Payday Prowlers

Occupational Fraud – (Part 6 of 7)

By Mark Palmer, President e:countable, LLC

Payday is one work day usually liked by employees more than others, for obvious reasons.  However, for business owners it may be a recurring day every two weeks where a certain amount of funds are being inappropriately (and illegally) siphoned out of his or her account.  The amount may be a little, or may be significant.  Either way, theft is theft and business owners should understand how this type of embezzlement can occur.  Taking a few precautions can help mitigate the risk of fraud, and provide for better sleep at night.  Even if you fully trust your bookkeeper it’s good practice to take steps to safeguard your bank account.  Here are some examples of payroll fraud and tips on how you can prevent it.

Invisible Employees – Similar to what was discussed in Part 3, Vapor Vendors, your bookkeeper could easily set up an Invisible Employee (aka Ghost Employee) if you’re not keeping an eye on who’s being paid and how much.  An Invisible Employee is a name on your payroll register that’s being paid, even though the person doesn’t work for your company or may not even exist at all.  The person processing payroll– it could be your bookkeeper or someone outside your bookkeeping function, perhaps HR– creates an Invisible Employee in the payroll system, pays the unseen one, then pockets the amount being paid.

Paying a non-existent person is only a little trickier than paying a real person, even if the real person doesn’t work for your company.  This is true especially if your company processes payroll manually in house.  The reason has to do with s