Preventing Common Types of External Fraud

Seth Spriggs

Fraud scams targeting small businesses range from strange office supply orders to fake invoices. Here are three common types of fraud schemes and three ways to avoid them.

1. Fake domain name renewal notices 

Be wary of unsolicited letters encouraging you to renew your website domain name or suggesting a new one.

  • Verify that the renewal notice matches your existing domain name. Look for small difference like “.org” instead of “.ca” or missing letters in the web address.

  • Confirm that the notice comes from the same company with whom you registered the domain name.

  • Check your records to verify that the expiry date of your existing domain name matches the expiry date on the notice.

2. Fake YellowPages directory listing or other unauthorized advertising 

This type of fraud may be disguised as a solicitation for an update of an existing advertising product you’ve purchased, or as an offer for a free listing when it’s actually an order for a listing requiring payment at a later date. Other times, the communication may be disguised to look like it’s from YellowPages when it isn’t.

3. Office supplies that were never ordered

Watch for invoices for goods you never ordered. Often this will be for regularly ordered items, such as paper, printing or maintenance supplies. Keep records of all orders placed and check these against all invoices received. In some cases, you may receive phone calls that falsely claim to be from your “regular supplier” with a limited-time or special offer. Supplies offered during these calls will usually be overpriced and of bad quality. Always deal directly with your supplier contact, or call your regular supplier to confirm this offer is indeed from them.

4. Equip your front lines

Make sure your staff who are processing invoices or answering phone calls are aware of these types of fraud, as they will often be the main points of contact. Always check that goods or services were ordered and delivered before paying an invoice.

5. Be careful about your business information

Never give out information about your business for advertising purposes unless you know how it will be used and you can confirm you are dealing with your standard advertising supplier.

6. Get it in writing

Never accept a business proposal over the phone – always request the offer in writing. Limit the number of people in your company who have the authority to approve purchases, or create a multi-level approval process.

Who to contact when you suspect fraud:

References: 

Does Canada Have a Problem with Occupational Fraud?”, Certified General Accountants Association of Canada, December 2011

Small Business Entrepreneurs: A Focus on Fraud Risk and Prevention,” American Journal of Economics and Business Administration, 2011

Preventing Fraud in the Workplace,” Cary Christian, Peak Small Business Center, 2003

The Little Black Book of Scams: Your Guide to Protection Against Fraud,” Competition Bureau, 2012

Preventing Small-Business Fraud,” Carole Matthews, Inc., 2002

How Companies of All Sizes Can Prevent Fraud,” David Mielach, BusinessNewsDaily, November 2012

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