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April 15th approaches, and business owners up and down the country start sweating.
According to recent research, employee fraud and occupational abuse take 5% of a business’s revenue each year.
Payroll fraud falls into that category, and this type of internal fraud could ruin your company if you don’t catch it.
To save your company, you’ll need to learn how to prevent payroll fraud. Keep reading for a few key strategies.
What Is Payroll Fraud?
There are different types of payroll fraud, but in general, it’s when an internal employee takes money from your payroll system. Payroll department managers or seniors will typically take advantage of the system to make fake payments.
However, it could also be employees submitting false claims for payments. It could also be conducted by businesses that categorize full-time employees as a freelancer so that they don’t have to pay taxes.
This is one of the most common types of company fraud, and unless you have safeguards in place, this could quickly happen to your company.
Have a Finance Team
Whether you’re a small or large business, you need to have a team of finance employees to run your books. If you trust it to just one person, there is room for error and fraud.
This team will take care of paying invoices, managing petty cash, handling client receivables, paying invoices, and processing different payments.
When only one person is on the team, it could be easy to have fraud go unnoticed before the company notices.
You should also audit areas of your business that are regarded on the payroll. Inform your employees that you will be conducting an audit but don’t tell them when. That ensures that they can’t cover anything up just for the audit.
When the audits are random, you’re more likely to find fraud if it’s happening.
Use Password Management
Make sure that all of your employees will use a strong password. Require it to be changed frequently too so that no one can hack into it.
If you use any software, also enable two-factor authentication. This will also help you track down which accounts were hacked in the case of fraud.
You should ensure that your employees are trained to find fraud in the business and know where to report it. Train them about the common warning signs they might notice in their coworkers.
It would be best if you also made it easy for them to report anonymously in case they are too scared to come forward. Have an official code of ethics to show that you’re dedicated to preventing fraud in your business.
This will also help coworkers know that this type of fraud is a crime, which will make them less likely to commit it.
Discover More About Payroll Fraud
These are only a few strategies you can use to detect payroll fraud, but there are many other strategies you can try.
However, one more strategy you could try is to let a trusted company take over your payroll.
If you’re interested in hiring a good company for bookkeeping services, contact us today!
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