Are You Opening Up Your Small Business to Payroll Fraud?

According to an article in Forbes by Matthew Garrett, payroll fraud is a problem. A really big problem. He says that 27% of all businesses are the victims of payroll fraud. And, small business owners beware, because Garrett says payroll fraud occurs nearly twice as often (14.2%) in small organizations with less than 100 employees than in large ones (7.6%).

Of course, small business owners are encouraged to put checks and balances into place to forestall any fraud. The premise is to put policies and procedures in place to catch it before it goes on too long. The average fraud lasts for more than 36 months. Imagine not just the cost to your small business, but the cost in the loss of trust in the culture of your business.

There are several ways payroll fraud can be managed in business situations.

1. Ghost employees. This is when non-existent people are added to the payroll Once paychecks are issued, the fraudster collects the pay.
2. Overpayments or underpayments to legitimate employees that are not caught by workers. In these cases, the fraudsters collect the differences.
3. Non-payment of payroll taxes. Some fraudsters can divert funds that are shown as tax deposits that do not get sent on but collected by the thief.
4. Collection of deductions or fees from each person on the payroll. Small amounts deducted from each paycheck may not be noticed by

Most of these issues can be found out through check and balance accounting processes and regular reviews and audits. Where the problem generally stems is that policies and procedures are overlooked because there is a culture of “family” so policies are disregarded as not necessary. Employers don’t want long-time employees to feel “not trusted,” which prevents them from insisting on compliance.

This situation may be another good reason to outsource payroll to a reliable payroll service. Teresa Ray at The Payroll Departments knows that the reasons for outsourcing payroll may be different for every one of her clients. Some want to save time. Some don’t want to stay abreast of the changing payroll regulations, taxes, and laws. Still others see it as a smart proactive business practice.

In reality, all these reasons are legitimate and make it a good business decision. Protect your livelihood and the future of your employees through safe, secure and reliable payroll practices that keep all payroll-related issues in the hands of professionals.

Contact Teresa at The Payroll Department to see how outsourcing your payroll to The Payroll Department is a smart and valuable tool for your business.

-Elaine of The Payroll Department Blog Team