When you are doing a business, you are prone to a lot of scams including fraud. To avoid this, you should understand one of the most common that can happen to you this includes payroll.
Payroll Fraud happens when money is stolen through the payroll system by someone who has been entrusted to do it. Although there’s no way to guarantee that employees won’t commit payroll fraud, you can take measures to prevent it or catch it quickly.
Checks and Balances
Keep an eye on employees who have access to account numbers and payroll checks, too. These employees could fabricate ghost employees and falsify wages. You especially need to pay attention if you only have one employee who handles payroll at your small business.
If you pass along responsibilities to employees, you need to make sure you don’t entrust everything with one employee. You should have different employees set up new hires, process payroll, and handle accounting duties. And, you should have more than one employee doing each task to make sure they are honest.
Mandate staff to report any malicious behaviors
As a business owner, you might not be able to see every detail that goes on in your business. But employees are most likely in a better position to spot payroll fraud red flags.
Establishing a special phone number for tips and a clear procedure for reporting suspected fraud is a good investment in fraud protection. Employees who report suspicious behavior may mitigate losses more quickly than if the fraud goes on undetected for years.
Clear and Transparent Auditing
An internal audit is a thorough checking of your business’s finances, operations, or management thoroughly. You can conduct these at random times to catch employees off guard. This can help you determine if anyone is committing payroll fraud.
When you conduct audits, you review your financial records to find where money is going. You can find gaps in records when you conduct regular audits, which can help you determine if employees are committing payroll fraud.
Separate payroll account
With a separate payroll account, you can count on additional security. You limit the amount of money that might be compromised in the case of payroll fraud, keeping the rest of your funds secure.
Keeping all your business funds in one bank account might be an invitation for fraud. A payroll account lets you separate your payroll funds from your general business funds. This way, you will only put enough money into the payroll account to cover employee wages and taxes.
Sure payroll tax deposits
There’s a tendency that the employee who is in-charge of running the payroll might be pocketing taxes. So, it’s important that you verify tax deposits are being made.
Being able to know whether your taxes are being deposited correctly can help you avoid penalties that result from not depositing taxes. And, it can help you catch payroll schemes before your business loses too much money.