How Can You Perform a Payroll Audit for Your Business?

Time sheets, folders, and a calculator

Conducting a payroll audit is something paramount as a business. It helps in deterring payroll fraud and embezzlement. Secondly, it lets you know if your payroll process follows the government’s set labour and tax laws.

Thirdly, it makes you effective in uncovering errors that may take place when processing payments. If you want to perform a payroll audit, there is a specific procedure you ought to stick to. This will give you accuracy hence make the audit serve its purpose. Which are the main steps to follow when doing the auditing?

 

List Your Employees Down

In the evaluation, focus on the pay rates and the number of active hours at work. The primary goal for this is to ascertain that everyone is getting pay at the same rate. It may be hard to identify them in a payment scheme with ghost-workers if you fail to audit. It is beneficial to look at each worker at a time.

If you have payroll software, the process of listing your staff should not take a long time. It gives you an easy time spotting the extra workers who are not rendering any services to the company. This saves your firm money, which goes to the bank accounts of the ghost-workers.

 

Check Your Employees’ Pay Stubs

Nowadays, pay stubs are at the centre of payment records as they capture payment information more comprehensively. This means, when it comes to knowing about the payment history of specific staff, pay stubs can be reliable reference points. It is advisable to ask your workers to obtain their pay stubs as this simplifies things. One option for this is to find a paystub maker online. Commonly, one completes the opening on his or her own by filling in the personal information.

 

Run the Reports for Payroll Data and Employees

At this level, go further with payroll information and employee data. This is where you concentrate on the pay rates, level of activeness, and any overtime. Consider updating any information on the workers, such as the names and Identification cards, whenever there are changes.

Another important thing is focusing on the active workers at the firm. As a small business, you can do this manually by going rounds at your company. It may be much easier to engage the department managers to provide comprehensive details on everything regarding the workers.

 

Go Through the Off-Cycle Payroll

First, write down the number of payrolls that run in the current auditing time. Afterward, you need to try and evaluate the expected number by the end of the same period. The difference gives the number of payrolls that are off-cycle. What is the purpose of this? It helps in trying to work out what brought about the disparity.

This is where you look at how you process the payroll. For instance, you may be processing variable payments such as bonuses in separate payrolls. In the end, you will have more payrolls than usual. If this is not the case, you may need to check for the nefarious activity bringing all the differences.

 

Do Payroll Reconciliation

This is usually a more relatively lengthy process and time-consuming. At this level, you want to check the payroll records and then compare them with the general ledger. In the modern world, businesses are utilizing software in this. They usually have two parallel software whereby one runs the payroll, and the other will use the processed information for the accounting bit. Also, consider doing a reconciliation between the internal payroll records and tax forms.

Payroll auditing is significant for a business as it reduces the chances of errors in the payroll process. However, a company needs to follow a specific procedure for the audit work to be successful. The use of modern documents such as pay stubs is significant in making managers effective in evaluating the payment history for the different workers.