No one wants to think that their employees are stealing from them, but it’s essential to be aware of the signs of payroll fraud so that you can take action if necessary. In this blog post, we will discuss a few red flags that may indicate a problem with your company’s payroll. If you see any of these signs, please don’t hesitate to contact an accountant or other financial professional for help!
You don’t have a robust audit trail: One of the first things that an accountant will look for when investigating payroll fraud is a lack of a robust audit trail. If your company doesn’t have adequate tracking systems in place, it may be more challenging to determine if any money has been stolen.
There are unexpected changes in employee salaries: If you notice sudden changes in employee salaries, this could be a sign of payroll fraud. Unexpected changes could mean someone is stealing from the company or getting paid off the books.
Employees are refusing to provide documentation: If employees are refusing to provide proper documentation, such as W-two forms or pay stubs, this could be another red flag. This behavior could indicate that they have something to hide.
Payroll is being handled by someone outside of the accounting department: If payroll is being handled by someone who doesn’t work in the accounting department, this could be a sign of fraud. Often, thieves will try to keep payroll duties separate from other financial tasks to avoid getting caught.
There are discrepancies between reported income and taxes paid: If your company reports significantly more income than what has been paid in taxes, this could be a sign of fraud. This discrepancy may indicate that money is being funneled into illegal activities or that employees are underreporting their income.
Employees are requesting advances on their paychecks: If employees are regularly asking for advances on their paychecks, this could be a sign of trouble. Employees struggling to make ends meet are more likely to resort to theft.
There is a high turnover in the payroll department: If there is a high turnover rate in the payroll department, this could be another sign of fraud. Often, thieves will target businesses with weak internal controls and then move on when they get caught.
The company is using multiple payroll services: If your company is using multiple payroll services, this could signify that someone is trying to hide something. This behavior may indicate that someone is embezzling funds or making unauthorized payments.
Payroll checks are being sent to P.O. boxes: If you notice that payroll checks are being sent to P.O. boxes instead of employees’ homes, this could be a sign of fraud. This behavior may indicate that someone is trying to avoid detection.
Employees are being paid in cash: If employees are being paid in cash, this could be another red flag. This behavior may indicate that someone is trying to avoid paying taxes or that the company is not keeping proper records.
Regular changes to the Masterfile If you notice frequent changes to the Masterfile, this could be a sign of fraud. This behavior may indicate that someone is trying to cover their tracks or that the company’s financial records are not accurate.
Out of hours access: Nobody will hack into the payroll system within regular office hours. These typically occur outside of normal business hours and more frequently via remote access to the payroll system. If your staff is frequently using the payroll system outside of working hours, there may be a need for further investigation as to why they require this access.
Sharing logins or using obsolete logins: It’s never a good idea to share login information or passwords, and anyone who engages in this is pushing the boundaries. Anyone who does this should be questioned. If you need access to the payroll system for a legitimate reason, you’ll need your login and password. It’s also critical that old logins are deleted when staff changes hands since these can be used to commit payroll fraud.
High percentage of casual employees. Payroll fraud is more likely to occur when you have a casual workforce. Payroll fraud may be prevented or eliminated by ensuring that your company has appropriate payroll procedures in place and limiting casual employees’ access.
If you see any of these red flags, it’s essential to take action immediately. Payroll fraud can have serious consequences for your business, so it’s important to nip it in the bud as soon as possible. Contact an accountant or other financial professional for help! They will investigate the situation and help you take steps to prevent future fraud.