Combating Fraud In Your Construction Business

by | May 6, 2019

Sadly, fraud cases and fraud schemes in construction are not uncommon. Discover what you can do to combat fraud and take control of your company.

The harsh reality is that far less people today are as honest and trustworthy as we thought they were back in the 1950s. If you are a business owner, you may know this all too well. From employees altering their timecards, to check cashing fraud and embezzlement. It’s not something we talk about often, and we all think it will never happen to us.

I recently worked with one construction company that struggles with deception in several areas of the business – from timecard discrepancies to cashing paychecks twice and even paying for employees that never actually show up on a job.

Great news! There are tools to help you combat fraud issues in your construction business to save you legal and financial hassels.

Hiring

The first step in the right direction starts during the hiring process. Make sure to do your due diligence with background checks and previous employment reference calls to check for red flags. The same goes for companies you are considering partnering with – references are key. If you need help finding skilled labor in your area that you can trust, check out this article for ideas on finding good laborers. Once hired, make certain your staff is using the mechanisms and processes you have put in place to prevent them from defrauding your company.

Paycheck Fraud

One way that employees can commit fraud within your company is by electronically depositing their paychecks into their bank via mobile capture and then cashing that check at a local check cashing counter. The check cashing service has no way to verify if this check has already been cashed, so it isn’t caught until it reaches your bank. When the bank refuses the duplicate check, the check cashing service will try to come after you to recoup the funds.

To combat this, you can implement direct deposit for payroll. This does not cost you anything extra through your bank, it saves you the cost of printing and mailing checks, and your Bangert consultant can help you set that up in less than two hours in your accounting system.

Some employees will say that they don’t have a bank account so they can’t enable direct deposit. There are ways around this as well. Several companies provide prepaid cards that someone with no credit can set up. This allows them to receive their payroll check via direct deposit. Visa offers a wide variety of such options for your employees.

Timecard Fraud

If you don’t have a physical punch clock on your job sites, another area that could be a challenge is verifying the accuracy of timecards. Although you may have foremen or supervisors approving time, they can’t be everywhere at all times, so there is a level of guessing and trust involved in this process. Having a phone app that tracks GPS on punches or allows for geo-fencing drastically reduces the ability to falsify time records.

There are software solutions that address this challenge, such as hh2 Remote Payroll, ExakTime, and AboutTime. Each of these solutions offer GPS capability and integration with Sage 300 Construction and Real Estate and other construction accounting software. For employees who do not have their own mobile device, a computer or tablet in your job trailer can be used as a login kiosk.

Employee Fraud

This one may be a bit more tricky. If your foreman has hired a family member, and is falsifying timecards on days that the employee is not there, how do you combat that? The best way to fight this is with a Biometric Time Clock. This technology allows you to verify that they are who they say they are, giving you peace of mind knowing that the right employees are where they should be, when they should be.

Both ExakTime and AboutTime offer this feature with a photo snapshot of the employee who is punching in and out on the mobile app. Laborers’ hands are often dirty, which makes fingerprint identification an impractical method of verification, so the photo method is used for the construction industry. Each punch on a smartphone or tablet uses the device’s front-facing camera to take a picture, ensuring the employee punching in or out is in fact the one doing the punching. The photo, along with the timesheet data, can be sent instantly to the office, allowing easy verification of identity by the payroll staff.

Conclusion:

There are countless forms of construction fraud, but fraud prevention is not impossible if you have the right tools and internal controls in place for the type of fraud you are combating. Unfortunately, not only can employees commit fraud and hurt your company, but also other contractors and subcontractors. There is no way to prevent everything, so finding and working with people and companies that you can trust is not always easy.

Want to know more about the tools and techniques I talked about in this article? Start a conversation with me by scheduling time on my calendar! Click the button below:

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