by Tony Rossiter B.Com, CA – Holmans
Caution: Small Business Scammers
The number of scams targeting small businesses has grown in recent years and the importance of owners preparing for possible threats is something to be considered.
Without taking the necessary precautions and being in the know about the most common signs to look for, businesses are left exposed and vulnerable to a variety of scams. Mum and Dad businesses are at the top of the list – Management Rights operators and Moteliers are a prime target.
Scams targeting small businesses come in many different forms and often scammers will go to great lengths to convince businesses that their offers or requests are legitimate. Since a lot of these scams look like the real thing, many are able to take advantage of busy office environments and succeed in stealing company money. Some of the most common scams getting around at present include the following:
Refunds scams
These will usually request a confirmation of personal details or an upfront payment in order to reclaim overpaid fees or tax. The scammer will usually pretend to be from a government agency, bank, telecommunications company or private law firm.
To protect a business from such scams, personal information should only be given out to those that are known and trusted or to those that were in fact contacted by the business owner or employee themselves.
Searches at abr.business.gov.au can provide ABN numbers and Deductible Gift Recipient (DGR) details to confirm that the organisation is legitimate.
Over-payment scams
A scammer will purchase goods and services from a company and send a cheque, money order or credit card payment for more than the agreed price.
The scammer will then request a refund for the overpaid amount in hope that the owner will do so before realising that the cheque in fact bounced or that their money order or credit cards were phony.
Office supply scams
These will involve the receipt and billing of non-ordered goods that are usually and regularly purchased by the business. Such items may include paper, printing or maintenance supplies and advertising.
The caller will claim to be the company’s regular supplier and offer “limited time only” offers that are in fact overpriced and of bad quality.
Requesting an order number, inspecting the quality of goods and checking that they were actually ordered before paying any invoice is good idea.
Direct entry / unauthorised advertising scams
A scammer sends a subscription proposal, disguised as an invoice or renewal notice, for listings and advertisements in magazines or on questionable websites and business registers that were not authorised or requested.
These are often overseas requests and, although sometimes appearing to be free, will demand payment after the subscription is signed off on. The scammer may even call to confirm details of a pre-booked advertisement or offer a “free trial” for which they will in fact charge you for later.
Company records should always be checked to ensure that these orders were actually placed and any ‘free trial’ offer should be checked for hidden terms.
Domain name scams
A business will be sent an unsolicited invoice for an internet domain name registration or renewal. The notice could be from a domain name supplier attempting to trick them into signing up to their service, or from a scammer trying to steal money.
Businesses should always match renewal notices with their current domain name and look for differences such as “.com.au” instead of “.net.au”.
To ensure that a business is protected, business owners should also:
- Keep their filing and accounting systems well organised so that they can easily detect bogus accounts;
- Limit the number of people authorised to place orders and make payments for the business;
- Ensure that computer firewalls and protection software is up to date; and
- Report any known scams to the appropriate government agency by visiting the SCAMwatch website
ATO Crack-Down on Cash
Businesses that fail to declare or report all their cash transactions will be exposed as the ATO continues their crack down on the cash economy.
An estimated 110,000 taxpayers who are suspected of participating in the cash economy will be contacted by mail in efforts to deal with under-reported or omitted income, and cash transactions used to hide or evade tax obligations.
Business taxpayers will be identified through one of the ATO’s cash economy indicators:
- Small business benchmarks;
- Data matching; and
- Allegations of tax evasion by members of the community
The majority of letters sent will be to businesses identified as reporting outside the small business benchmarks for their industry. Letters will contain information on how their business transactions compare with key benchmark ratios, the selection process for business auditing, how benchmarks are used to calculate default assessments and how they can correct their mistakes or make voluntary disclosures.
Eight thousand letters were sent to businesses that had reported transactions outside the small business benchmarks for their industry and plenty more are to come. Taxpayers are encouraged to review their records to ensure they have correctly reported all income – especially cash transactions.
Personal Property Securities Act (PPSA)
The Personal Property Securities Act (PPSA) came into effect in October 2011, dramatically changing the way security is taken over personal property, impacting many businesses and individuals nation-wide.
The PPSA reform requires all forms of security interest, in respect to personal property, to be registered under the Personal Property Securities Register, a new and single online register controlled by the Insolvency and Trustee Service Australia.
Replacing almost all existing Commonwealth, State and Territory laws and registers, the PPSA affects such securities as:
- Company charges;
- Motor vehicles;
- Stock mortgages;
- Crops and livestock;
- Bills of sale;
- Intellectual property;
- Licences;
- Household items;
- Business and retail stock;
- Financial instruments such as shares;
- Business equipment; and
- Other securities, both tangible and intangible, which affect personal property rights
Those that are refinancing, leasing assets, selling goods on credit or providing them on consignment should be most aware and should take the necessary steps to protect the interests of their business and to ensure compliance with the new provisions.
Businesses and individuals will need to:
- Review their business arrangements between group entities;
- Review their terms of supply;
- Review their financing arrangements and contracts;
- Identify the assets that will be affected by the new laws;
- Identify any transactions which need to be registered;
- Update their procedures for making new transactions;
- Update their existing arrangements, not currently considered to be security interests, and ensure that they are registered;
- Review and redraft their standard terms; and
- Ensure that registered security interests do not exceed expectations
Businesses and individuals with ownership of an affected security interest and those that use retention of title arrangements in their business operations, or have used one which will remain in place when the PPSA commences, should seek professional advice now.
Failing to prepare for and accommodate these new laws may result in a loss of assets.
