Stop Thief!

The 6 most common small-business scams and how to protect yourself.

A Washington, DC public relations entrepreneur watched in horror as her computer screen went blank. She hurriedly checked the Yellow Pages and called the first technician she found. He assured her the files could be retrieved and her computer would be working in a few days. She was relieved. Months of research for several clients' projects and a long list of hot business prospects weren't lost after all.

Wrong. Several computer crashes later, the entrepreneur called a second technician and learned the sad truth. The replaced parts weren't new but used, and most of her system's components had been stripped and replaced with secondhand parts.

In Wisconsin, the owner of a patio furniture and supply store received a phone call from a man on the West Coast who seemed to know the entrepreneur's operation well. The caller had a large supply of merchandise a customer didn't want and suggested it would be perfect in the Wisconsin store. He'd give it away if the owner paid the freight fee. The man wired $950 to the West Coast and waited for the merchandise. It never arrived.

These stories aren't unusual. Small-business owners are easy prey for rip-off artists of all kinds. "The atmosphere in a small business can be very appealing to a potential scam artist," says Barry Goggin, president of the Better Business Bureau in Sacramento, California. Many small businesses, he explains, don't have a proper system of checks and balances to protect themselves. "In larger companies, purchase orders are required, and invoices go through three different hands before being paid," says Goggin. "You generally don't find a rigid structure like that in a small business."

To protect your business from being taken, here's the inside word on six common scams and how to avoid them:

Scam #1: Office supply rip-offs. If the offer sounds too good to be true, it probably is. Dishonest peddlers lure their victims with claims of a liquidation sale or a shipment mistakenly labeled with your company's name that you can have at a greatly discounted price.

Other con artists might claim to be conducting an office equipment survey. After you innocently provide information about your copy machine, for example, the individual will call back and pose as your new supplier or authorized dealer for the products you use for your copy machine.

Ordering supplies from out-of-state callers can be a waste of time and money. Frank D. Vincent, a Sacramento, California, insurance executive, recalls the day he received a call from a New York City salesperson who offered him a great deal on copy paper. "Saying he was from New York made him sound important, and his call easily got past the secretary and to my office." The deal sounded good, so Vincent bought six boxes of paper.

"He delivered what he said, but the paper was junk," says Vincent. "It was so thin, it easily ripped and made terrible copies. We threw it all away."

Solution:Whenever possible, do business with local suppliers. "I want to do business with people I know in the community," Vincent says now. You should also make it a rule never to buy from a new supplier by phone or mail before you check out the company's background and references. Insist on written purchase orders and don't accept c.o.d. shipments or pay cash for a shipment.

Scam #2: Phony invoices. Knowing small businesses don't use elaborate accounting systems, scam artists often use phony invoices to great advantage. Here's how it works: The swindler calls your company to get your name and other information. Then he sends an invoice for an amount just small enough not to attract attention. The invoice might be for goods you never ordered or for advertisements in bogus publications.

Solution: Set up a system of checks and balances to weed out bogus bills. Every order should be given a shop number. When an invoice is received, pay it only if it has a matching shop number.

Scam #3: Sneaky solicitations. A popularscam involves what look like invoices for directory listings or advertisements but are really solicitations, with this disclaimer in very fine print: "This is a solicitation. You are under no obligation to pay unless you accept this offer." Sending solicitations with such a disclaimer isn't illegal. But many business owners miss the small print and pay anyway.

Solution: If a "bill" arrives by second-class or bulk mail, beware. It's probably a solicitation. When you receive a "bill," match it with a purchase order for the product. If you can't find one, chances are you never ordered the item.

Scam #4: Charity pleas. Want to support your community by donating money to build a home for abused children? It sounds like a great cause, but the charity may not be legitimate.

Solution: Be cautious. Some solicitors use names that closely resemble those of well-known organizations. Before you give, check with the local charity registration office of your state attorney general's office and with your Better Business Bureau. If a caller offers to send a "runner" to pick up your contribution, pleading that the group needs your money now, hang up the phone. It's a scam.

Scam #5: Phony phone books. Let's say you receive a copy of an ad you placed last year in your local Yellow Pages. An attached statement reads "present listing information" and "renewal payment stub." You assume you're renewing the ad in the local directory and mail a check.

Don't move so quickly. Small businesses are often billed for what they think is ad space in locally distributed Yellow Pages. What you're really getting is your name in a directory that's distributed in very limited quantities or not published at all.

Solution: Call your phone company and ask if it sent the solicitation. Then call your Better Business Bureau for information about the Yellow Pages promoter. Don't pay for the ad unless you get satisfactory information.

Scam #6: Technical difficulties. A repair technician might offer you a free inspection of your office equipment to ensure it's in good working order. That's fine if the technician is qualified to perform the work. Otherwise, you could suffer inferior materials, poor workmanship and the possible loss of your equipment.

Solution: When someone solicits you, ask for references. If you decide to accept the offer, insist your equipment remain at your business while it's being inspected or repaired. If you must send your equipment in for repairs, request that damaged parts be returned. If you suspect foul play, call another technician for a second evaluation and contact the Better Business Bureau if you've been ripped off.

One sure way to protect yourself against any scam is to listen to the bell that goes off in your head when an unknown caller offers you a deal too good to be true. If the person doesn't give you references, avoids leaving a phone number and wants you to send cash now, chances are you're about to be conned. You've got nothing to lose by saying "no."

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