Payroll Audits will strengthen small businesses: see why Nigerians should embrace it
When doing anything business, a factor you should always put in place is accountability.
It makes everything about the business to be organised, which in turn ensures the smooth running of the business. A way of doing so, is conducting Payroll Audits.
But, what are Payroll Audits? Payroll Audits are methods put in place, to ensure the financial information of a company’s workforce are as they should be in the business database or documents.
When this is done, the reward for labour of every employee is rightly remitted at due time.
Basically, audits should be done to ensure money is going into the right place and every money moving in and out of the business is accounted for.
This applies to Payroll Audits also. With this, a business owner or employer can monitor the rewards of his employees and also know when to increase or stop their monthly pay.
Many people might feel or see the auditing processes quite unimportant, but if you take a closer look, you will start thinking otherwise.
In fact, only those who are not keeping up with the latest trends will still see the auditing process being redundant.
Almost every businessman sees it as utmost priority.
We understand why you here; You wish to know why your company needs to start/conduct Payroll Audits.
In that regard you are in the right place, That is why this article was prepared in the first place. There are a lot of reasons why businesses should conduct Payroll Audits. Sit back and let me drive you through.
Keeping track of Employee Activity
Take a look at this. You, as a business owner could be spending money which is not meant to be spent in the first place. You will not know this, until you start payroll Audits.
Almost all businesses have made it a priority for their workers to fill an attendance sheet everyday or every hour.
A worker could have skipped a day at work and the only way to balance it, is by comparing the attendance with the Payroll.
It is usually a red flag when the attendance sheet or register do not match up with the total amount being paid out by the business owner.
Keeping to Tax Obligations
It is now a common habit of many employers to make all necessary tax calculations and deductions from the salary of employees before they pay to them.
This is usually done by the financial department of the companies. However, the employer will not know if this is the case unless Payroll Audits are conducted.
This will ensure that the employees pay their exact taxes and do not pay less or more than they should.
Verification of Staff Strength
Asides containing the accounting documents, which includes the financial details of the employees, a good payroll audit will also contain everything that has to do with the employee or the worker.
These details are known as Human Resources Information and are very important in an good audit.
They are handled by the Human Resources Department, and they should be considered when documenting.
The basic task of the Human Resources Department is to provide complete information about each staff on the payroll, which must have been garnered at the point of employment.
This document will show that the members of staff are actually employed and the terms on which they were appointed. These information will be collated and included on the Payroll.
The importance of this cannot be overemphasized. That is, it is very important. It will allow a business owner know how various activities are being carried out in the company
and know which staff is underpaid,over paid or does not deserve to still be on the company’s payroll. This can help in the organised management of the company’s funds.
For External Financial Review
Like I said earlier, audits are done to see to accountability of the business or a company. At regular intervals, businesses organise company wide Audits.
However, this can only be feasible if previous smaller audits like payroll Audits have been conducted.
These smaller audits information will be collated and used for the company wide Audits.
This will help show how accountable the company stakeholders are, and help the business owner know which member of staff is slacking.
When conducting the company wide Audits, pay dates, figures and descriptions on the payroll documents must tally with the ledger entries.
This information should be recorded on a balance sheet. In addition, the company should see to ensuring proper notes are documented when remitting pay to employees as this can come in handy for tracking the company expenditure.
In order for a company payroll audit to be successful without glitches, the stakeholders should always put these into consideration;
- The payroll management roles must be clearly divided amongst those in charge. There are various tasks for the payroll Audits and each of them should be carried out by different groups to avoid being overworked. Tasks for Payroll Management include; data entry, paycheck disbursements, data collation etc.
- Remember I mentioned earlier that the Human Resources Team or department play a very crucial role in the Payroll Management or Auditing. Therefore, they should be consulted ahead of time so they can provide documents of the employees which contains their information. These details will help to guide the auditors checks.
- Every company have a number of signatories to the payroll documents. These signatories have some documents in their possession which Will be used in the process of the Payroll Auditing. As a result, the signatories to these payroll documents must be informed of the audit activities so they can get every necessary document together and on time.
- The company should ensure that the time checks processes are as accurate as possible.
If you, as a business owner should put all these into place, I can assure you that you will have a very successful Payroll Audit, and everything will work as planned.
I believe you have seen the reasons why business should start conducting Payroll Audits too and I am confident you will put it into practice very soon.