Simple Steps to Protect Your Small Business Against Scams

February 20, 2024
minutes to read
Ben Winford
Table of Contents

In the fast-paced world of entrepreneurship, where every dollar counts, small businesses often find themselves vulnerable to the ever-evolving landscape of scams and fraud. These malicious schemes can come in various forms, from invoice fraud to cyberattacks by hackers. In this blog post, we will delve into small business scams, explore strategies to prevent them and provide actionable steps to protect your small business. Let's equip you with the knowledge and tools to safeguard your hard-earned assets.

Common Small Business Scams

Small business owners should know the most prevalent scams targeting their enterprises. Here are some of the common ones:

  • Invoice Fraud: Invoice fraud, also known as invoice scams or invoice bill fraud, is a widespread menace. Scammers send fake invoices to small businesses, hoping they'll pay without question. These bogus invoices often appear legitimate, leaving businesses out of pocket and their finances in disarray.
  • Friendly Chargebacks: Often referred to as 'friendly fraud', this describes the situation when a cardholder disputes a legitimate charge with their bank or credit card company, often claiming they didn't make the purchase or that it was unauthorised, despite having made the transaction themselves. As a result, the small business incurs a chargeback fee and losses, even when the customer did make the purchase.
  • Business Identity Theft: This can involve stealing the company's credentials, tax identification numbers, or other sensitive information to fraudulently access financial resources or obtain loans and services in the business's name. The consequences of small business identity fraud can be severe, as it can lead to financial losses, damage to the business's reputation, and legal liabilities.
  • Hacking and Cyberattacks: In an increasingly digital world, hackers pose a significant threat. They can infiltrate your systems, steal sensitive data, and even launch ransomware attacks, holding your business hostage until a hefty ransom is paid.

How Can Small Businesses Prevent Fraud?

Now that you know the dangers, it's time to explore ways to prevent these scams. Vigilance and proactiveness are your best allies in this battle.

1. Stay Informed and Educated

Education is your first line of defence. Stay informed about the latest scams and their tactics. Encourage your staff to be vigilant and provide training to help them recognise potential scams.

In the constantly evolving world of fraud, knowledge is power. Keeping yourself and your staff informed about the latest scam tactics can make a significant difference in preventing fraud. While it may be impossible to predict every scam that could target your business, having a well-informed team is your first line of defence.

2. Regular Training

Consider organising regular meetings or training sessions to keep everyone updated. Encourage your employees to share any suspicious messages or invoices they receive, creating an open and collaborative atmosphere that fosters vigilance.

3. Secure Your Digital Infrastructure

Hacking and cyberattacks can be mitigated by investing in robust cybersecurity measures. Utilise firewalls, antivirus software, and employee training to create a robust digital defence.

The digital world is where many scams and frauds find their breeding ground. Protecting your digital infrastructure is critical to safeguarding your business. Here are some steps you can take:

  • Firewalls: Implement strong firewalls to prevent unauthorised access to your network. Regularly update and configure them to stay ahead of potential threats.
  • Antivirus Software: Invest in reliable antivirus software that scans for and removes malware, spyware, and other threats. Ensure it's updated in real-time to defend against the latest threats.
  • Employee Training: Your employees are the first defence against phishing scams and cyber threats. Train them to recognise suspicious emails, links, and attachments. Implement a policy of "think before you click."
  • Regular Software Updates: Many cyberattacks exploit vulnerabilities in outdated software. Ensure all your software, including your operating system and applications, is regularly updated.

4. Implement Automated Accounting and Bookkeeping

Modern accounting and bookkeeping tools like Thriday can help you prevent fraud. Automated accounting systems like Thriday not only streamline your financial processes but also minimise the risk of human error in managing financial records.

Accounting is often the backbone of a small business's financial health. Manual bookkeeping can be prone to errors, opening the door to fraudulent activities. Automated accounting solutions offer several benefits:

  • Accuracy: Automated systems reduce the risk of human error in financial record-keeping. This ensures that your financial data is accurate, reducing the potential for fraud.
  • Efficiency: Automated accounting can save time and effort, allowing you to focus on other aspects of your business. It streamlines the invoicing, payment, and reconciliation processes.
  • Audit Trail: Automated systems maintain a comprehensive audit trail, making it easier to trace financial activities. This can be invaluable in detecting and preventing fraud.
  • Access Control: You can set user-specific permissions in automated accounting systems, ensuring that only authorised personnel can access sensitive financial data.
Thriday's automated accounting system reduces human error

How Can You Protect Your Small Business?

