Contractors face financial risks on every corner, and unquestioning contractors can quickly find that their pockets have been picked, and their hard work and efforts have been turned to nothing by unscrupulous people. Contractors need to be wise to these tricks and have systems in place to protect themselves.
So who are these potential pickpockets?
- Employees. Employees can steal from us in many different ways:
- They steal time – arrive late, have extended lunch breaks, leave early, and even call in sick when they aren’t. If everyone on your project starts work 5 minutes late, take an extra 5 minutes on each side of their rest breaks and leave 5 minutes early you could be paying 30 minutes or more per person every day. It can add up quickly!
- They use company resources for private use. This could include the company vehicle and cell phone. But sometimes it’s more blatant and they use company tools and equipment after hours, sometimes even renting it out to friends and pocketing the money.
- They steal materials. From office supplies to timber, paint, and adhesives, it may seem minor but quickly adds up. Some employees are even more blatant about arriving in vehicles after hours to take stuff. In the retail industry, the biggest cause of shrinkage (what retailers call theft of merchandise) is from employees and not from the public shoplifting.
- They falsify travel and petty cash claims.
- Use company resources to do private work. I’m sure there are many homes that have been built with company resources that the individual never paid a cent for! I certainly know some.
- Pay subcontractors and suppliers through the company, for work that was done in their private house.
- Use subcontractors or suppliers who happen to be their friends, but who weren’t the cheapest or the best for the project. In extreme cases, they may even have a share in the subcontractor or supplier business.
- Accept bribes from subcontractors and suppliers to award them contracts, to accept substandard work, or to pay bogus invoices.
- Double invoice for materials.
- Don’t provide the correct quantities as per the delivery notes. This is often the case with suppliers of building sand and gravel. Who checks that the quantity on the truck is what’s on the delivery docket? I know when we checked, we often caught suppliers short delivering.
- Deliver damaged or defective materials or equipment.
- Invoice for work that hasn’t been completed.
- Deliver substandard work.
- Lodge spurious variation claims.
- Don’t pay contractors.
- Pay contractors late. Why should you be your client’s bank? They are earning interest from your money – money that you need to pay employees, suppliers, and subcontractors.
- Back-charge for items they shouldn’t.
- Refuse to pay variation claims which the contractor is entitled to.
- Request changes, but don’t issue written instructions, then argue they don’t need to pay for the item.
- May retain deposits because they claim the contractor damaged infrastructures, such as roads and curbs.
- In the worst case may even expect bribes to process documentation.
- The public
- Steal equipment and materials from construction projects.
- Engage in cybercrime which could include ransom malware.
- Submit bogus claims for damages, even injuries, which they claim were as a result of construction activities.
What’s the cost of theft
Theft results in:
- The immediate loss of the item.
- Work could be interrupted because equipment or material was stolen. This results in costs of people and equipment standing.
- Money stolen could have been used to invest in the company. To purchase new equipment and to grow the company.
- Money stolen may have been used to pay off loans, so you now have the cost of additional bank interest.
- Thieves often damage other items which have to be repaired.
- The cost to investigate the theft.
What you can do to prevent theft
Don’t let your hard earned cash disappear out the door. There are steps that you can put in place.
- Set the right example. Our employees are always aware of what management does.
- If they see you having extended lunch breaks or arriving late in the morning they’ll think it’s okay for them to do the same.
- Don’t take materials from your projects, or if you do, then make sure that employees know that you’ve paid for them.
- Don’t encourage employees to steal from other contractors, or to cheat suppliers, subcontractors or clients.
- You’re setting up a culture of theft and employees will notice that you condone theft in some cases, therefore theft is okay, even if it’s theft from your company.
- Enforce rules fairly and evenly.
- Those caught stealing must go through the full disciplinary procedures. The worst thing that can happen is you dismiss someone for stealing and then have to re-employ them because it’s found their dismissal was unfair. Don’t get carried away in the heat of the moment, rather do things properly following procedures.
- Never overlook an indiscretion because an employee is a good worker, or you need them. If you turn a blind eye others will follow the example. But importantly, if you’re aware somebody is stealing, there are probably other thefts they’ve been involved with that you haven’t noticed. In fact, often we tend not to suspect our best workers of stealing so don’t see the obvious signs.
- Enforce the rules. Sometimes it seems hard work, but when you let employees slide for some items they’ll start sliding elsewhere. Whether it’s safety, quality or timekeeping, make sure that employees keep to the rules.
- Ensure that employees understand that theft of any sort, even ‘borrowing’ equipment, is unacceptable. Make this part of every employees’ induction, even discuss it at ‘tailgate’ meetings. You don’t want anyone to say they didn’t understand the rules!
- Put systems in place to detect and prevent theft. These include checking and reconciling materials and invoices. If employees and others know there are robust systems to detect theft they’re less likely to try and steal. Detecting theft early will enable you to take steps to prevent further theft.
- Ensure that proper security is in place on all project sites.
- Check that computer systems are safe from infiltration, viruses, and malware.
- Encourage employees to look out for theft and suspicious behavior. All employees must understand that theft hurts the company, and it ultimately impacts them in that the company makes less profit, which impacts their wages and bonuses, it could prevent the company from purchasing new equipment, and in the worst case, the company could even become bankrupt.
- Carefully research your clients. Don’t work for clients that have a reputation for paying their contractors late, or even not at all. Nobody wants to work for free.
- Take every precaution on projects to ensure that work is safe and that the public can’t be injured in any way and that property can’t be damaged.
- Never trust anybody. Even someone that’s been trustworthy for years can suddenly turn rogue and steal from the company. We often aren’t aware of problems our employees have, which could include gambling debts or a seriously ill child that needs expensive medical attention.
You work hard for your money so don’t let others steal it from you. Money stolen is usually money that could have been used to grow and improve the company. Never be too naïve or trusting. Crime happens everywhere and it’s probably happening in your office and on your projects.
Take action to prevent theft. Often catching a thief is too late and it’s virtually impossible to recover what’s stolen. Rather prevent and deter theft.
Be aware of where theft could occur. My motto was always never to trust anyone. It’s a sad statement, but it’s stood me well in construction.
What theft has your project or company suffered?
Would you know if there was theft in your company or on your projects? What systems do you have in place to deter theft?
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