Here it is: The most important thing you must do to help prevent payroll fraud in your business

Simangele Mzizi, Fsp Business, 27 Oct. 2014

Tags: payroll, payroll fraud, how to prevent payroll fraud

Payroll fraud is one of the most devastating things that could happen to your business. If undetected, it could bring your company to its knees.

Everything you’ve worked so hard to build could perish because of this form of white-collar crime.

Our advice when it comes to payroll fraud is: Prevention.

But how do you go about it?

Read on to discover the most important thing you must do to help prevent payroll fraud in your business.

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Understanding why people commit payroll fraud is the start of preventing the crime

According to Yolande Schoültz, Risk & Fraud Management Division manager at Sage VIP Payroll & HR, motivation is the reason an employee might try to defraud you. For example, your employee needs money to feed a gambling or drug habit, or she’s short of cash for school fees or medical expenses.
Schoültz goes on to say, even when you carefully screen employees to avoid hiring those with poor credit histories or criminal records, you can’t be certain that your employees won’t have a motive for theft.
And what’s worse, is once people have been tempted to commit payroll fraud, they can usually rationalise their behaviour to themselves. For example, they’ll tell themselves that they’re underpaid or that they’ll pay the money back when they can.
It’s for these reasons that oversight is necessary. You must assume that anyone working with money in your business needs oversight.
This brings us to the one thing you must do to prevent payroll fraud.

Help prevent payroll fraud in your business by doing this

The most important thing to do, according to Schoültz is enforce segregation of duties in your payroll department.
For example, a clerk could capture payroll data, while your payroll manager could manage access to the system as well as add and remove employees from the payroll. Then, your financial person can be in charge of checking that the numbers add up.
Here’s the bottom line: You can’t eliminate people’s motivations and rationalisations for payroll fraud, but you can significantly reduce their opportunities to act on the temptation to commit the crime. And doing the one thing outlined above will help you prevent payroll fraud in your business.
PS: For more information on how to prevent payroll fraud, check out the Practical Accountancy Loose Leaf Service.

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