If you run your own business and have any measure of success, you are a major target for scam artists. As an entrepreneur, you are seen as someone who is more successful and who has more money than the average person. Scammers see companies as large, faceless organizations and do not think they are hurting an actual person by finding a way to steal money from your company. Other scam artists see you as a greedy, wealthy, business owner and think that this perception justifies stealing money from you. When you run your own business, it is a matter of when, not if, you are going to be targeted by one scam or another.
Common External Scams
The first time my company was targeted with fraud was in 2008, just after I incorporated. The name of my company is: American Consumer News, LLC. Another company with a similar name claimed they owned the phrase, “American Consumer,” and demanded I pay $7,500 per year to license the name from them. They sent a threatening letter from an attorney in an attempt to intimidate me. I assumed their accusation was unfounded since the phrase, “American Consumer,” is generic and probably could not be trademarked. I paid an attorney to respond to their letter and tell them to get lost. I did not hear from them again.
As a business owner, be prepared to receive a lot of fake invoices in the mail. There are companies that scan domain name registration information and send you fake renewal notices via snail mail. They are never the company you originally registered the domain with and often ask 10 times the going rate. If you ever file for a trademark or patent, you will get inundated with fake invoices. When I filed for a trademark for the name, “Analyst Ratings Network,” I got several invoices for as much as $2,300 for supposed international trademark registration services. Pay close attention to the invoices that you receive and keep track of your domain name, trademarks, and purchases. If you did not order it, do not pay it.
As your business expands to the point where it is affordable and necessary for you to hire team members to share the workload, hire people you trust. There has only been one time during my career where one of my team members tried to steal money from me. I had a writer who sent me invoices for some articles that he did not write. It took me a few months to catch on to what he was doing. I was not proactive in verifying the work he said he was doing, so his deception went on longer than it should have. I ended up losing about $1,500 from that ordeal, which shows why it is always a good idea to trust but verify. If you run an online business, take steps to make sure you do not get hit with internal fraud. Do not let your team members have access to your checks, credit cards, or online payment accounts such as Pay Pal. If you only have a handful of team members, it is easy to pay all of the bills yourself. This is a benefit that entrepreneurs with relatively small, online businesses have that larger companies do not.
Protecting Your Financial Accounts
There are particular steps that you need to take with your bank accounts as a business owner. Consumer checking accounts and credit cards have much stronger fraud protection regulations than business accounts do. I recommend getting a separate personal credit card and using it as your business credit card so that you can enjoy the same protections under the law that personal credit cards have. You will also want to be particularly careful with checks. Keep them locked in a safe or lockbox in your home or office when not in use. If you are running an online business and most of your expenses are services like web hosting and advertising, ideally you will only have to write a few checks, which will limit your exposure to check fraud.
You will also want to protect your online credentials for your financial accounts by using strong passwords and making sure that your computer does not get infected with malware. I recommend having a separate password for your email account, your financial accounts, and one for everything else you use online. If you want to get really fancy, use a password manager like Last Pass to ensure you have a unique password for every website you visit. To prevent malware from attacking your computer, use a modern web browser like Fire Fox or Google Chrome and run anti-virus software. Alternatively, buy a Mac.
Insurance for Your Internet Business
Finally, you need to make sure you have good liability policies in place for both yourself and your business. If you have any meaningful amount of money, you should look at getting a personal liability policy to provide home and auto liability above and beyond what your homeowner and car insurance policies offer. For your business, you should look into an Errors and Omissions policy that will protect your company if you make a mistake and end up costing someone money. You might want to look at a Business Interruption policy that will pay you if your business is interrupted by a server issue or other event. Talk to an independent insurance agent to make sure you are getting the right coverage for your specific type of business once you hit a reasonable revenue level.
These steps and suggestions will help you take healthy, preventative measures against the possibility of scams. As an entrepreneur, you should not spend extra time worried about how someone is going to defraud your company. But, being aware that it does occur and making smart decisions to limit fraud from affecting your business can ease your fears.
- Maintain a healthy level of skepticism toward questionable invoices. Hire a lawyer when necessary.
- Open a separate consumer credit card to pay business expenses.
- Keep your online credentials secure. Use a password manager and install anti-malware software.
- Work with an independent insurance agent to set up business and personal liability policies.