Being an entrepreneur and running a company is an arduous task, that too if everything goes well. You need to be prepared for every possible situation that may arise and put your quick decision making skills to the test.

All business owners are afraid of discovering fraudulent activity, especially discovering that a trusted employee is cheating them. But your money is for your business, and you don’t want to continue harboring a dishonest employee, particularly someone who could get you in trouble with the IRS.

Payroll fraud is real and the main source of accounting theft in companies. According to statistics provided by the Association of Certified Fraud Examiners (ACFE), 27 percent of all businesses face payroll fraud cases and almost twice as many small businesses than large ones. Non-profit organizations are also not exempt from this criminal activity.

Let’s see a case. Forensic Accounting Specialist Tiffany Couch shared some payroll fraud stories in a podcast with Accounting Today that will put things into perspective.

A 14-year-old trusted clerk at a dentist’s office is found guilty of cash theft. He is a sweet person, hardworking and popular with his colleagues. He handles the cash coming in and bank deposits, he handles the QuickBooks data, he handles all the money related tasks. Since no one is controlling her, he gives her free access to steal it. He starts paying himself extra paychecks, manipulating cash bills coming in, and not depositing all the money into the official bank account.

The dentist goes through some tax forms one day, discovers that she is being paid more, and confronts her about it. She denies it at first, then says that the boss had agreed to pay her by the hour for all the overtime she did last year and she gets mad at him for not believing her. The dentist, avoiding the fuss and wanting to get some facts straight before the conversation went any further, said they’ll talk about it later in the day. The lady went to lunch and never came back. When the accounts and data were verified, she showed a large number of discrepancies, deleted receipts, and missing cash receipts. In all, she stole over $400,000 and is now serving time in prison.

Payroll fraud seems difficult to commit, but if well hidden, it can take months (or even years) to discover. It can happen in any industry, be it a small shop or a large company. The key is to regularly review your accounts yourself. In the above case, too much trust cost the dentist a lot of money. If I had reviewed or counted invoices earlier, the case would have been different.

Using QuickBooks Payroll can save you a lot of trouble. It comes with the facility of remote access, allowing you to check your accounts from anywhere at any time. This way, you will always know about your cash flow and can check financial data from home. You can also smartly catch a scammer in the act and with evidence.

The following are the most common payroll fraud schemes:

1. Ghost Employee

A fake or fired employee receives paychecks that the scammer collects himself. This is common in organizations with a large number of employees who are managed by one supervisor. It is crucial to perform regular audits of payroll reports to ensure that the correct payment reaches the employees. Check for multiple deposits to the same bank account, or checks issued to employees at the same address.

2. Manipulation of the spleen

When an employee who has access to payroll accounts increases their own salary or pays themselves for overtime or a bonus. This fraud is clearly taking advantage of the employer’s trust in the employee. As a business owner, you need to remember that trusting your employees is okay, but too much trust is unwise. Establish internal control and regularly monitor critical financial records.

3. Time sheet setting

This is a very common occurrence in companies where employees are paid by the hour. Employees can clock in for absent employees or inflate their own work duration. But if the supervisor is strict, this can be avoided.

Payroll is a company’s largest expense, and payroll fraud can do a lot of damage to a company’s finances and reputation. It is of the utmost importance that all financial operations are monitored in detail so as not to leave anything to chance. Hosted QuickBooks gives you many benefits, including the right to work on your QuickBooks from a remote location. It is essential to keep a close eye on cash flow and stay up to date.