraud for small businesses is $155,000. Not only does the staggering cost bring many small businesses down, but once they are a victim their information is shared with other scam artists that keep an ongoing list of easy prey, says Juliet.
In order for a small business to protect itself from billing scams it first has to know what to look for. According to fraud experts, a popular scam that many small businesses fall victim to is the phony grant scheme. With this one a small business will get a phone call from a so-called grant writing service that will promise the unsuspecting victim government grants of hundreds of thousands of dollars. In order to get the grant, the small business owner has to pay a processing fee of $3,000 to $5,000, and is told it can take two years to get the grant. During that time the fake “grant-writing company” disappears with the money.
“This type of fraud scheme targets small business owners who are living week to week and can’t make their payroll and think this is the light at the end of the tunnel,” says Mucha-Aydlott.
If and when you receive offers like this, get the name of the company so you can research it by checking with the Better Business Bureau. Also request they send over a contract and have that contract vetted by an attorney or accountant. Mucha-Aydlott says to always check http://www.grants.gov/ for reputable and available grants.
Another very common scam that small businesses fall victim to comes under the bogus vendor bills bucket. Within that bucket is a scam that targets small businesses that are incorporated, whether as a LLC or S-Corp. Called the compliance scam, the small business owner will get an official looking letter in the mail warning that the business is not in compliance with filing annual minutes and requires a processing fee. According to Juliet, many small businesses assume it’s an official government letter and pay the fee.
In another scam, a company will offer you free samples of printing toner and will send you the product even if you say no. Before long you’ll be hit with a grossly overstated bill and the company won’t accept returns.
Scammers are not only after your money but also your services. According to Mucha-Aydlott, in one scam the business owner will get a call purportedly from the telephone company telling the business it wants to check the line and to press 90#. Once the business owner does that the scam artist can place long distance phone calls and bill them to the business.
According to the BBB, in another scam operators of the scheme will gather enough information about a business to make a phony bill look legitimate.
The fake bills will be small enough so not to raise a red flag, and may even include past due or final notice to pressure the small business into paying quickly.
When it comes to paying the bills, be sure to read the fine print, and never accept free products over the phone. Knowing the type of scams out there is a first line of defense, but the small business also should have internal controls in place. The BBB also suggests educating all employees about the different scams so they know what to look for.
“Just like with customers and clients you need to know who you pay money to and need to follow the rules,” says Mucha-Aydlott. “The small business owner needs to be involved in the finances and not look the other way because he or she is too busy.”
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