Chika Uwazie’s TalentBase: Why Businesses Should Conduct Payroll Audits

Payroll audits are a simple way of going through business documents to ensure financial details are really as they should be, as it relates to the company’s workforce. Payroll documents are kept in order to rightly remit monetary rewards to employees in the right amounts and at the right time.

Like every other audit, the goal of payroll audits is to ensure that money is not being spent wrongly, or that discrepancies don’t exist. It provides a business owner the opportunity to take a closer look at employee benefits – and who knows, maybe bring about a raise.

In the past, people have thought it to be a redundant process and only take a full company audit as important; but, trends show that this is becoming more and more important. It also is not as time or energy consuming – thanks to HR technology tools.

If your company isn’t doing these audits, these are reasons why they should:

Measuring Employee Activity
Payrolls actually take up a good chunk of business expenditure and it’s only right to let go of those large expenses for the right reasons. At jobs where hours worked and daily attendance is of utmost importance, payroll audits show exactly how employees kept, or didn’t keep to their commitments. It’s usually a red flag when attendance registers or clock-ins do not tally with the amounts being paid out.

Keeping to Tax Obligations
At most companies, employees leave tax calculations to the financial department who handle their wage payment. The usual expectation is that all necessary deductions are done before the salary gets to the employee. Payroll audits confirm that this is actually the case, and that employees are neither remitting less nor more than they should

Verification of Staff Strength
A good payroll audit doesn’t only take into consideration accounting documents, but everything connected to employee management. This means that Human Resources are very important for a good audit. Their task is to provide complete information about each staff on the payroll, to show they’re actually employed at the company and on what terms.
This is crucial, especially when a business owner seeks to understand how processes are being carried out. This particular angle can show which staff is underpaid, overpaid, or doesn’t deserve to still be on the company’s payroll.

For External Financial Review
When the time comes for company-wide audits, ensuring that a previous smaller audit has been done is crucial to show company stakeholders responsibility and accountability. Pay dates, figures and descriptions on payroll documents should always tally with ledger entries. There should also be proper notes of bank documents used for remitting pay to employees as this can come in very handy for tracking expenditure.

For a very successful payroll audit, a company should always ensure that:

• Payroll management roles are clearly spent out. Tasks for data entry, paycheck disbursements and other processes should be differentiated
• Human Resources should be properly consulted to provide employee documents to guide the auditors checks
• Time check processes are as accurate as possible
• All signatories to payroll documents are kept in the know of the audit activities so that they get every necessary document together and on time.

Usually, at small companies, payroll audits would take at most a week or two, but a proper Payroll Software makes it easy to handle this in less time and with lower error margins.