The Association of Certified Fraud Examiners says that nearly 40 percent of
fraud cases in 2002 occurred in organizations with fewer than 99 employees.
And in all workplaces nationwide, one in 10 fraud cases involves payrolls, at
an estimated cost of $60 billion. Fraud is more costly to small businesses than
to large ones: Small organizations pay an average of $127,500 per incident,
compared with a $97,000 average for big organizations.
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Download NowA major vulnerability in small businesses is a lack of accounting controls.
From Fiducial, an accounting firm that offers tax, financial, and other business
services to smaller companies, come these tips to safeguard your payroll:
- Ensure you have checked work backgrounds and criminal records for all financial
employees (Ideally, you should make these checks for all employees.)
- If you do payroll in-house, divide the tasks between two trusted employees
rather than leaving them to only one. This step creates a quality control
for data input and review.
- Consider outsourcing your payroll processing and administration.
- If you outsource, choose your provider carefully, based on a reputable history,
credentials such as individuals' attaining Certified Payroll Professional
status, secure services, and a range of expertise. Be very specific about
the contract or service-level agreement you create with the vendor, including
detailed instructions about your needs. Identify who will have access to payroll
information and who is authorized to act on the company's behalf.
- Be aware of computer system security, especially that payroll information
is totally secure and protected by passwords. Hide passwords; never leave
them written down where they can be found.
Fiducial experts say small businesses sometimes don't notice fraud until it's
been occurring for a year or more. So watch carefully for red flags like these:
- unusual spikes in the number of checks presented for payment;
- a payroll provider that delivers many packages during the payroll period;
or,
- atypically high federal or state payroll taxes.
Review bank statements carefully and look at them online at least twice a month.
Be especially alert for unfamiliar third-party fees.
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