Payroll Fraud Prevention Saves Time, Money and Headaches

Payroll Fraud Prevention Saves Time, Money and Headaches

Payroll service is a basic and important part of business and requires a great deal of care and planning.  Payroll involves issuing of paychecks and maintaining records among other things, hence it is important that an honest and trustworthy person is in charge. Payroll frauds are common as often business owners and top executives don’t consider the possibility. There are many ways to a dishonest payroll employee can manipulate the system and steal company funds. Hence, it is important to pay attention to your payroll process or else it makes it easier for an employee to do payroll fraud and steal from the company. More details!

Ways to Commit Payroll Service Fraud

Payroll fraud is among the most common types of accounting fraud and employee theft.  Usually payroll frauds are discovered within a short period of time but it can last for as long as 36 months. It is important to reconcile your payroll periodically, at least quarterly, so that payroll fraud can be caught and minimized. In addition, you should be aware of different ways a payroll employee can commit the fraud. Here are few ways:

  • Payroll clerk can submit reports representing hours worked with any number they wants, more than the hours they have actually worked. They can fraudulently soliciting technical support and changing the system on the computer.
  • Payroll clerk can keep terminating employees on the active payroll but assign their direct deposit information to the terminated employee’s file.
  • Payroll clerk can add ghost employees to the payroll with realistic employee identification information. Ghost employees re worker that are on the company’s payroll but do not exist in reality.
  • Payroll clerk can enter loan repayment field to employee’s computer payroll records to compensate for the amount of money they helped themselves to in particular payroll cycle.
  • Payroll clerk can generate phony commissions in businesses that pay their employees’ commissions on sale and performance. The commission mount can be inflated through falsifying sales records, invoices and other financial documents. Check out this site:

How to avoid Payroll Fraud

The most important factor is avoiding payroll fraud is to ensure that the payroll providers you choose for your business or the person you employee for payroll service is properly vetted and researched. Ensure that they have reliable reputation and qualification. When choosing the payroll service provider, you should consider the following:

  • Whether they have a good reputation?
  • Do they have long and well-satisfied client lists?
  • Do they have certificate of liability insurance?

Payroll fraud prevention can help you save time, money and worry as payroll process activities are highly sensitive, hence ensuring that right person or company is in place. In case, you are employing someone for payroll service, you should do proper background checks and monitor them closely. Usually, payroll frauds happen due to lack of attention from the management.

Payroll frauds are real and relatively common in businesses. It is important to pay adequate attention to the payroll process so that no one can steal from you or take any undue advantage. There are more important and useful information on available on Many payroll fraud can be avoided by practicing due diligence in the payroll service.