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Running a business comes with its fair share of challenges, from keeping track of inventory and finances to making tough decisions about where to invest resources. But what happens when people try to trick you? Whether it’s through fake emails or bogus invoices, falling for scams can entirely disrupt your operations. Despite all the fancy technology and security measures available, small businesses are still top targets for fraudsters. With their limited resources and often inadequate defenses, they’re easy prey. In the last year alone, 96% of US companies were in the crosshairs of at least one fraud attempt. That’s why being vigilant and ready to outsmart those scammers is more important than ever.
Related: Fraud is Everywhere — Are You Safe? Follow This Guide to Secure Online Transactions
1. Phishing attacks
Phishing attacks are insidious tactics cybercriminals employ to deceive individuals into revealing personal information such as passwords and financial details. In fact, phishing is the most common type of cybercrime, with an estimated 3.4 billion spam emails sent daily.
How can small businesses protect themselves? Start by recognizing phishing attempts and training your employees to do the same. Be cautious with unexpected emails or messages, and double-check if they’re real before responding. Studies show that businesses that regularly train their employees in cybersecurity are way less likely to fall for these scams.
Next, make sure your emails are protected with email authentication protocols such as SPF (Sender Policy Framework) and DKIM (DomainKeys Identified Mail). These protocols help verify the authenticity of email senders, making it harder for attackers to spoof legitimate addresses. Implementing these measures can significantly reduce the risk of falling victim to phishing attacks.
2. Invoice fraud
Invoice fraud schemes trick businesses into paying for goods or services that were never provided. These fake invoices can easily deceive employees, leading to unauthorized payments. In 2019, this kind of fraud caused businesses to lose $132 million.
Watch out for red flags like discrepancies in billing details, invoices from unfamiliar vendors, and requests for payment to unverified bank accounts. To protect your business, it’s essential to have a solid payment approval workflow in place. Start by setting up strict invoice approval processes that require multiple reviews and authorizations before any payment is made.
Make it a habit to verify vendor identities through independent means, especially when dealing with new or unfamiliar vendors. Use email authentication protocols to catch and block phishing attempts linked to invoice fraud. Regularly audit your accounts payable transactions to spot any unusual activity early. Also, train your employees to recognize and handle potential invoice fraud. By taking these precautions and ensuring a robust payment approval workflow, you can greatly reduce the risk of falling victim to these scams.
Related: How to Keep Your Startup’s Cash Flow Safe from Invoice Scams
3. Business email compromise (BEC)
Business email compromise (BEC) scams occur when cybercriminals impersonate company executives or trusted vendors to manipulate employees into transferring funds or sensitive information under false pretenses. These scams are alarmingly common, with the FBI reporting that BEC scams accounted for $1.8 billion in losses in 2020 alone.
One of the biggest BEC scams ever recorded targeted tech giants Facebook and Google between 2013 and 2015, resulting in approximately $121 million in losses. This high-profile scam serves as a stark reminder to all organizations of the threat posed by BEC scams. So, if even big companies like Facebook and Google can get scammed, it’s a wake-up call for everyone to stay sharp and keep their guard up against BEC scams.
BEC scammers use various tactics like social engineering, email spoofing, and gathering information about organizations to exploit weaknesses. To fight against BEC, businesses need to use multiple cybersecurity measures. Implementing email authentication protocols like DMARC can also help prevent email spoofing and impersonation. Also, having strict verification procedures for fund transfers can ensure that financial transactions are legitimate, reducing the risk of falling victim to BEC scams.
4. Payment fraud
Payment fraud is a serious issue that takes advantage of weaknesses in payment systems, like counterfeit checks, unauthorized transactions, and card skimming. If there are signs of payment fraud, such as sudden drops in revenue or strange activity in your accounts, call for careful monitoring and action. To tackle these threats, businesses need to beef up their payment security with things like encrypted payment solutions and keeping a close eye on transactions.
The numbers on payment fraud are pretty worrying. 59% of eCommerce companies have seen a rise in online payment fraud. Reports of check fraud almost doubled between 2021 and 2022, hitting 683,541 cases. Identity theft, especially credit card fraud, is still a big concern, too, with 426,000 cases reported in 2023 alone. Looking ahead, the US credit card fraud costs are expected to hit a staggering $165.1 billion over the next decade. These stats show why taking proactive steps to protect against payment fraud is crucial. Consider teaming up with more secure payment platforms and moving away from slow traditional methods like checks and credit cards.
Related: How to Combat Payment Fraud and Negative Cash Flow
5. Impersonation scams
Impersonation scams are becoming more common and can hit anyone, so staying on guard is crucial. In 2020, the Federal Trade Commission received 498,000 reports of these scams, causing $1.2 billion in losses. Scammers often pretend to be from trusted organizations like the IRS or banks, hoping to trick you into giving them money or personal information. Scammers use clever tricks to make themselves seem legitimate, like threatening legal action or creating urgent situations.
To protect yourself, be cautious of unsolicited requests for money or personal info, especially if they’re demanding immediate action. If you’re unsure, verify the request independently through official channels, like contacting the organization directly.