A Guide to Detecting and Preventing Payroll Fraud

A Guide to Detecting and Preventing Payroll Fraud

It’s an unfortunate reality that in many instances, payroll fraud isn’t detected, or even suspected, until large amounts of money have gone missing, and it can even take years for timesheet fraud or ghost employees to become apparent.

To help your business prevent payroll fraud, you could try hiring a remote payroll service, who are trained to detect such issues and prevent them. If you don’t want to do this however, or are in the process of doing so, the following brief guide can help you better detect and prevent payroll fraud within your business:

Detecting payroll One of the best ways to detect payroll fraud within your business is to schedule regular payroll audits, which can help you identify and correct payroll errors related to fraud. Some examples include fictitious timesheet data or payments to ghost employees, but can also include human error.

Annual audits can be useful, but quarterly or monthly ones are even more effective, and they can be carried out by internal staff, or a third party, such as a CPA or consultant.

Below are some activities that should be included in a payroll audit: ● Check that all payroll procedures are followed correctly every pay period ● Review your list of payroll software administrative users and ensure that only those employees with specific system rights are processing payroll ● Check your active employees list for discrepancies ● Make sure that no payments have been made to terminated employees after the termination date ● Analyze pay rates and check for any unusual alterations ● Study any hours worked for unscheduled overtime or a higher number of hours than you would expect for part-time employees

● Review commissions and bonus pay along with any off-cycle payroll checks ● Compare total payroll expenses across pay periods within your general ledger and examine any fluctuations that appear to be unexplained Verifying a ghost employee When conducting an audit, one simple way of being able to spot a ghost employee is to look for anyone with few or no deductions from their pay, along with the following: ● An employee who has a record with information missing from it

● The same bank account being used for the deposit of wages for more than one employee ● A turnover of staff that you can’t explain ● A name appearing on the payroll that nobody recognizes, or which has no defined job description attached to their record The best ways to prevent payroll fraud As an employer, there are many options for protecting your business and payroll department from fraud, and here are 4 of the most effective:

Outsource payroll – with a professional remote payroll service, they will help you to ensure that all payroll procedures are being followed to the letter, making much more difficult for mistakes to slip though, and fraudulent actions to remain undetected.

Conduct background checks – if you prefer to have an in-house payroll department, carry out background checks for all employees who will be able to access company bank accounts.

Segregate payroll duties – you can achieve this by processing payroll using a checks-and-balances procedure in which one person prepares the payroll and another reviews it.

Review standard employee and payroll reports – do this for each pay period to enable you to quickly spot any payroll errors.

Simplify all of your payroll needs and make fraud something you never have to worry about, by outsourcing your payroll requirements to a professional provider.

Apollo Payroll is dedicated to delivering expert advice, responsive service, and highly accurate payroll processing and reporting to ensure the success and growth of the business that we serve. Our services include comprehensive payroll services in Homestead and other cities in Miami-Dade County, employee background check and group health insurance in Miami & Coral Gables