Four accounting controls that'll help you eliminate payroll fraud from your company
Fact: Last year, payroll fraud cost South African organisations more than cash-in-transit heists did, according to a recent study conducted by Johannes Booysen, head of Alexander Forbes Payroll Services. That's quite shocking when you consider that one of the country's biggest cash-in-transit robberies got away with over R31 million in cash. But the good news is there are four simple accounting controls you can put in place to ensure your company doesn't become a victim of payroll fraud...
Identifying payroll fraud
can be as simple as looking for fictitious employees that have been added to your payroll or finding an extra 'zero' on an employee's payslip that shouldn't be there.
That's why the Practical Accountancy Loose Leaf Service
recommends you apply the following four accounting controls
to your payroll
system so you can pick up mistake and payroll fraud
at a glance…
Use these four internal accounting controls and ensure your payroll process is fraud-free
Make sure changes to the payroll system can only be processed by a designated, trusted, payroll manager. By doing this, you'll not only ensure that the confidentiality of your employees' salary structure is kept, you'll know who's at fault if something goes wrong or who to investigate in the event that payroll fraud takes place.
Only add new employees to your payroll once they've signed a contract. Don't forget to keep the contract as proof that you've hired the employee and confirmation of their salary. Should anything change, (i.e. you dismiss the employee or promote them), remember to let your designated payroll manager know so they can make the appropriate changes to your payroll system. Make all requests in writing and keep these on file in case you need to check them against the employee's record.
Review pay slips on a monthly basis and sign payroll reports off as evidence that you've checked and approved them.
Get department managers to compare the salary totals on their monthly management reports. After all, since payroll doesn't change much from month-to-month, this is an excellent control to ensure your company isn't falling prey to payroll fraud. If you find any changes, investigate them immediately to ensure you pick up errors before your next payroll is due.
By having these accounting controls
in place, you'll be able to safeguard your company from one of the most common types of corporate fraud out there: Payroll fraud.
For more information on how to prevent payroll fraud
in your company make sure you know how to calculate and interpret financial ratios correctly. In the Practical Accountancy Loose Leaf
we've got a dedicated chapter on financial rations, in it you'll discover:
What is ratio analysis?
What ratios are involved in ratio analysis?
Using and understanding the ratios
Calculation of ratios
Who uses ratio analysis and why?
Get your copy of the Practical Accountancy Loose Leaf