Columbia, Md. (Nov. 10, 2003) -- Small businesses are often the most vulnerable occupational fraud and abuse targets, particularly for payroll fraud, according to Fiducial, a provider of professional business outsourcing for tax, financial and business services.

The No. 1 complaint Fiducial hears from small business clients is that they are overwhelmed by back-end office functions like payroll and often miss the “red flags,” according to Eric Myers, manager of Fiducial’s payroll processing center.

According to the Association of Certified Fraud Examiners Report to the Nation on Occupational Fraud and Abuse, more than 39 percent of fraud cases occurred in businesses with fewer than 99 employees. Payroll fraud schemes accounted for nearly 10 percent of the $600 billion lost to fraud last year. Small businesses pay an average $127,500 in fraud losses per incident, while large companies' losses average $97,000 per scheme.

Fiducial detailed five tips to recognize and avoid payroll fraud: check employee backgrounds and criminal records; establish quality controls; consider outsourcing payroll processing and administration; choose payroll processing vendors carefully and provide specific instructions; and be aware of cyber security. In addition, small businesses should review their bank statements very carefully, check for unfamiliar fees charged by third parties, and check bank statements online at least twice a month.

Some of the “red flags” that may indicate payroll fraud include: unusual spikes in the number of checks being presented for payment; high federal or state payroll taxes; or a payroll provider that is delivering multiple packages during the payroll period.

-- WebCPA staff

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access