Watch Out for These 7 Common Scams Targeting India’s Small Businesses

In India’s vibrant markets—whether a kirana store in Jaipur, a salon in Mumbai, or a tiffin service in Bengaluru—entrepreneurs juggle countless daily challenges. Amid rising rents, supply constraints, and tight margins, scams can silently erode profits and morale. Here are seven real-world frauds you’re likely to encounter—and practical defenses you can put in place today.

1. Fake Inspector & “Facilitation Fee” Schemes

How It Works:
Impersonators (or overzealous officials) claim there’s a violation—food safety, fire compliance, or GST irregularity—and demand an on-the-spot “penalty” or “facilitation fee” to avoid a formal notice.

Red Flags:

• Unannounced visits outside normal inspection cycles.
• Requests for cash payments and refusal to issue receipts.
• Lack of official identification or refusal to show “order copy.”

What to Do:

• Verify Identity: Ask to see official ID and reference their assigned inspection schedule—then call the municipal office to confirm.
• Accept Only Receipts: Never pay cash without a valid receipt or official challan.
• Report Attempts: Log the encounter and report impersonation attempts via your local police’s cybercrime portal.

2. Supply-Chain “Bait-and-Switch” Orders

How It Works:
You place a bulk order at a quoted price; when goods arrive, they’re inferior or partial, and the supplier demands extra payment for “premium” items that were never part of the original deal.

Red Flags:

• Supplier delays “confirming” final quantity until after delivery.
• Unexpected “quality surcharges” on arrival.
• No written order confirmation or ambiguous proforma invoice.

What to Do:

• Get It in Writing: Always issue a purchase order clearly specifying SKU codes, unit costs, and delivery terms.
• Inspect On Arrival: Check quality and quantity before accepting delivery—retain photographic evidence if there’s a dispute.
• Hold Payment: Pay only for goods that match your signed PO; negotiate resolution for shortfalls before disbursing the balance.

3. Digital Payment Frauds & UPI Phishing

How It Works:
Scammers send fake payment requests via UPI, mimicking trusted vendors or posing as “platform support.” A mistyped UPI ID or a malicious deep link diverts your payment.

Red Flags:

• Payment links or requests from unfamiliar IDs.
• Urgent language (“Pay now or account will be blocked”).
• Links that open in external browsers rather than your official UPI app.

What to Do:

• Double-Check UPI IDs: Save vendor IDs in your address book and initiate payments only via the app’s contact list.
• Reject Suspicious Links: Never click unknown payment links—initiate payments directly from your UPI app.
• Enable Transaction PIN: Ensure every transaction requires your PIN; watch for any “skip PIN” prompts.

4. ATM & PoS Skimming

How It Works:
Criminals install skimming devices on ATMs or counterfeit point-of-sale (PoS) terminals to capture card data and PINs, leading to unauthorized withdrawals.

Red Flags:

• Unusual card insertion resistance or loose-looking card slots.
• Overlay on PIN pad that feels thicker than normal.
• PoS machines that ask you to swipe instead of chip/tap when chip is available.

What to Do:

• Inspect Before Use: Wiggle the card slot and compare the PIN pad to other machines.
• Use Trusted Machines: Prefer ATMs inside bank branches and branded PoS devices.
• Monitor Statements: Check your bank and merchant accounts daily; report unauthorized transactions within 24 hours.

5. Fake Consumers & Chargeback Frauds

How It Works:
A “customer” pays via credit card or digital wallet for goods or services, then disputes the charge claiming non-delivery or defect, prompting a chargeback that refunds their payment while you lose both product and cash.

Red Flags:

• First-time customers insisting on high-value, urgent orders.
• Unusual billing-shipping mismatches (different addresses).
• “Customer” becomes unresponsive after delivery.

What to Do:

• Proof of Delivery: Always get signed or photograph-backed confirmation when you ship goods.
• Document Customer Agreements: Keep copies of order confirmations, service contracts, and WhatsApp chats.
• Respond to Disputes Promptly: Provide your documentation immediately when a chargeback arises.

6. Cash Shortage & False Claims by Staff

How It Works:
A staff member claims a till-count discrepancy or “misplaced” cash and pressures you to cover the shortfall from your pocket—regardless of actual error.

Red Flags:

• Repeated “mystery shortages” isolated to one employee’s shift.
• Resistance to CCTV or digital billing audits.
• Pressure to reimburse cash without investigation.

What to Do:

• Implement Cash Audits: Do surprise till-counts at shift changes; reconcile digital records daily.
• Use Digital Billing: Encourage all transactions go through digital PoS—minimizing unrecorded cash.
• Rotate Staff Duties: Prevent any single person from handling cash start-to-finish.

7. “Consultant” & Franchise Scams

How It Works:
You’re approached by a “consultant” promising rapid growth, or a franchise agent offering exclusive territory—both require upfront fees, but deliver little or no real support.

Red Flags:

• High initial fees with vague deliverables or no performance guarantees.
• Pressure tactics (“Enroll by Monday to get the ‘founder’ rate”).
• No local references or verifiable case studies.

What to Do:

• Ask for References: Speak with at least two existing clients or franchisees—ideally in your city.
• Get Deliverables in Writing: A clear scope of work with milestones and refund clauses.
• Start Small: Pilot a single service package or a limited region before committing to full fees.

Building Your Scam-Resistant Toolkit

1. Standard Operating Procedures: Document receipt, inspection, and payment processes—train your team.
2. Digital Record-Keeping: Invoice via apps, archive chat logs, and save PO copies in a shared folder.
3. Regular Reconciliation: Daily sales vs. cash/UPI records; weekly inventory vs. billing.
4. Peer Alerts: Join local WhatsApp or Telegram trader groups that share real-time scam warnings.
5. Legal Safety Nets: Display clear refund, damage, and dispute policies—both in-store and online.

Bottom Line:
Scams are as much a part of India’s small-business landscape as bustling footfalls. By recognizing the tactics—fake officials, supply-chain bait-and-switches, digital phishing, skimming, chargeback fraud, inside thefts, and dubious consultants—you can institute practical defenses. With clear procedures, digital audit trails, and community vigilance, you’ll protect your margins, preserve trust, and focus your energy on growing your enterprise—undistracted by avoidable losses.