Payroll is one of the most important components of the accounting system of any business or even non-business organization. Payroll focuses on keeping the record of working hours and time of the employees, their rewards, compensation etc. and paying them accordingly. Payroll management is an important responsibility that should be handled with great care and expertise. The small and large business organizations in developed countries like the United Arab Emirates hire extra staff to manage the payroll, as it requires record and maintenance on a daily basis. Still, payroll fraud is becoming more common. The employees try to misuse the leverage provided by the organization and add loss to their financial fraud, which is a criminal and unethical activity.
The following are the common types of payroll fraud you need to watch out for.
Keep scrolling down this article to explore a brief guide about payroll fraud.
Payroll fraud can be in the form of receiving more funds from the employer or getting paid less than the already defined payment bracket. Most of the time, the payroll managers and employees with a little authority are the guilty parties of leading a payroll fraud. It can be easily identified and prevented by imposing proper scrutiny measures. Here are some of the top tips you can use to prevent payroll fraud in your organization.
The first tip for preventing payroll fraud in your organization is to reconcile the balance sheets quarterly. The authorities hand over payroll management responsibility to amateurs that misuse their trust and disturb the balance sheets. On the other hand, some business organizations acquire the service of bookkeeping and accounting firms in Dubai to get the payroll management service and ensure proper quarterly checks that boost transparency.
At times, the employees utilize the record of terminated workers to commit payroll fraud. An important tip to avoid such fraudulent activities is to maintain the record of terminated employees separately. In most cases, the payments of terminated employees are also terminated. However, if you are generous enough to pay them, manage the accounts separately.
Timesheet fraud is one of the most common and prevalent types of payroll fraud. You need to be aware of it. It is especially more common in the settings that operate on multiple shifts. You can prevent timesheet fraud by imposing approval by the managers. You can ask the managers to manually check the clocking in and out the time of the workers to manage the payroll effectively.
One of the most important tips to prevent payroll fraud in any business organization is to limit the pay rate modification by the employees. This is also a common type of payroll fraud in which the employees increase their pay rate on their own and demand a revised salary. The payroll managers often take part in such frauds to earn a little more money.
Checking the records of employees, their attendance, rewards, penalties etc., on a regular basis is crucial to identify payroll frauds. So, an important tip to limit such practices in your organization is to utilize data analytics to keep a close eye on the mismanagement of the payroll and hold the guilty parties accountable for the fraud.
Processing the payroll is the responsibility of tracking the due salary of the employees and preparing their checks. On the other hand, payroll transferring is another responsibility that requires transferring the amount in the employee account according to the payroll checks. You need to keep the two tasks separate in order to limit fraudulent activities and also keep track.
The business organizations working in various shifts of day and night often have teams of payroll management, instead of handing over the responsibility to one individual. If you are using such a system, it is important to manage the shift of payroll management teams strategically, so they do not plan fraud with some employees.
Lastly, the most important tip for preventing payroll fraud is to provide better training to your managers. It will help them fulfill their responsibility efficiently, in addition to planning for the future. On the other hand, if you cannot arrange for their training, you can hire bookkeeping and accounting firms in Dubai to get skilled and trained payroll managers on board and ensure smooth management of payroll that identifies and prevent fraud.
Payrolls often take a major share of the income of any business organization. Mismanagement or fraud in payroll can cause significant loss to the authorities. Therefore, it is quite important to hand over the responsibility to skilled and professional workers. You can also outsource the service of Forensic accountants in fraud inspection and enjoy your profits without any mishandling.
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