Being an entrepreneur and running a company is a strenuous task, that too if everything goes smoothly. You need to be prepared for every possible situation that may arise and test you on your quick decision-making skills.
Every business owner has a fear of discovering a fraudulent activity, especially of finding out that they are being cheated by a trusted employee. But your money is for your business and you do not want to continue harboring a dishonest employee, particularly someone who can put you in trouble with the IRS.
Payroll fraud is real, and the top source of accounting theft in businesses. According to statistics provided by the Association of Certified Fraud Examiners (ACFE), 27 percent of all businesses face cases of payroll fraud and almost twice as much in small businesses than in large companies. Non-profit organizations are also not exempted from this criminal activity. https://antiguabarbuda.com
Let us look at a case. Tiffany Couch, a forensic accounting specialist shared a few stories of payroll fraud in a podcast with Accounting Today that will put things in perspective.
A well-trusted employee of 14 years at a dentist’s office is found guilty of cash skimming. She is a sweet person, hardworking and popular among colleagues. She handles the cash coming in and bank deposits, she takes care of QuickBooks data, she is handling all tasks related to money. Because nobody is checking up on her, it gives her free access to steal it. She starts paying herself extra paychecks, she manipulates the cash invoices coming in, and she is not depositing all the money in the official bank account. https://embassy.ag
The dentist reviews a few tax forms one day finds out she is being paid extra and confronts her about it. She denies it at first, then says that the boss had agreed to pay her hourly for all the overtime she did last year, and gets angry at him for not believing her. The dentist, avoiding the fuss and wanting to clarify a few facts before the conversation went further, said that they will talk about it later in the day. The lady went for lunch and never returned. When the accounts and data were checked, it showed a huge amount of discrepancies, deleted receipts and missing cash entries. In total, she stole over $400,000 and is now serving time for it in prison.
A payroll fraud seems difficult to commit, but if it is concealed well, it might take months (or even years) to uncover. It can occur in any industry, be it a small shop or a large enterprise. The key is to review your accounts on a regular basis yourself. In the case above, too much trust cost the dentist a lot of money. If he had reviewed or tallied invoices before, the case would have been different.
Using QuickBooks Payroll can save a lot of trouble. It comes with the facility of remote access, allowing you to go through your accounts from anywhere and at any time. This way you always know about your cash flow, and you can verify financial data from your home. You can also catch a fraudster smartly in the act, and with evidence.
Following are the most common payroll fraud schemes:
1. Ghost Employee
A fake or terminated employee is being paid salary checks that the fraudster cashes in for themselves. This is common in organizations with a large number of employees who are managed by a supervisor. Conducting regular audits of payroll reports to ensure correct pay is reaching the employees is crucial. Check for multiple deposits to the same bank account, or checks being issued to employees at the same address.
2. Rate Manipulation
When an employee who has access to payroll accounts, increases their own pay or pays themselves for extra overtime or a bonus. This fraud is clearly taking advantage of the trust that the employer has in the employee. As a business owner, you should remember that trusting your employees is fine, but too much trust is not wise. Establish internal control and supervise critical financial records yourself periodically.
3. Timesheet Adjustment
This is a very common occurrence in companies where employees are paid at an hourly rate. Employees can punch in time for absent employees or inflate their own work duration. But if the supervisor is strict, this can be avoided.
Payroll is a company’s biggest expense, and payroll fraud can cause a lot of damage to the company’s finances and reputation. It is of prime importance that all financial operations are monitored in detail to leave nothing to chance. Hosted QuickBooks gives you many advantages, including the right to work on your QuickBooks from a remote location. It is essential to keep a close eye on the cash flow and stay up to date.