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Four ways small businesses can avoid scams

Scams can jeopardise the financial stability of small businesses and take a toll on the wellbeing of owners and staff. But some small businesses, like motel operator Teresa, have found a way to fight back.

3 minute read

Although businesses of all sizes can be impacted by a scam or cyber incident, financial losses can have a particularly significant impact on small businesses, which generally have limited resources and financial buffers, making it harder to recover.

According to research conducted by BNZ and Camorra, one in five businesses fell victim to scams in the 12 months to August 2023. Cold calling was the most common scam type. Of those targeted, one-third responded to a scam attempt, mainly by clicking on a link or replying to the scam via email, text, or phone call. While approximately 40% of those affected reported a financial loss to their business, there was an operational impact and personal financial loss to others.

Staying vigilant and educating yourself as a business owner or operator is key to spotting scams before they have a chance to escalate. 

We spoke to Teresa, the manager of Village Motel in Havelock North. With nearly 40 years of experience in the hospitality industry, she oversees the day-to-day operations of the motel. Teresa was able to avoid falling victim to scammers when her motel was targeted via email, and her experience can help highlight common characteristics that other small businesses can look out for to avoid scam attempts.   

1. Keep an eye out for red flags

In Teresa’s instance, scammers made contact via email requesting a substantial booking at the motel. It’s a common hallmark of this type of hospitality scam, and the first red flag to watch out for. “This may be for multiple rooms, a long period of time, or both,” says Teresa. The allure of a large booking or order makes it tempting to overlook it as a warning sign, and indeed there are occasions when this may be legitimate, but in most cases the scammer will reach out with an attractive offer.

Another red flag is when the scammer requests unconventional payment methods, such as paying for all of it in advance rather than just a deposit, or splitting payment across multiple cards, adding a layer of complexity to the transaction.

2. Report any suspicious incidents to your bank

The first time Village Motel encountered this scam, Teresa made the booking as requested by the ‘guest’. “Within 48 hours he emailed back with a story of why he had to cancel, asking to refund two different cards.” Teresa says the motel’s policy was to only refund the card the payment was taken from, so she was able to avoid falling victim to the scam attempt. Refunding a different card than the one the payment was made on is the biggest red flag to watch out for, and what prompted Teresa to contact the BNZ fraud team at the time. "I now contact BNZ to let them know about any suspicious activity and provide details to help prevent future occurrences.” She encourages others to seek guidance from their bank when they’re unsure or worried.

BNZ worked through the incident with her and continues to provide support with suspicious or fraudulent activity.

3. Share information in your network

Teresa belongs to a Facebook group of moteliers where they share information about suspicious emails, amongst other topics related to running a motel. This helps to raise awareness within the motelier community and helps to protect each other from falling victim to these crimes. Sharing this information also helps others stay vigilant, while reducing the feeling of shame and isolation that victims of scams often feel.

The emotional impact of falling victim to a scam goes beyond the financial loss. Teresa says she was scared and emotionally shaken the first time she realised she’d been targeted by a scam. As well as the bank’s support, she received support from her community and continues to share in the Facebook group to help others avoid future incidents. 

4. Put strategies in place to safeguard your business

As a small business manager, Teresa hasn’t needed to implement systems for training staff members to avoid scams, as she is the only one who handles emails and email bookings. “I even take my phone with me to keep on top of emails while I’m on holiday.” However, other businesses with multiple administrators may have more of a need to educate staff and put strategies in place to stay alert to red flags. 

“Keeping my own knowledge up to date, with the help of the bank, and my Facebook community, means I remain vigilant and responsive. It’s important to have an awareness of scams and cyber threats and understand the ways they could affect the business I work in, so I can spot potential scammers.”

Teresa's experience serves as a valuable lesson for small businesses in any sector. By staying informed, being alert to red flags, sharing information within your network, and collaborating with your financial and IT providers, businesses can build resilience against scams.

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This article is solely for information purposes and is not intended to be advice with respect to any matter discussed in it. If you need help, please contact BNZ or your professional adviser. Neither BNZ nor any person involved in the material accepts any liability for any direct or indirect loss or damage arising out of the use of, or reliance on, all or any part of the content. References to third party websites are provided for your convenience only. BNZ accepts no responsibility for the availability or content of such websites.