Is your Payments Process Putting You at Risk?
3 ways to Keep Your Company Safe in the Subcontractor Payments Process
With headlines of security breaches, identity theft, and other types of fraud making headlines seemingly every day, protecting yourself and your business can certainly feel daunting. However, there are some simple measures Construction Companies can take to reduce their risk during the Subcontractor payment process. So is your payments process putting you at risk? We hope this list can provide some valuable insights.
- Avoid making payments with paper checks. Even in this digital world, paying with checks is incredibly common in the construction payment process. Many Trades prefer them over digital alternatives, and checks may seem like a tried-and-true way to get people paid.The truth is, writing checks risker than it ever has been. Each person who sees the checks your company writes is a potential weak link in its chain of custody. All one has to do is pull out their phone and take a quick picture to access all of the information it contains: Names, addresses, the banking institution, routing numbers, and account numbers. Checks are an absolute gold mine to fraudulent individuals, and just a single lost or stolen check could cost your company thousands in lost revenue and legal fees.
Checks can be stolen outright, or that account information could be sold on the dark web and result in account takeover. There may be circumstances where you have no choice but to pay via check, but exercise caution when doing so.
- Make the switch to a secure online payment system and make your payments digitally. There are countless digital payment solutions out there, but not all provide the same level of security. Some must-have credentials are:
- SOC2 compliance, or in the process of becoming certified
- Meet or exceed bank-grade encryption of your sensitive data
- Possess Web Application Firewalls
- Follow AML/KYC/SARS/OFAC requirements and procedures
- Routinely “pen test” their platform
For optimal efficiency and security, choose one that provides historical data, gathers and stores digital signatures for lien waivers, and provides visibility to everyone involved in the project, from the Lender to Trades and Vendors.
- Understand the risks and train your Team. Your team should understand the inherent risks associated with making payments of any kind. Establish procedures on avoiding risks, along with a plan of action in the case of a security breach. Consider monthly security training if you are not already doing so. Some basic measures go a long way, such as never sharing passwords, changing passwords often, and not opening email links and attachments that seem out of place.
Of course, there are more ways to de-risk your construction payment processes. The key to stopping fraud before it starts is making it a priority, and making sure the digital payment platform you use is up to the security standards you need. The National Association of Home Builders (NAHB) has excellent resources for Construction Companies regarding safety and fraud detection.
NEXT: Protect your project and improve efficiency with digital lien waivers.