482: How To Prevent Employee Theft In Your Construction Company

This Podcast Is Episode Number 482, And It's About How To Prevent Employee Theft In Your Construction Company Recent employee theft statistics are increasing, and small business owners are more vulnerable to the problem. The most common embezzlement methods include billing fraud, cash on hand, and check tampering. You may not know how employees can steal from you as a construction business owner. Some standard methods include: redirecting company checks to personal accounts and altering entries to cover up the theft undercounting change to customers and keeping the balance seeking reimbursement for non-business related expenses or  pocketing inventory or supplies. Just as you can't be 100% secure all the time, there is no way to eliminate 100% of the embezzlement in your contracting company. However, you can limit your losses and avoid most of them with suitable preventative measures. As a small construction business owner, you may not have the significant security budget of a large company, but you can combat employee theft with these simple strategies: 1. Do your due diligence when hiring. This may be one of the most critical steps to combat employee theft. Screen all potential employees carefully. Look into employment history, call references, and run a credit check. Hire someone else you feel comfortable with. Above all, trust your instincts. If you sense someone might risk your business, don't give them the benefit of the doubt. Construction Bookkeeper Embezzlers come of every race, creed, color, gender, and age. There is no definitive profile or absolute way to know which contractor bookkeeper is an embezzler until they have been caught and convicted. Even then, if you do not perform extensive background checks, you may never know it until it is too late. 2. Identify and eliminate opportunities to steal. Think of any opportunities where staff have unsupervised access to sensitive financial data, cash, or anything of value – then brainstorm how you can minimize the risk. For instance, ensure no employee signs any checks. Restrict access to financial records and change your secure company passwords often. We recommend opening three separate checking accounts - one for your central operating funds, one for payroll with just over enough to clear all outstanding payroll checks, and one for the owner's debit card purchases. 3. Conduct ongoing audits In addition to having an annual third-party audit, it's wise to perform random internal audits every few months to spot fraudulent activity early. Your bookkeeper or accountant can help you maintain accurate numbers and flag transactions that appear suspicious.  If you have a cash drawer, balance it daily like a bank account. Bookkeepers who develop the habit of embezzling usually start with taking small amounts, often from petty cash. Keeping track of small amounts of money can help save considerable amounts from disappearing. 4. Keep a close watch on inventory and supplies. Invest in an automated real-time inventory management system or take time to monitor your office supplies and tools in your trucks. Check your records regularly to catch any discrepancies in your physical inventory and recorded data.  5. Invest in security measures.  It only makes sense that when the staff knows they're being watched, they're less likely to steal from you. Critical areas for video surveillance include storage space for inventory and supplies and offices where financial data is kept. Final thoughts There is a lot of work here, but it could save you thousands, if not hundreds of thousands of dollars. One of the best ways to limit your exposure to bookkeeper embezzlement is to outsource your contractor's bookkeeping services to us because we handle all of the construction bookkeeping services chores and never touch your money. Although it's essential to do everything you can to eliminate opportunities for staff to steal from you, one of the most effective ways to avoid employee theft is to nurture a positive relationship with your team.  It is much harder to steal from people you know. So take the time to interact with your employees, fostering goodwill with the people who work for you. A friendly environment where people care about each other creates an atmosphere where criminal behavior is less likely to occur. One final tip: give your staff a way to safely and anonymously report suspicious employee activity. Your staffs are the eyes and ears of your business, but they may not come forward with incriminating information unless they feel safe doing so.  About The Author: Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or [email protected]