How to Take a Proactive and Diligent Defense Against Payroll Fraud

What do you know about payroll fraud? Have you given it much consideration? Payroll fraud is a crime in which employees use the payroll system to steal money from a company, and it does happen. In fact, an article in Forbes reports that 27% of all businesses experience payroll fraud and that small businesses are nearly twice as likely to encounter fraud as larger businesses are. As these statistics show, this is obviously a problem that should not be ignored.

The damage of payroll fraud can be devastating to a small business.

This is true in part because it is not necessarily a one-time occurrence. It can go on over a long period of time, with the amount of money stolen growing with each pay period. So, as a small business owner, what can you do to protect your business?

A few common sense recommendations follow.

Your People. As you no doubt know, the people you hire will have a profound influence on your small business. Whenever you embark on the hiring process, it is important that you do your due diligence. Be sure to do background checks and carefully check all references. If you have any doubts, investigate your would-be employee further. It is better to avoid fraud altogether, rather than having to catch it and deal with it.

Your Process. Even when you do your best to hire only trustworthy employees, you still must take steps to protect yourself from payroll fraud. You can proactively address this potential problem by creating and following a detailed payroll process. It is important that no one person has total authority over or access to the payroll process. There should be a system where checks and balances are in place. In addition, supervisors or managers should do a monthly audit of hours reported against other documentation of hours actually worked.

Your Partners. You don’t have to go it alone in your efforts to prevent payroll fraud. You can enlist your bank to help you avoid it by taking advantage of services like direct deposit. Additionally, utilizing a reputable external payroll processor, such as The Payroll Department, can help to standardize your process and keep it in trustworthy hands.

Instances of payroll fraud can easily be found in the news. One article reveals fraud in forged time cards. Another article shows how payroll fraud and embezzlement can explode into tremendous amounts quickly. These articles detail just a couple of examples and good reminders of how harmful payroll fraud can be.

Outsourcing payroll provides another process to help prevent payroll fraud. If we can be of assistance to you in your efforts to streamline and protect your payroll operation, we would love to talk with you. Contact Teresa Ray of The Payroll Department at (317) 852-2568. Call us!

-Jessica of The Payroll Department Blog Team