Scams targeting Australian businesses are on the rise and it’s the very small end of town that is most vulnerable.
That’s the key takeaway from the Australian Competition and Consumer Commission’s last report into scam activity across the country, released on Thursday.
In 2017, scammers managed to cheat businesses across the country out of $4.7 million, which represents a 23% increase on the 2016 amount.
The ACCC received 5432 scam reports from businesses last year, but more than 50% of those came from small businesses with fewer than 20 employees.
ACCC deputy chair Dr Michael Schaper tells SmartCompany it is “absolutely” the case that businesses of this size are the most vulnerable to scammers. Small retailers are particularly vulnerable, he says.
“In many cases, especially for small retailers, they are visible online and they need to operate online. But they don’t necessarily have sophisticated security,” he says.
They’re also not necessarily going to have dedicated staff to look after their cyber security, says Schaper. As a small business owner, it then becomes a question of “how much can you afford to invest?”
“With big firms, if [the scammers] can break through, I suspect they can make a lot money. But scammers can also make a decent living from lots of small businesses.”
According to the ACCC’s report, the most common business scams are false billing scams, which accounted for 1323 of the reports made to the watchdog. These scams typically involve a scammer trying to convince a business to pay false invoices for things like directory listings, domain name renewals of office supplies, says Schaper.
However, it was employment and investment scams that accounted for most losses, at close to $1.7 million.
These scams usually involve a business being duped into signing up for what they believe is a legitimate service, such as website development, search engine optimisation or even small business loans. They quickly discover that the service doesn’t exist and the arrangement was a sham.
The ACCC’s figures include both instances where a business has reported the existence of a scam, and occasions where a business has actually fallen victim to a scam and lost money. When businesses have lost money, the average amount lost was $11,000.
Schaper says the increasing dollar amounts businesses lose to scams is one of the noticeable trends from the past few years. When businesses do report a loss, it is, on average, “significantly higher” than when general members of the public lose money to scams. For consumers, the average amount lost is $6500, says Schaper.
He also suspects a large amount of scam activity goes unreported. “If it’s a good scam, you wouldn’t be aware of it,” he points out. But equally, small business operators don’t necessarily have extra time in their day to spend reporting scams to the regulators.
There’s no shortage of scam warnings in the media and from the regulators themselves, but Schaper says such warnings are often quite general in nature and it’s not surprising that many small businesses may not heed the advice. Similarly, we live in a “world full of messages” and scam warnings are “just one of many” pieces of information being directed at the sector.
There’s also a relatively high rate of “churn” among small businesses, with just as many new businesses starting up each year as there are ones that are closing.