27 Apr Time-sheet Fraud – How can your business prevent it?
Posted at 08:51h
in Time and Attendance
Are you still relying on spreadsheets and paper timesheets to manage your employees’ time, activities, skills, and costs? You could be leaving yourself open to a vulnerability related to inefficiencies, inaccuracies, non-compliance with working time regularities, and in some cases even employee fraud. Inaccuracy in tracking employee time and timesheet fraud is a common concern in organizations that manually maintain time and attendance – and your business can be one of them too. Some of this is due to a conscious intent and some are due to a lack of management controls.
Timesheet fraud is one of the common problems in all organizations – big or small. A lot of research has been done on this subject and a lot of companies have developed software to curtail time theft.
Types of Timesheet Fraud
Entering or approving incorrect data is one of the most common abuses of attendance information. When done accidentally it can expose employee carelessness and a lack of management to control it, however, when done deliberately, it is fraud. Employees are responsible for entering their correct attendance data and supervisors are responsible for approving that this information is correct. While we all hope that the majority of employees are honest and maintain integrity, unfortunately, experience shows that this is not always the case. Set out below are some of the most common ways employees can commit timesheet fraud.
- Inflating work hours – With paper-based timesheets, it’s very easy for employees to enter incorrect times of reporting and leaving work and exaggerate or round their hours up to the nearest hour. Overpayment then occurs as the employee is paid based on hours or rates he may not have worked at all.
- False data entry – If employee attendance data has to be retyped from timesheets into a payroll system, it is very easy for a dishonest employee to change the numbers. Also, this type of process is capable of making typos and mistakes.
- Nepotism – It is a known fact that in every organization, there is a manager who favors a co-worker, relative, or friend by assigning them to a specific task rather than assigning a different employee, who is also available to work, and maybe a more cost-effective choice. This can be controlled too!
- Errors due to delays in completing timesheets – Although not technically fraud there are often inaccuracies when employees fill in timesheets weeks after they have worked these hours. Supervisors then sign off on these timesheets whereas it can be a case wherein the employee did not clock in those number of hours. It gets very difficult for supervisors to monitor the time for each of its team member, especially with big team sizes.
How to Prevent Time-Sheet Fraud in the Workplace
Timesheet fraud is a severe problem in many workplaces. It can also be an opportunity for your company to impact the world. Everyone knows it’s expensive and time-consuming to manage employees. They account for hours spent on essential tasks, especially when billing outside clients. The ideal solution will balance trust with accountability. Employees who understand the importance of integrity and reputation will resist the temptation to pad their timesheets and risk being caught later. But, not all workers feel that way, so it may be necessary to have safeguards against the abuse of the system. Enabling transparency through technology can help companies operate more and prevent various kinds of fraud. Here are four best practices when implementing a time-tracking solution:
Track computer usage with timestamps
Computer systems allow you to track employees’ computer usage. In other words, you can know who, when, and how often they accessed specific programs. This opens many opportunities to discover timesheet fraud through anomalies. For example, if you notice someone was using a particular program for a limited time, you might want to investigate why. The program could be legitimate but have exceptions. For example, an editor may need to use screen-capture software for research purposes. Or, the employee may be abusing their rights so you could refer their case to HR. Timestamps can also help you verify employees’ hours worked for businesses that charge clients by the hour. If you have employees logging time in a digital timesheet, timestamping their entries will add another layer of trust. They will have to record the exact time they worked on each task.
Record the identity of everyone who accesses the system
To prevent timesheet fraud, where employees record hours they didn’t work, you should keep track of the identity of everyone who logs into the system. A centralized time-tracking solution will record users’ login information and IP addresses. A company’s IP address reveals its physical location, which can help you determine whether an employee was in the right place at the right time. This will be particularly useful if you notice abnormal patterns. The system should also record when they log in and out. If someone logged in during the weekend, you should keep track of this to determine if they were working. If many employees log in at unusual times, it could signify that they’re trying to manipulate the system.
Must employees to enter the reason for their Activities
An essential step towards preventing timesheet fraud is to must employees to enter a reason for each Activity logged on the time sheet. The system should also prompt them to select what type of Activity it is, such as “phone call,” “conference call,” or “in-person meeting.” This will help you detect anomalies, such as employees entering unreasonable amounts of time for Activities that don’t make sense. By default, the system should must employees to select a valid reason for each Activity. You can also set up more rules to help detect any fraudulent Activity. For example, you can ask employees to select from a list of valid reasons when entering the time for a conference call.
