Workplace crime costs businesses in the United States $50 billion a year, and a chunk of that is attributed to payroll fraud. But, there are ways for your business to prevent that portion of fraud by using cloud-based payroll software.
Detecting Payroll Fraud
Small amounts of money taken over extended periods can end up costing your business millions. Knowing how to recognize and combat payroll fraud is the best line of defense for business owners, who lose an average of $72,000 per fraud incident.
Primary methods of the fraud come from internal employees in the form of timesheet cheating, ghost employees and misclassification. Smart business owners reduce their exposure to the risks by using controls built into payroll processing software.
- Timesheet fraud happens when employees report more hours than they've worked.
- Ghost employees are those who don't exist, but are regularly included on the payroll, costing businesses millions.
- Misclassification happens when employees are paid the wrong rate or are listed in the payroll system with incorrect job classifications.
Cloud-based Payroll Software Helps Prevent Payroll Fraud
Payroll software systems automatically assign employee identification numbers so they are easily tracked. Suspicious activity is recognizable on payroll reports built into the software.
Putting appropriate access controls in place is the first step in combating fraud once you've installed payroll software. Here's a breakdown of key payroll software controls and how they help you fight fraud.
Approval workflows: One of the most popular features built into today's payment-processing software is workflow tracking. Payroll history is tracked seamlessly and requires approval before moving on to the next step in the process. The built-in access control provides an added layer of data security to your payroll processing.
Payroll fund management: Fund management determines how and where your payroll is sent. It focuses on managing disbursement for automated clearing house payments, direct deposits, investment accounts, vacation balances, paid time-off and incentives.
Limited data access controls: Controls limit the amount of access that individual's have to data as a way of reducing fraud opportunities. They install checks and balances in your payroll processing system that assign role-specific duties. For example, one party prepares the payroll, but a second processes it.
Background checks: Comprehensive checks verify that the people you're hiring are who they say they are, and include criminal, educational, employment history and more.
Positive pay services: Offered by most banks, positive pay reconciles the account number, check number, dollar amount and payee to the payroll. The bank flags mismatched information and returns the unpaid items for your review. Payroll software reconciles with bank software to make keeping track of your payroll easier.
Salary changes: Processing salary changes is quick and easy using payroll-processing software. It can alert you when it's time to complete incentive-based employee reviews and make completing the process of salary changes a breeze.
HR managers and other decision-makers can manage all of those features, and that's just an example of the power of today's payroll software. When combined with other important HR solutions, it packs a powerful punch.
Inflection HR provides a cloud HCM system that combines payroll, HR, talent acquisition, and timekeeping for an all in one location for your administration needs. We provide solutions to help you manage your payroll and HR data in real time. HR managers can breathe a collective sigh of relief by automating payroll tax deposits and new-hire reporting even as they receive payroll advice and support.
Looking for payroll solutions like those for your business? Contact us today to see what you can do to protect your business from the cost of payroll fraud.