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How can I protect my construction business against fraud?

If you're a contractor in Raleigh, you probably strive to ensure fair dealings with both customers as well as associates. Unfortunately, many unscrupulous people exist in the world of business and if you're not careful you could find yourself embroiled in serious legal trouble should you encounter one of these people. To ensure you can protect yourself and your company, follow these tips from Construction Business Owner.

Know what to look for

The Fraud Triangle is a theory developed by criminologist Donald Cressey that can be extremely helpful for business owners concerned about being taken advantage of. In general, there are three factors that can potentially lead to fraud; they entail some form of personalized financial pressure, the opportunity for abuse of authority, and a rationalization their actions will solve their financial woes without being discovered. Because it can be difficult to identify these factors on your own, it's up to you to take the right steps to prevent fraud from occurring in the first place.  

Perform your due diligence

Internally, it's vital that you screen new hires for any potential issues in their background (these could be issues with their credit history or criminal background). You should also strive to create the type of working environment where employees feel empowered to report issues. Accountability in construction is an indicator of an honest work ethic and you want your workers to uphold these principles. Additionally, it's a good idea to spread out job duties evenly to prevent any one employee from holding an undue amount of authority.

When it comes to external due diligence, exhaustive checks on subcontractors are also recommended. When bidding, try to get at least three separate bids on every project. After selecting a bid, make sure you compare it to pricing documents to check for any discrepancies. Lastly, all change orders should be thoroughly inspected. This process is best performed by two different people before approval is granted.

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