27 Apr Time-sheet Fraud – How can your business prevent it?
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 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 organisations 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 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 accidently 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 organisation, there is a manager who favours a co-worker, relative or friend by assigning them for a specific task rather than assigning a different employee, who is also available to work, and may be 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 time for each of its team member, especially with a big team size.
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 minimise 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 minimise error arising out of manual time keeping 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 labour costs, excess hours worked, projects exceeding their budgets are discovered at the earliest possible time and dealt with quickly.