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How to Spot a Small Business Scam

Date: June 06, 2008

Best-selling author Gene Marks owns and operates the Bala Cynwyd, Pa.-based Marks Group PC, a 10-person firm that provides technology and consulting services to small- and medium-sized businesses. But even his grasp of technology didn't save him from being scammed.

"Our Web site domain was hijacked last year and the people behind it began blasting out spam like it was coming from my company," Marks says.

It took weeks to clean up the mess, which meant numerous calls to his ISP, trying to connect with the right people there to explain the situation, and lots of hands-on digging through the e-mail system to get things back in order.

"Our e-mail is now handled by an outside service," Marks says. "They have control through their own server, but I have an administrative account so that I personally get the bouncebacks. If I start seeing a lot of activity that I haven't seen before, I immediately make sure the problem isn't happening again."

Even if you think you've taken every precaution to avoid fraud, your business still could be susceptible. There are literally dozens of scams that can target small business owners at any time, and they come from the whole spectrum of sources: e-mail scams, fax offers, phony phone calls and work-at-home offers, not to mention internal threats from staff. Here are a few steps you can follow to keep your business scam-free.

Keep your guard up.

Work alongside your employees, even if you think they're trustworthy. "What I still see--even 20 years into owning my own business--is bookkeepers stealing money," Marks says.

Nick Tootle, an audit principal at Kaufman, Rossin & Co., a Florida-based full-service accounting firm, agrees. "Even if you've trusted this bookkeeper who has been doing your work forever, you must realize that he or she is in the best position to steal from you," he says.

Give employees a break.

Making employees use their vacation time helps you keep a closer eye on finances. "Scam artists who end up employed with your small business are given too much responsibility and internal control," Marks says. "One golden rule: Force your employees to take vacations."

Marks says a common thread seems to be that employees get caught while out on vacation or sick. Someone else does their job in their absence, and when something looks weird, "the owner starts digging and the scam is found," he says.

Do your research.

"The Internet exposes your information to the world," Marks says. "But it also helps you investigate scams. If you get an e-mail and you're not sure about the subject matter, a quick search on Google will come up with a blog or forum where the topic is being discussed."

Marks also suggests using online business networking sites as a way to prevent scams and internal fraud.

"Web sites like LinkedIn and Plaxo are good places to find out more about people to help avoid being scammed," Marks says. "Doing your research is good for subcontractors and vendors as well as potential employees."

Pay attention.

"Be a glass-half-full person, but go through some simple due diligence," Marks says. For example, perform simple reference checks. "It seems so obvious, but you'd be surprised how easy it is to overlook the obvious," Marks says.

Sites to Help You Avoid Scams

There are many online resources that can help you steer clear of scams targeting your small business:

  • www.fraud.org: The National Fraud Information Center was established in 1992 by the National Consumers League to fight the mounting problem of telemarketing fraud by improving prevention and enforcement.
  • www.ftc.org: The Federal Trade Commission offers a wealth of information related to small business scams, such as spamming and phishing.
  • www.bbb.org: The Better Business Bureau offers information about complaints filed against any company you might have questions about.

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