Fraud is everywhere and you need to stay alert to detect any form of fraud either from contractors or engineers and other experts. To implement your project successfully, you need to minimize the losses that occur due to cases of fraud and this can only be made possible if you can understand the various forms of frauds you are likely to encounter in the construction industry.
As several experts including Rocco Basile will advice, you need to first lay out your plan before you negotiate anything with other parties. Basille is an expert in construction who founded Avo Construction, a highly rated construction company that has been operational since 2010. Lack of internal controls is the biggest issue that contributes to fraud in the construction business, and this is something you need to learn about before you dive deeper into the industry. Here are some of the most common forms of fraud in the construction business and how you can prevent them.
The effect of corruption in the construction business is that it inflates the cost of the project and in the long run could amount to huge losses in profit. This is usually perpetrated by employees and managers who overlook ethical principles that govern best practices in the industry. To prevent fraud through corruption, you should keenly observe every employee for unusual behavior or relationships with fellow employees.
You can easily tell when an individual is living beyond what they make and this should give you a clue that something extra is happening with the employee. Automating all processes that have to do with money is one of the ways you could curb most of the corruption that emanates from employees.
Billing is a difficult process to oversee if you have many transactions every day. In this sector, there is likely to be fraud and it could take you a long time to notice. To prevent this from happening, ensure you have a third party to help you review quantities and items on pay applications. This confirmation will to some extent enhance accountability and no one will be tempted to engage in fraud knowing well there is someone watching the movement of all transactions.
You need to also maintain an organized system that shows you the movement of money from the client into the system. In this category you need a lot of monitoring and checks to ensure only money approved is paid and that is what is deposited into the company.
Expenses also offer a perfect avenue for fraudsters to squeeze some money from the business. You might have come across lists of items that the business is asked to cater for and when you review the cost you later learn that most of them are overvalued. To solve this problem, you should ask for approval of all expenses. Having an approval supervisor could make your work easier. Also ask for original receipts showing all expenses incurred to avoid paying for items that were not delivered to the business.