How Small Businesses Can battle Payroll Fraud?

If payroll services are not good then there is a great chance of payroll fraud. Study illustrates that countless frauds are found in small organizations instead of large organization. If the frauds are not appropriately checked then the small organizations can come to an end. Another study shows that 16.5 % frauds are found in small organization’s payroll departments and 8.2 % frauds are found in the large organizations. Therefore, there is a need of proper check and balance in small organizations to reduce the payroll frauds.

Payroll frauds can be avoided by proper internal controls. People must not have access to the company’s critical information. Some accounting and financial experts suggest that companies should not go for payroll outsourcing as it increases the chances of fraud. Here some other important points are mentioned which can help the small companies to reduce the chances of fraud. Read on to find out more.

Establish check and balances:

Check and balance is very important for all the organizations no matter what size they have. These checks and balances should begin from the very start of the business.

Keep a careful watch:

A study shows that accounting personnel were more indulged in payroll fraud activities. There percentage is more than 18, worldwide. The most common payroll frauds to be found are

  • fabricating ghost employees
  • falsifying commissions and
  • falsifying wages

Employees in payroll departments are involved in fraud due to access to the account numbers and blank cheques. An expert states that you can play down the payroll frauds if you go for payroll outsourcing by hiring someone other than payroll processor.

Never permit payroll service department employees to create their own paychecks:

It is suggested that don’t allow the payroll employees to make their own pay slips. These employees can embezzle in many ways. They may add extra overtime hours or may include vacation pay to which they are not entitled. They may also leave to deduct the insurance premium from their salary and much more like that.

The best way to avoid this problem is to rotate the responsibilities within the payroll department. In large organizations it may work well but in small organizations it may not be feasible.

Conduct surprise audits:

Both internal and external audits are necessary to check out the frauds within the organization. In the course of audit, if the auditor finds any fraud then he must report this to the audit committee or to the regulatory authority.

Perform regular background checks:

Payroll service Australia requires checking the background of the employees. This background checking procedure keeps the thieves away from applying. Occasionally it take places that employee get involved in fraudulent activities later on. But the best way to avoid fraud is to check the references and backgrounds which they have provided.

So there is a need to develop an ethical code of conduct within the organization. Payroll service department should also make it clear to the employees that no fraudulent activities will be tolerated within the organization.

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