Small businesses can take several practical steps to protect their operations:

Verify Invoices Thoroughly

When you receive invoices, double-check the sender's details, contact information, and the legitimacy of the services or products listed. Take your time paying after confirming the validity of the invoice.

Invoice fraud is a common scam, and it often starts with seemingly legitimate invoices landing in your inbox. To protect your business, follow these steps:

  • Verify Sender Details: Double-check the sender's information, including the email address and contact number. Scammers often use fake or slightly altered details.
  • Validate Services or Products: Ensure that the products or services listed in the invoice were delivered or performed. Cross-reference them with your records.
  • Confirm with Suppliers: If you have any doubts about an invoice, contact the supplier directly using their official contact information. Don't use the contact details provided in the suspicious invoice.

Use Strong Passwords and Two-Factor Authentication

Protect your business accounts using strong, unique passwords and enabling multi-factor authentication (2FA). 2FA adds an extra layer of security by requiring two or more identity verification methods.

Your digital accounts, including email, banking, and other business-related services, need robust protection. Here's how to enhance your account security:

  • Strong Passwords: Create complex passwords that include a combination of letters (both uppercase and lowercase), numbers, and special characters. Avoid using easily guessable information like birthdates or common words.
  • Password Managers: Consider using a password manager to generate and store strong, unique passwords for each account. This helps you avoid the common mistake of using the same password for multiple accounts.
  • Two-Factor Authentication (2FA): Enable 2FA wherever possible. This adds an extra layer of security by requiring you to provide two or more verification forms, such as a password and a temporary code sent to your mobile device.
  • Regular Password Updates: Change your passwords periodically to reduce the risk of unauthorised access. If an employee leaves your organisation, ensure their access is promptly revoked.

Regularly Update and Backup Data

Frequently update your software and operating systems to patch vulnerabilities. Additionally, back up your critical data regularly to minimise the risk of data loss due to ransomware or other cyberattacks.

Cybersecurity threats are ever-evolving, and your best protection is staying ahead of potential vulnerabilities:

  • Software Updates: Cybercriminals often target known vulnerabilities in outdated software. Ensure that your operating system, applications, and security software are updated. Consider enabling automatic updates.
  • Regular Data Backups: Back up your business data to secure off-site locations. This minimises the risk of data loss due to ransomware attacks or hardware failures. Test your backups periodically to ensure they can be successfully restored.
  • Data Encryption: Consider encrypting sensitive data to protect it from unauthorised access. Encryption ensures that even if data is stolen, it remains unreadable without the decryption key.
  • Security Software: Install reliable security software that offers real-time protection against malware and other threats. Regularly update it to stay protected from the latest risks.

Are Business Accounts Fraud Protected?

The extent to which business accounts are protected against fraud largely depends on the financial institution and the type of account you hold. Many banks offer protection against unauthorised transactions and fraud. However, it's essential to understand the terms and conditions of your account and the specific protection measures your bank provides.

  • Account Type: Different business bank accounts may offer varying levels of protection. For example, a business savings account may have different terms than a business transaction account.
  • Unauthorised Transactions: Most banks provide some level of protection against unauthorised transactions, especially if you report them promptly. This protection can extend to both online and offline transactions.
  • Liability Limits: Banks often have liability limits, determining the maximum amount you may be responsible for in case of fraud. Review these limits and discuss them with your bank.
  • Reporting Procedures: Familiarise yourself with your bank's procedures for reporting fraud. The sooner you report a suspicious transaction, the better your chance of resolving the issue and recovering your funds.

It's advisable to communicate with your bank to understand the specific protections they offer and inquire about any additional security measures they recommend for your account.

How Does Thriday Prevent Invoice Fraud?

Thriday, a leading automated accounting solution, provides several features to protect your business against invoice fraud and other financial scams.

1. Invoice Validation

Thriday includes built-in invoice validation features, which can automatically cross-check invoices against your financial records to see if any details have changed. This helps identify discrepancies and protect against invoice fraud scams. When you use Thriday's bill manager feature, you can take advantage of the following:

  • Real-time Validation: Invoices are validated in real-time as they are entered into the system, reducing the risk of erroneous payments.
  • Alerts and Notifications: Thriday will notify you when it detects that invoice details have changed, allowing you to double-check the details before proceeding.
Thriday's bill manager feature

2. Access Control

Thriday only allows you, the business owner, to access the platform and perform actions. This reduces the risk of internal fraud. Thriday also maintains a comprehensive audit trail, which logs all financial activities. This helps in identifying unauthorised access or modifications.

