Greg's Corner

Fake Order Scam, Targets Small Businesses

By Greg Collier

A small Los Angeles bakery specializing in unique baked goods recently fell victim to a scam that serves as a stark reminder of the dangers facing small businesses. The bakery, known for its intricate cookies and special occasion cakes, received an unexpected order for around 1,000 cupcakes. Although the bakery is not typically associated with cupcakes, the sizable order seemed like a great opportunity to generate income.

The payment for the order arrived via priority mail. It was a check for over $7,500. After consulting a bank representative, the bakery owner felt reassured when the funds cleared and promptly began preparations, purchasing ingredients and starting the baking process. However, the situation took a turn when the person who placed the order requested that the quantity be halved and half of the payment returned. Despite initial reassurances from the bank, the bakery owner refused the refund request due to the expenses already incurred.

The next day, the bakery received devastating news. The check had been flagged as counterfeit, and the funds were withdrawn from the account. Further investigation revealed that the scam involved stolen checks from another company, and the bakery was not the only victim. Several other businesses, mostly bakeries and landscaping companies, had received similar fraudulent orders.

Small business owners can protect themselves from fraud by taking the following precautions. Always verify the authenticity of large or unusual orders, especially from new or unfamiliar customers. Contact the customer directly using a verified phone number to confirm details before proceeding.

Exercise caution with payments made by check, particularly for large sums. If accepting a check, wait for the funds to be fully cleared by the bank before fulfilling the order. Remember that initial bank verification is not always final.

Establish and communicate clear refund policies to prevent scammers from manipulating your business. Avoid issuing refunds for orders paid by check until the payment has fully cleared.

Be wary of customers who make unusual requests, such as rushing an order, changing the quantity, or requesting refunds before the order is fulfilled. Scammers often create a sense of urgency to pressure businesses into quick decisions.

If you suspect a scam, report it immediately to your bank, local authorities, and relevant fraud prevention agencies. Early reporting can help mitigate losses and prevent the scammer from targeting others.

This scam left the bakery owner with excess ingredients, unsold products, and significant financial and emotional distress. The experience underscores the importance of vigilance for small business owners, who are often targeted by increasingly sophisticated scams. By sharing this story, the hope is to raise awareness and help prevent others from falling victim to similar schemes.