Insurance Basics: Everything You Need to Know

How Do You Protect Your Small Business From Contracting Fraud?

If you own a small business, you may hire contractors to complete some of your company's jobs. Although you may expect the contractors to complete the work properly and on time, you may need some security that they'll do so. You can do several things to protect your company from fraudulent practices, including these below. 

Investigate the Contractors

Contractors can work for themselves or for a large company, such as a temp agency or employment firm. But no matter how you obtain your contractors, it's very important that you learn as much about them as you can. Although this doesn't apply to every contractor, some contractors can use fraudulent methods to steal from unsuspecting companies.

If possible, run a background check on the contractors you plan to hire. You may make your request directly to the contracting company, or you may ask an attorney to help you. If the background check reveals multiple law suits against the contracting company or its members, you may want to hire another company for your jobs.

The background checks may also reveal the state of the contractors' credentials and licenses. If the contractors don't have viable paperwork or credentials to back up their claims, avoid them at every cost. You want to use contractors who understand how to do the job right.

If you still wish to hire the contractors in questions, take other precautions to protect your company from fraud.

Obtain Surety Bonds

Surety bonds are protective measures you can take against fraud. The bonds are legally binding contracts that you obtain from an insurance company, bank, or another financial institution. If the contractor fails to honor your contract agreement, the bonds will automatically pay for the work you need done. The contracting company will legally be responsible for repaying the financial institution the amount owed on the bonds.

To obtain the bonds you need, you should contact a financial institution directly. Many institutions require credit and background checks before they sell or issue bonds to customers. If you have problems with your credit, you may wish to straighten it out before you apply.

You may also need to submit a list of the jobs and their expenses to the institution before you receive your bonds. The institution may need to figure out the bond amounts you need based on this information. If you need more information about this part of the application, contact a surety bond provider right away.

You can protect your company from fraud with the right steps. For more information, contact a business such as Service Insurance Company.