Businessman presses button internal control on virtual screens.Most employers find that their greatest area of expense is the wages and benefits that they distribute to their employees. Wherever money is involved there is the potential for unnecessary loss, be it intentional, as in the case of theft or fraud, or unintentional as in the case of error or lack of awareness. Your payroll department really needs to have controls in place to guard against both of these possibilities.

When it comes to intentional theft or fraud, some of the safeguards might be separation of tasks and job rotation. This avoids having all of your eggs in one employee’s basket. Relegating tasks perpetually to one individual may invite trouble. Rotating responsibilities is a good idea from the standpoint of maintaining checks and balances and also can be advantageous when coverage might be needed due to unplanned absences. Also, performing unannounced physical payouts that requiring all employees to display a photo ID prior to receiving their payroll check can ensure that phantom employees are not being paid by your organization.

So that’s talking about outright fraud. You may think your valued employees are above that sort of crime, but even in a small operation it bears watching.

Perhaps a more common source of asset leakage is employee error or ignorance. Remaining current with regulatory and administrative changes is critical, but by no means easy. This has proved true especially with regard to the Affordable Care Act (ACA) which has demanded major changes for many employers. Employers need reliable resources in order to stay up to date and assure that their business is complying with regulations and is neither overpaying nor underpaying.

Various resources exist to help payroll managers stay up to date in these critical areas. The American Payroll Association (APA) and the Society for Human Resource Management (SHRM) provide a trove of information that may prove helpful to employers. Regional meetings and conferences provided by these organizations may be beneficial as well. For businesses utilizing Dynamics GP, Payroll and Human Resource functionality, Integrity Data shares key information through such portals as: Twitter (@IntegrityData), LinkedIn, Facebook and the blogs on our website.

Implementation of internal controls can ensure that your company’s policies and requirements are delineated and adhered to. This can be done within your Dynamics GP solution; using Integrity Data’s Payroll and Human Resource add on can ensure that they are followed on a consistent basis.

Having your company’s processes and policies clearly documented means that they can be referred to by new members of your payroll staff as well as by existing employees who cover other positions in the case of absence and when rotating job assignments.

If you haven’t implemented and documented your internal controls, take the time to write down your processes and guidelines and maintain your documentation. It can be time consuming, but the benefits you receive from these internal controls can greatly outweigh the effort required to implement them. Mitigating exposure to IRS penalties and employee fraudulent activities should be a top of mind issue for payroll managers. Internal controls are the best first line of defense against these potentially costly issues.