It’s an unfortunate reality that in many instances, payroll fraud isn’t detected, or even suspected, until large amounts of money have gone missing, and it can even take years for timesheet fraud or ghost employees to become apparent.

1. A Guide to Detecting and
Preventing Payroll Fraud

2. It’s an unfortunate reality that in many instances, payroll fraud isn’t detected, or
even suspected, until large amounts of money have gone missing, and it can even
take years for timesheet fraud or ghost employees to become apparent.
To help your business prevent payroll fraud, you could try hiring a remote
payroll service, who are trained to detect such issues and prevent them. If you
don’t want to do this however, or are in the process of doing so, the following
brief guide can help you better detect and prevent payroll fraud within your
business:

3. Detecting payroll
One of the best ways to detect payroll fraud within your business is to
schedule regular payroll audits, which can help you identify and correct
payroll errors related to fraud. Some examples include fictitious timesheet
data or payments to ghost employees, but can also include human error.
Annual audits can be useful, but quarterly or monthly ones are even more
effective, and they can be carried out by internal staff, or a third party, such
as a CPA or consultant.

4. Below are some activities that should be included in a payroll audit:
● Check that all payroll procedures are followed correctly every pay period
● Review your list of payroll software administrative users and ensure that
only those employees with specific system rights are processing payroll
● Check your active employees list for discrepancies
● Make sure that no payments have been made to terminated employees after
the termination date
● Analyze pay rates and check for any unusual alterations
● Study any hours worked for unscheduled overtime or a higher number of
hours than you would expect for part-time employees

5. ● Review commissions and bonus pay along with any off-cycle payroll checks
● Compare total payroll expenses across pay periods within your general
ledger and examine any fluctuations that appear to be unexplained
Verifying a ghost employee
When conducting an audit, one simple way of being able to spot a ghost
employee is to look for anyone with few or no deductions from their pay, along
with the following:
● An employee who has a record with information missing from it

6. ● The same bank account being used for the deposit of wages for more than
one employee
● A turnover of staff that you can’t explain
● A name appearing on the payroll that nobody recognizes, or which has no
defined job description attached to their record
The best ways to prevent payroll fraud
As an employer, there are many options for protecting your business and payroll
department from fraud, and here are 4 of the most effective:

7. Outsource payroll – with a professional remote payroll service, they will help
you to ensure that all payroll procedures are being followed to the letter, making
much more difficult for mistakes to slip though, and fraudulent actions to
remain undetected.
Conduct background checks – if you prefer to have an in-house payroll
department, carry out background checks for all employees who will be able to
access company bank accounts.
Segregate payroll duties – you can achieve this by processing payroll using a
checks-and-balances procedure in which one person prepares the payroll and
another reviews it.

8. Review standard employee and payroll reports – do this for each pay
period to enable you to quickly spot any payroll errors.
Simplify all of your payroll needs and make fraud something you never have to
worry about, by outsourcing your payroll requirements to a professional
provider.
Apollo Payroll is dedicated to delivering expert advice, responsive service, and
highly accurate payroll processing and reporting to ensure the success and
growth of the business that we serve. Our services include comprehensive payroll
services in Homestead and other cities in Miami-Dade County, employee
background check and group health insurance in Miami & Coral Gables