Ever get an inquiry or order for your products that just doesn't feel right?
Recently, Frank, a fine art painter in the Creative Juice group had a funny feeling that something wasn't quite right with a client who'd been contacting him via email. He happened to tell this to another Creative Juice friend at lunch. This friend happened to have been in my hemisphere when I was scammed proper a few years back (listen to the sad, sad, expensive story on The Juicecast podcast here) and threw the red flag of caution. She had him call me and after listening to only half of the story, I firmly told him to drop this client immediately--they were trying to scam him.
How can you tell if it's a scam?
Scammers are, by nature, tricky folks so don't feel stupid if you didn't see this coming. In general, after talking with some folks who have been scammed, I've come up with a few easy ways to discern a scam from a bonafide customer.
Red Flag 1: They offer to pay (and sometimes overpay) via check. Red Flag 2: They require payment via Credit Card that is in their "client's" name.
Red Flag 3: They make a claim of urgency to put you in a rush so that you can't think things through clearly.
Red Flag 4: They convince you that something you did is wrong and needs to be corrected by paying in cash immediately (before a service is cut off)
Red Flag 5: They make special and sometimes convoluted shipping arrangements.
Red Flag 6: English is not their first language.
Red Flag 7: They want you to ship overseas.
So, what happened with Frank?
In Frank's case, he received an email with specific instructions: "We will send you a check. This check will clear. We will send our own shipping company to pick up the painting." Frank wasn't willing to let this go completely, so he stuck in the exchange for a little while longer. The "client" ordered 2 paintings and sent a check that included the cost of the paintings and about $2,000 in shipping. Frank did something quite smart; he took the check to the bank and asked them to verify the account before cashing or depositing the check into his account. SURPRISE! It was a fraudulent account. No surprise he has not received anything from his "client" since mentioning this issue.
How the scam works
I don't even know because I'm not a sneaky bastard like these scammers. I will tell you that the check/credit card payment will clear first, but later it will come back as invalid or unauthorized and guess who's bank account is "corrected"? Yours. And there is no getting that money back. There is little to no recourse for we small business folks. It's pathetic.
The Shipping Scam
In my case (we refer to mine as the Helsinki Scam), the client gave me stolen credit cards and had me wire the money to a "special" shipping company that knew just how to take care of delivery and tax duties. 30 days later, the credit card holder discovered the fraudulent charges, I got a charge-back (no love for the small business person here) and I was out the entire cost of the job.
The Retail Business Scam
This one happened to TWO people I know; both small retail businesses. They received a phone call at the store from the energy company saying that they had not received payment and were cutting off the power if payment was not made in cash or money order immediately. The payments were to be delivered to a certain location or a representative would drop by the store to pick it up. This scam used the urgency tactic to confuse the shop owners ("Didn't Sarah pay that last month? I can't remember now!") and made them panic. Some scammers are so sophisticated that they have a phone number you can call to "verify" this situation. In the one case, the owner kept her head, called the energy company directly and was assured that her account was in perfect working order. In the other case, the owner's wife was on her way to get a money order before we got wise to the scam. Luckily, no money was lost.
I would never fall for that!
Yes, you would. Everyone is vulnerable. Everyone wants to make a great sale and is willing to overlook some subtle inconsistencies to make some great coin. It's tough to turn down a potentially good customer. It feels so awesome to take a big sale. You want the business and you try to make it work, because you are in the business to sell your stuff.
How to protect yourself and your business from scams
If something smells fishy, it probably is. Ask for account verification. Insist on your own UPS or FedEx shipping because it's insured. Require 30 days hold until all payments clear and clear again. If the client is legit, all will be good. If they're not, they'll head on down the line to another unsuspecting small business person.