When last we discussed fraud, we touched upon the widespread prevalence of bribery and corruption in the construction industry. As discussed, a major source of fraud is the global nature of the industry and how larger firms must work in high-risk markets. Many contractors in these high-risk markets reported going to great lengths in order to remain lawful, even turning down lucrative opportunities in some instances due to the risk of corruption and the possibility of incurring a fine and prison time. But what can construction company owners do to address risks within their own organization?
Below, a Naples construction lawyer with Cotney Construction Law will discuss how you can fight construction fraud with software. You may not realize it, but you already have many of the tools necessary to safeguard your business from corruption, bribery, and fraud.
Behind Closed Doors
The problem with bribery is that transactions aren’t made out in the open; they’re made behind closed doors, signed with a handshake, and dealt discreetly using under-the-table payments. Other forms of fraud are just as nefarious and difficult to catch. Entire shell corporations can be fabricated for the purposes of hiding a billing scam. Furthermore, the majority of perpetrators have no prior record. Construction companies would rather settle disputes internally than risk damaging their reputation and business relationships.
In the past, construction firm owners would have little option but to profile their workforce for signs of a weak link. An employee caught up in fraudulent business dealings may have issues in their personal life, struggle with personal finance, insist on working alone, or otherwise be a loose cannon. An unusually close relationship between an employee and a subcontractor or vendor may tip you off to fraud, but this strategy is hardly reliable. In order to protect your company from risks from within, you’ll need assistance.
Man vs. Machine
Someone committing fraud within your company isn’t going to make things easy for you. You have to do your due diligence in order to prevent fraud and the resulting legal fallout. Fortunately, you may already have what you need: good old-fashioned financial software. Our Naples construction attorneys have recommended financial software in previous articles for its utility and versatility. These programs are irreplaceable for contractors wishing to organize their business dealings and watch transactions in real time. Financial software may not be a fraud-detection system, but it allows for tight workflows, approval chains, and audit trails that make fraud detection easier. With this technology, you can track your expenses and be notified of suspicious payments the day they happen.
Related: The Right Software for Your Business
By removing the human element from the equation, you can further protect your company from fraudulent workers. Computer systems can prevent your subcontractors from billing in excess of their contracts, making it impossible for funds to be diverted to a shell corporation. They can also examine submitted paperwork, such as lien waivers and joint checks, to ensure that they are properly processed.
Additional Tech to Consider
While financial software is excellent for tracking business transactions, it’s 2019; your company has an assortment of technological advancements to choose from. There’s software available that helps verify the legitimacy of subcontractors — something that’s incredibly beneficial considering how many subcontractors may be needed on larger projects. There’s software that tracks the order and installation of assets on the jobsite. There’s even software designed specifically for fraud and risk detection. However, while software has caught up with many of the needs of the construction industry, it can’t guarantee that your company won’t unwittingly succumb to fraud. In order to safeguard your company from threats within, you’ll need to partner with an ally that will protect your company before, during, and after incidents of fraud.
A Partner You Can Trust
Sooner or later, your company will face fraud in some form, and when that happens, you’ll need a representative that can help you avoid the incredible penalties that perpetrators of fraud can incur. At Cotney Construction Law, our unique team is comprised of attorneys with real-world experience, nearly all of which have a background in the industry. For an attorney that can not only help you initiate anti-fraud initiatives but also protect your business in the event of fraud, look no further than the Naples contractor lawyers from Cotney Construction Law.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.