Veteran certified public accountant Leslie Garcia pointed out in a recent report that margins in the construction business are slim, thus they can ill-afford to lose hard earned revenues to fraud.
Garcia noted that on the average, US construction companies earn 3.5% in profits from their projects. Still, the industry has the sixth highest median loss per case of fraud at $259,000, according to the Association of Certified Fraud Examiners.
Companies lose cash and other assets through pilferage of cash and inventories, as well as purchasing schemes and fixed asset loss, she added.
“To reduce opportunities for financial fraud, company owners need to meet with their CPA so bookkeeping systems can be inspected for vulnerabilities. Industry accountants can recommend accounting processes, including software, that provide the maximum protection against fraud by either employees or outsiders,” Garcia emphasized.
Garcia advised companies to do the following to curb fraud in their organizations: follow a set schedule for subcontractor pay applications, compare actual spending with budget using line items, reconcile payables with actual payments, track contingency account changes, keep up with inventories, and link subcontractor bills with payment applications.
“Successfully combating fraud requires a forceful stand by owners and top managers. More than just giving lip service to the issue, company owners and top managers need to initiate a dialogue about the importance of honest behavior—and the consequences that await employees who act unethically,” she concluded.