Stamping Out Payroll Fraud In Your Organization

Stamping Out Payroll Fraud In Your Organization

Research has shown that as much as 5 percent of corporate revenue is lost each year due to payroll fraud. Whether you’re a startup company or Fortune 1000 firm, such losses can have devastating consequences to the long term success of the organization. Below are some techniques for eliminating fraud in payroll.

Never Allow Payroll Staff To Produce Their Own Checks

There have been cases where staff members working in the payroll department embezzled company funds by creating overtime hours they didn’t work and adding vacation time that they didn’t earn. Such techniques can be tough to monitor and it could be months or years before the employee is discovered. It is for this reason that employees working in the payroll department should never be allowed to generate checks for themselves.

Train Employees To Look For Signs of Fraudulent Activity

There are warning signs or red flags which indicate that someone may be involved with fraud; employees should all be trained to watch for this. Examples of such red flags include those who are having financial difficulties, an inappropriate relationship with a client or vendor, an employee that lives a lifestyle which greatly exceeds their salary and a recent divorce or other problems in the family.

Employees who seem to enjoy wheeling and dealing, have addiction troubles or who behave in a manner that is suspicious could be involved in fraudulent activities against the company they work for. It is also important to watch for employees that are unhappy with pay or disaffected in other ways. When all the employees of an organization are trained to detect instances of possible fraud it creates a “neighborhood watch” type of environment which protects everyone.

Ensure That Tax Deposits For Payroll Are Being Made

There have been other cases of fraud where employees would keep tax payroll deposits for themselves. This is an extremely dangerous situation for employers, as they will be held responsible for the money the government doesn’t receive. An employer could find themselves facing stiff penalties and possibly criminal charges because one of their employees didn’t make the necessary tax deposits and instead decided to keep the funds.

It would be wise for business owners to maintain separate copies of the password and PIN for the Electronic Federal Tax System so they can access the regularly to ensure that tax deposits are being made on time and in the correct amounts. Business owners can also monitor the tax filings for quarterly payroll to ensure that everything is accurate.

Keep An Eye On The Accounting Department

Studies have shown that employees working in the accounting department have been responsible for almost 20 percent of fraud cases globally. The three most common frauds include altering wages, creating ghost employees and falsifying wages. Accounting department staff members should be monitored carefully as they have access to all types of sensitive information including account numbers and payroll checks which are blank, making it easy for them to fabricate things.