Track employee location and device data
Employee location data can also help you detect timesheet fraud. If you have employees tracking their time in an online system, you should be able to see their location. This will be based on the device they use to log their hours. If the system integrates with GPS, you’ll have even more information. You’ll know where employees are located and how long it took them to travel between two points. This data may reveal suspicious patterns and help establish trust in the time sheets. Employee device data can also be helpful if you notice a sudden change in devices. If you see an employee logging time using two devices, it’s likely to be legitimate. But, you should investigate if an employee switches between a laptop, a smartphone, and an IoT device.
Most Common Types of Timesheet Fraud
Employees may attempt to record false hours for any number of reasons. They could be overworked and trying to register fewer hours than they worked. Alternatively, they could be trying to make it appear like they worked more than they did. You should have a clear policy against all timesheet fraud, but you should be especially vigilant against double-dipping – You expect employees to record their work hours and charge clients for their time. But, they may attempt to record the same hours for both clients. This type of timesheet fraud can happen when employees log on to your time-tracking system. They may record their hours for the same client twice. Excessive billing – You expect employees to billing their clients for the appropriate amount of time. However, they may attempt to bill their clients for more hours than they worked. This fraud can happen when an employee logs their time on the system. They may record their time for the same client for longer than they worked.
How to Prevent Timesheet Fraud
There are many ways to prevent timesheet fraud. The above paragraphs describe the most important ones. To summarize, your time-tracking solution should: – Require employees to log their time based on the location of the device they’re using. This will reduce the risk of double-billing and help you determine if they were in the right place at the right time. – Prompt employees to enter a reason for each time they log on to the system. This will help you distinguish between legitimate and fraudulent Activities. – Ask employees to select an appropriate level of detail when logging time. This will prevent them from entering unreasonably high levels of detail. – Track computer usage with timestamps so you can verify employees’ legitimate use of specific programs. – Keep track of the identity of everyone who logs into the system. This will help you detect people who log in from a different location. – Require employees to enter the reason for each Activity they log. This will help you detect anomalies caused by timesheet fraud.
Replacing manual timesheets
If you’re still using manual timesheets, you probably know why you should switch to an online time-tracking solution. Timesheets are an unfortunate reality for many companies. They have to track time to create invoices for clients. If you have employees tracking time manually, you will have to rely solely on the trust they’re willing to put into their integrity. However, an automated solution can reduce the risk of fraud and system abuse. You’ll have more accurate and detailed data, enabling you to create more accurate invoices. This will reduce the risk of clients questioning your billing and requiring additional time sheets to explain their current charges.
Develop a Company Culture
It’s impossible to prevent timesheet fraud in any company completely. However, you can do your best to prevent it by creating a company culture where everyone is trusted. It would be best if you communicated the importance of integrity and reputation within the company. It would be best if you also empowered employees to challenge the actions of others. If someone suspects another employee is falsifying their hours, they should be able to ask questions without feeling embarrassed. Employees who value their reputation will resist the temptation to pad their timesheets. They will make the more difficult choice, which will also help them gain more trust from co-workers.
Conclusion
Timesheet fraud happens in many different forms. You can prevent it by implementing a time-tracking solution. It will enable you to see computer usage with timestamps, record the identity of everyone who logs into the system, and require employees to enter the reason for their Activities. These three things will help you detect anomalies and prevent timesheet fraud. If you want your business to succeed, you need to be able to bill your clients for their hours. With a time-tracking solution, you’ll be able to do that more accurately and efficiently. Timesheet fraud is very disturbing not just because of the money that companies lose, but also because of the breaches of trust that may occur. While it may not be possible to completely stop this fraud, there are certainly ways you can minimize this abuse and take corrective actions. As an entrepreneur, you should have clear policies in place along with the consequence of deviating from the policies. You should also consider electronic timesheets so as to minimize errors arising out of manual timekeeping thereby preventing fraud. The potential for timesheet fraud is significant and the consequences are far-reaching and expensive. As a business, you need to be aware of your internal controls and management reporting so that issues such as; payroll irregularities, excessive labor costs, excess hours worked, and projects exceeding their budgets are discovered at the earliest possible time and dealt with quickly.
With the help of ClockIt, you have ready access to the employees’ time performance index and the dashboard gives you the details at a glance. Try ClockIt today and prevent this fraud!
