Although you may not want to hear it, all businesses can be hit with payroll fraud. Find out how it happens and what you can do about it.
Unless a small business owner handles all aspects of computing and paying payroll, there is room for fraud. Even if your company has only a few employees — it does not guarantee your funds will be safe.
Perhaps one of the easiest payroll fraud techniques is the overpayment of withholding or payroll taxes. Your bookkeeper simply overpays the government. When the refund check arrives, the employee deposits it to his or her personal account.
In some cases, the employee will have an account at a different bank but in the company name. Such an account could be used for the fraudulent deposit of other company receipts as well.
The greater the number of employees, the easier it is for someone to pull off a scam. Perhaps the payroll clerk has invented a fictitious employee or falsifies hours or commissions for a cooperating employee who shares the stolen funds. Or perhaps the employee holds the payroll deposit funds in his or her own interest-bearing account until it is time to make the payroll deposit to the government.
Small businesses can be exceptionally susceptible to payroll fraud because they often lack anti-fraud controls that larger organizations have in place. Here’s a few ways you can work toward preventing this type of fraud: