In the recent Report to the Nations 2014 study by the Association of Certified Fraud Examiners (ACFE), most fraudulent activities were found to be discovered by accident, with a turnaround time of 18 months to uncover all the related activities. For a business owner, this not only presents a significant investment from a financial perspective, but wastes time as well. This is often a factor that many smaller businesses cannot afford to deal with, leading to their untimely demise in some cases.

 Effecting the bottom line

These were some of the harsh truths dispelled at Sage VIP’s Woodmead offices, where Yolande Schoültz, Risk and Fraud division manager, detailed the schemes and tactics employed by payroll fraudsters across the country. Schoültz was quick to point out that the world of payroll fraud is cut and dry, with no areas of ambiguity that are free to interpretation. She stressed emphatically, “Fraud is a black and white area, there is no grey,” serving as a strong indication that this is one facet of business she is intensely passionate about protecting. The reason for her fervour stems from the fact that many payroll fraudsters often escape prosecution, with companies simply asking them to resign in order to avoid any reputational risk.

For Schoültz this is one of the reasons why there are very few hard statistics on how much of a negative impact payroll fraud is having on businesses within South Africa. In 2012, payroll fraud accounted for more monetary losses than cash-in-transit heists in SA, according to Sage VIP, a figure that Schoültz believes has only increased since.

Segmented duties is key

After painting a rather bleak landscape, Schoültz did detail two ways that business owners can increase their degree of protection against payroll fraud. The first and most important element, is to ensure that payroll activities are correctly segmented between different individuals. “The non-alignment of segregated duties is one of the primary reasons that fraudulent activities can go unnoticed,” she added. If one person is responsible for all payroll related tasks, business owners and employees are often left in the dark, from a back-office perspective, on what is truly occurring in the company. Next is to view the payroll division not as a subsidiary of the human resources department, but rather tied to the financial-related aspects of the business. If a company’s chief financial officer for example can be brought into the payroll fold, they can ensure that an additional layer of protection is in place as a safeguard against fraud.

It may require greater effort, but it is up to the business owner to ensure that he or she does not lose sight of the financially related activities taking place in the business, even as one’s company grows and remains fixed on generating a profit.