Is Your Business Ready To Fight Payroll Fraud?

[Fit Small Business | ]( Payroll Insights from our Experts [Read new articles from our HR experts]( Welcome to this week's HR newsletter! We’re so happy to have you. Have you looked at your payroll security recently? Do you have the tools to detect and prevent payroll fraud? Arming your business against potential fraudulent activities can help you avoid detrimental losses, but what are the warning signs you should watch out for? Keep reading for our HR professionals’ insights on just that!   Payroll Fraud: What Is It & How To Detect It?   Payroll fraud is when a worker manipulates the system to get a higher paycheck. Small business owners are more likely at risk of experiencing fraudulent activities in the workplace because they often have fewer safeguards in place. Companies with fewer than 100 employees had the highest median loss (around $150,000), according to a [2022 report from the Association of Certified Fraud Examiners (ACFE)](. This study covers 2,000+ real fraud cases from organizations across 133 countries and 23 industries, wherein 675 (or 36%) of the cases happened in the US and Canada region. There are many forms of payroll fraud, and some can be difficult to detect so you have to look for warning signs or red flags. It’s important to detect fraud as soon as possible because the longer it remains undetected, the higher the financial loss. According to the ACFE report, the typical time when a fraud begins and when it is detected is 12 months, with businesses suffering a median loss of $100,000. Here are a few red flags to watch out for: - Payroll record changes that you don’t recognize - Employees with identical SSNs and bank account information - Payroll record errors - Notifications from unrecognized email addresses concerning pay runs you didn’t process 📌 In The News: In today’s remote world, payroll fraud is at an all-time high. It’s vitally important for small business owners to have safeguards in place to ensure that this isn't the case. One of the most important questions small business owners ask themselves is “How do I know when my remote employees are actually working?”. To remain proactive against time theft, you should consider outlining what you define as time theft in your employee handbook so that it’s understood what your expectations are. You may even want to define what your idea of working hours is within your policy. Alternatively, you may consider flexible work hours with other factors to measure your employees' performance.     Common Payroll Frauds: Tips To Prevent It   Payroll fraud can take many forms, and knowing what the different types can help you help prevent fraudulent activities from happening in the workplace. Here are some of the most common payroll frauds: - Timesheet Fraud: This involves adding small increments to an employee’s work hours. Sometimes, employees do [buddy punching]( where they get other workers to clock in/out for them. Field workers may also clock-in/out even if they’re not in a recognized business location (such as a client office or work site). Conducting regular [payroll reconciliations]( is also a great way to spot errors. And if you have salary changes, it’s best to compare the pay rate authorization documents to the amounts in your payroll register. - Pay Rate Alterations: This requires someone working with a payroll system or a smart fraudster hacking into your payroll software to falsify wage amounts. To prevent this, ensure that the payroll system you’re using is password protected, has access permissions, and provides robust data protection tools. To prevent these from happening, have a clear policy about clocking in/out. Using a [time tracking software]( also helps, especially if it comes with authentication tools like an ID badge, password, biometrics (like fingerprint or facial recognition), and geolocation tracking. - Expense Reimbursement Fraud: This involves fraudulent expense reports claiming for expenses that are non-work related. Other times, the expense reimbursements cost less than the actual expense either through falsified receipts or accidental overpayments that went unnoticed. In such cases, it’s best to have a clear policy on what expenses are claimable, including the limits for each transaction. You may also want to consider getting a [business expense tracking too](l or a payroll or accounting software that also handles expense reimbursements to automate the process. 📌 For more information about payroll fraud and how to prevent it, read our [payroll fraud guide](.       While you’re working on setting up clear policies and strengthening your [payroll security]( to prevent fraud, don’t forget to take a look at the software you’re using to pay employees. If it doesn’t come with strong compliance tools, consider QuickBooks Payroll. In addition to its unlimited pay runs, automatic tax calculations, and user-friendly interface, Quickbooks Payroll monitors and updates federal and state payroll taxes to ensure you’re always up-to-date with the latest regulations. Its solid pay processing solution is also one of the reasons why it’s on our list of [best payroll services]( for small business users. [Visit Intuit Quickbooks Payroll](     What’s Hot In HR This Week Check out some of our latest Payroll content:   [How to Set Up Direct Deposit for Employees]( One way to prevent payroll fraud is to switch from using paper checks to direct deposit payments. This makes the process more seamless because salary payouts are sent directly to the employees’ bank accounts after each pay run. For more information, check out our guide to setting up direct deposits. [READ MORE]( [Best Payroll Software for Small Businesses]( In this guide, we evaluated more than a dozen payroll solutions and narrowed the list down to our top nine recommendations. [READ MORE](     Meet Fit Small Business’ HR & Payroll Experts   [-Jennifer Hartman, HR Staff Writer & Human Resources Expert] Throughout her career, Heather has worked to help hundreds of small business owners manage many aspects of their business, from bookkeeping to accounting to HR. Her experience has allowed her to learn firsthand the payroll needs of small business owners. Heather Landau [-Jennifer Hartman, HR Staff Writer & Human Resources Expert] Jen has more than 20 years of writing and content experience, working with small businesses and Fortune 100 companies. She worked as an HR generalist for over a decade, providing accounting, payroll, and HR expertise. Jennifer Hartman [-Jennifer Hartman, HR Staff Writer & Human Resources Expert] Robie is a payroll and HR expert at Fit Small Business, focusing on software. She has more than five years of content writing experience. Before becoming a writer, she worked as an HR specialist at several multinational companies. Robie Ann Ferrer [-Jennifer Hartman, HR Staff Writer & Human Resources Expert] Juvy has more than 10 years of experience writing product reviews and providing online content for small businesses. Juvy was also a college instructor. She believes that her teaching background, writing experience, and supportive team members are crucial in providing the best answers to readers. Juvy Vallescas [-Jennifer Hartman, HR Staff Writer & Human Resources Expert] Genevieve has more than 13 years of writing experience, working with different clients in various industries. She has ghostwritten several books and ebooks on marketing and leadership. Genevieve also worked as an HR Head of a local manufacturing company and has helped small businesses set up their business and HR processes. Genevieve Que   Are you thinking of expanding your HR team? Check in next week for everything you need to know, plus tips and tricks! Until next time, Heather Landau, Jennifer Hartman, Robie Ann Ferrer, Juvy Vallescas, and Genevieve Que   For more quality resources on growing your small business: [Marketing]( | [Financing]( | [Accounting]( | [HR]( | [Retail]( | [Ecommerce]( | [Sales]( [Facebook]( [Twitter]( [LinkedIn]( [Alternate text] Want to change what you receive in your inbox? [Update Your Preferences]( [Image]   We spend hours researching and writing our articles and strive to provide accurate, up-to-date content. However, our research is meant to aid your own, and we are not acting as licensed professionals. We recommend that you consult with your own lawyer, accountant, or other licensed professional for relevant business decisions. Our business model allows us to bring you the best answers to your questions, without editorial biases or cluttering the site with banner ads that everyone hates. The solutions we recommend to business owners often include products and services. 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