Although unfortunate, it is impossible to deny that fraud is a common problem for businesses of all sizes (especially for SMBs). Of course, like any threat, simply hoping the situation will solve itself is unlikely to achieve any results; real change will require a direct approach to the situation at hand. Did you know that if your business is currently relying on manual processes to manage your payroll, then you’re unnecessarily putting your business at risk? In this article, we’ll be taking a look at the various types of fraud and the changes that need to be made if you want your business to avoid becoming the next unsuspecting victim.
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The Many Risks of Payroll
There’s inherent risk when you’re dealing with money, so it should come as no surprise that payroll is one of the most common places for fraud to appear in a business. Payroll isn’t the only thing at risk in your business. Accounts payable fraud is just as common and can be avoided using AP automation software like the one offered by Yooz. Whether it’s employees falsifying hours to obtain a bigger paycheck, payroll staff giving themselves an extra paycheck by using a “ghost employee”, or an outsider (or insider) stealing valuable employee PII (Personally Identifiable Information) to sell for a profit, the risks are numerous. Below, we’ll take a closer look at exactly what these issues entail. After all, you must learn about the problem before you can attempt to fix it!
Time Card Fraud
This type of fraud is extremely common, and for good reason: it’s easy to do! Especially if your company is still using physical time cards, employees need only to write down the hours they’d like to be paid for if they want a larger paycheck. Unless they do an extremely sloppy job or are completely obvious, it will likely be months (or even years) before you catch on to their antics and catch them in the act. Sadly, this will likely cost you hundreds—if not thousands—of dollars in the meantime.
It’s not only the general workers you need to worry about: payroll specialists have also been known to engage in fraudulent activities themselves! One of the most common tactics is the use of “ghost employees”, which are fake employees that the specialist will add to the payroll. Once paid, the ghost employee’s paychecks will be redeemed by the specialist, appearing innocent and accurate across all of the paperwork. While this is unlikely to be an issue for the smallest of businesses, it can quickly become a problem as your business continues to grow.
There’s a market for everything, especially when it comes to information. PII such as banking information, Social Security numbers, or Driver’s License information is often the target of nefarious thieves looking to make a quick buck at the expense of others. If your company stores PII using paper and ink, it’s all too easy for a potential wrongdoer to see an opening and take it. Not only can this result in the employee having their identity stolen, but it could also end up in fines (or even a lawsuit!) for your business if it’s determined that you did not properly protect their PII.
How Automating Your Payroll Can Help
Timecard fraud, ghost employees, and identity theft are all major issues that can be solved using one simple tool: payroll software! Managing your payroll digitally secures employee data from theft and prevents falsified records by using digital timesheets rather than physical ones. Payroll information can only be accessed with the proper login credentials, and vital information can be limited on a need-to-know basis. If information is stolen internally, the restrictive access will make it easy to determine who the culprit is. Convenient digital records make discovering any ghost employees a quick task, and some advanced payroll management software can even detect payment anomalies, meaning any unordinary bonuses or paystubs will trigger an alert Problems prevented!
While it is unfortunate that fraud has become such a widespread problem throughout the business world, that certainly doesn’t mean that you have to become a victim yourself. Manual payroll processing is not only inefficient; it’s also a huge security risk to your company! For this reason, we highly recommend making the switch over to your choice of payroll management software so that you can keep your business (and your employees) protected. Of course, there are additional benefits as well, so click here to learn more about everything that payroll processing software can provide.