Drop the F-Bomb: Finding Fraud in your Construction Office.

Fraud? In My Business? No Way… Right?

If you think risk management is only about protecting your business from hackers like this guy trying to get into your email, steal your credit card info, or hack into your system to get your money,.. I’ve got bad news for you.

You’re wrong.

Some of your greatest threats are sitting in your office with you each and every day - and you’re paying them to be there.

That’s right. I’m talking about your office staff.

It’s called Occupational Fraud, and it isn’t just a big corporate issue—it’s happening in small residential construction businesses like yours every single day.

Even though residential construction is a considered an audit heavy industry, occupational fraud is a widespread industry issue. Why? Well, here are some reasons that make it easy for your office staff to commit internal fraud:
✔ Large, frequent cash flow transactions - easy to move money without being noticed

✔ Lax practices like little to no system for checks and balances related to financial activities - open playing field for hiding fraud transactions

✔ Multiple hands touching financial processes - with no system for checks and balances and many hands in the finances, it’s easy to shift the blame and reduce clarity

✔ Disorganized or outdated bookkeeping systems - whether intentionally a mess or a mess when they arrived, hiding fraud is easier than hiding a needle in a haystack when your books are a hot mess.

✔ A culture of trust without accountability - which, unfortunately, makes fraud easy

The reality is this: if you don’t think fraud is a risk in your business, you’re the most vulnerable (and may actually have happened or be happening to you right now).

F-Bomb Truth

Here’s something that might keep you up at night:

💰 The average business loses 5% of its annual revenue to fraud.
💰 Small businesses (especially those with fewer than 100 employees) are the MOST at risk.
💰 The median loss in a construction fraud case? A staggering $259,000!

And those are just the cases that get caught.

For every fraud scheme that’s exposed, there are dozens more flying under the radar. Some last for months, some for years. Literally.

And by the time most construction business owners realize what’s happening? The money is long gone.

F-Bomb Locator

Fraud will not look like someone walking out of your office with stacks of cash. I mean, that’s just stealing.

Fraud is sneakier than that. Fraud uses deceptive practices to obtain unauthorized benefits. These are deliberate actions or choices not to act.

It usually shows up in deceptively small ways like the following and adds up over time:

🔹 The Office Manager Overpayment Scam – A trusted office admin writes small fake checks to themselves, tweaks payroll hours, or “accidentally” double-pays themselves.

🔹 The Vendor Kickback – A subcontractor overbills for work, then splits the overage with the employee approving the payment.

🔹 Ghost Employees & Fake Vendors – Paying workers who don’t exist, or processing payments to non-existent suppliers and pocketing the funds.

🔹 Underbilling or Misreporting Work in Progress (WIP) – “Losing” billable expenses or misreporting job progress to manipulate cash flow.

🔹 Client Payment Fraud – Homeowners or investors delaying or disputing payments, knowing it will put strain on the contractor.

These are real problems happening in construction businesses right now.

So the question is—how protected is your business?

Protect Your Business!

Good news—fraud is preventable if you take the right steps to protect your finances.

Here’s where to start:
✅ Separate Financial Duties: The same person who processes your bills and creates your draws, should also approve your payments AND reconcile your accounts. Again, No single employee should control billing, payments, and bank reconciliations without oversight.
✅ Review Financial Reports Regularly: If you aren’t looking at your own numbers, someone else will—and not in a good way.
✅ Use Technology to Reduce Manual Handling: The more hands touching financial data, the more risk. Streamlined systems leave fewer gaps for fraud.
✅ Work with a Third-Party Oversight Team: Having outside financial professionals review your books is one of the most effective ways to stop fraud before it starts.

What’s Next in the Dropping the F-Bomb Series:

➡ Internal fraud: How employees could be skimming from your business without you knowing.
➡ Vendor & Subcontractor fraud: The schemes that could be costing you thousands.
➡ Bookkeeper fraud: How the person handling your financials could be stealing from you.
➡ Client & Lender fraud: How the people paying you could actually be the biggest risk.

📌 Don’t miss these next posts—they could save your business thousands (or more).

If you’re ready to put safeguards in place NOW, let’s talk. At Catalyst CAC, we help construction businesses set up fraud-proof financial workflows that eliminate chaos and protect every dollar.