In 2006, occupational fraud cost U.S. businesses about $600 billion, or roughly $4,500 per employee, according to the Association of Certified Fraud Examiners. Building contractors rank second in the list of targets, after retail stores. Most builders already know how field employees can skim money (padding their hours, for instance, or fueling their personal vehicles with the company credit card), but few are aware of the many ways that a dishonest bookkeeper can rip them off.

Small contractors leave themselves open to fraud by not paying attention to the books. This isn't surprising: People become contractors because they like doing construction; they're often so ecstatic when they find someone reliable to track the numbers that they walk away from that part of the business. They put their complete faith and trust in...

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