Unless a small business owner handles all aspects of computing and paying payroll, there is room for fraud. Even if your company has only a few employees — it does not guarantee your funds will be safe.
How
payroll fraud happens
Perhaps one of the easiest payroll fraud techniques is the
overpayment of withholding or payroll taxes. Your bookkeeper simply overpays
the government. When the refund check arrives, the employee deposits it to his
or her personal account.
In some cases, the employee will have an account at a
different bank but in the company name. Such an account could be used for the fraudulent
deposit of other company receipts as well.
The greater the number of employees, the easier it is for
someone to pull off a scam. Perhaps the payroll clerk has invented a fictitious
employee or falsifies hours or commissions for a cooperating employee who
shares the stolen funds. Or perhaps the employee holds the payroll deposit
funds in his or her own interest-bearing account until it is time to make the
payroll deposit to the government.
How
to prevent payroll fraud
Small businesses can be exceptionally susceptible to payroll
fraud because they often lack anti-fraud controls that larger organizations
have in place. Here's a few ways you can work toward preventing this type of
fraud:
- Get outside help. A payroll
review by an independent accountant may help prevent employee schemes.
- Divvy up duties. Even in
small companies, it is possible to divide office tasks to make employee
theft more difficult.
- Limit payroll access. Figure out
who needs to have access to payroll data. That list will likely be very
small. Make sure it stays that way.
- Offer direct deposit. No paper
checks means less opportunities for employees to handle funds, meaning greater
security all around.