3. Secure Data Storage

Thriday employs robust data security measures to protect financial information from external threats.

  • Encryption: Financial data is encrypted in transit and at rest, ensuring it remains secure and unreadable to unauthorised parties.
  • Secure Servers: Thriday uses secure servers and data centres to protect your financial data from physical threats.
  • Regular Security Updates: Thriday stays updated with the latest security measures to protect your financial information from evolving threats.

By utilising a trusted accounting solution like Thriday, you can reduce the risk of falling victim to invoice fraud and other financial scams.

Where to Report Dodgy Companies in Australia?

In the unfortunate event that you encounter a suspicious company or scam in Australia, reporting it is crucial. Reporting not only helps protect your own business but also contributes to the collective effort in combating fraud. Here's where and how you can report dodgy companies and scams in Australia:

Australian Competition and Consumer Commission (ACCC)

The ACCC is the primary government agency responsible for enforcing consumer protection and competition laws in Australia. They manage the National Anti-Scam Centre, where you can report scams and fraudulent activities. Reporting to the ACCC helps track and investigate scams that target Australian businesses and consumers.

Australian Cyber Security Centre (ACSC)

If your business is a cyberattack victim or you suspect you are targeted, the ACSC is the place to report it. They provide resources for reporting cybersecurity incidents and offer guidance on handling cyber threats. You can contact the ASCS 24 hours a day, seven days a week, via the phone number 1300 CYBER1.

Australian Securities and Investments Commission (ASIC)

If you encounter suspicious financial activities, including potential scams related to investments or financial products, you can report them to ASIC. They regulate Australia's financial industry and can investigate fraudulent companies and activities.

Australian Cybercrime Online Reporting Network (ACORN)

ACORN is the national policing initiative where you can report cybercrimes and online incidents. It's a platform designed to help individuals and businesses report online scams and fraud.

Your Bank or Credit Card Company

If you've been a victim of financial fraud, it's essential to report it to your bank or credit card company. They can help you with the necessary steps to dispute unauthorised transactions and recover your funds.

Remember that reporting fraudulent activities not only helps protect your own business but also contributes to the prevention of scams and the potential prosecution of scammers.

How Do You Train Your Staff to Spot Scams?

Training your staff to recognise and respond to scams is an essential component of protecting your small business. Here's a guide on how to train your team effectively:

Recognise Common Scam Indicators

Begin by educating your staff about common scam indicators. These can include unsolicited emails requesting payments, suspicious invoices, and urgent messages with threats or requests for personal information.

Conduct Regular Training Sessions

Schedule regular training sessions to update your employees on the latest scam tactics. Share real-world examples of scams and how to identify them.

Simulate Scenarios

Conduct simulated scam scenarios to help your staff practice recognising and responding to potential scams. This can include mock phishing emails or fake suspicious invoices.

Create a Reporting System

Establish a clear and easy-to-use reporting system for employees to report suspicious messages or activities. Please encourage them to report without fear of consequences, as prompt reporting can prevent potential scams.

Stay Informed

Encourage your staff to stay informed about the latest scams and threats. Provide them with resources and tools to help them recognise and report scams effectively.

Foster a Culture of Vigilance

Create a company culture that values vigilance and fraud prevention. Encourage open communication about potential scams and celebrate employees who take proactive steps to protect the business.

Key Takeaways

Protecting your small business from scams and fraud requires a combination of knowledge, vigilance, and the right tools. By staying informed about common scams, securing your digital infrastructure, implementing automated accounting, and training your staff to recognise potential scams, you can significantly reduce the risk to your business. Remember that reporting suspicious activity and using trusted accounting solutions like Thriday can be instrumental in safeguarding your assets. Stay proactive and dedicated to the security of your business, and you'll be better prepared to face the challenges of the modern business world. Your success depends on it.

DISCLAIMER: Team Thrive Pty Ltd ABN 15 637 676 496 (Thriday) is an authorised representative (No.1297601) of Regional Australia Bank ABN 21 087 650 360 AFSL 241167 (Regional Australia Bank). Regional Australia Bank is the issuer of the transaction account and debit card available through Thriday. Any information provided by Thriday is general in nature and does not take into account your personal situation. You should consider whether Thriday is appropriate for you. Team Thrive No 2 Pty Ltd ABN 26 677 263 606 (Thriday Accounting) is a Registered Tax Agent (No.26262416).

Why waste time on financial admin when Thriday can do it for you?

Already have an account? Login here
Thriday Debit Card


Live demo this Thursday at 12:30pm.