Payroll Fraud Prevention Strategies 

Payroll Fraud Prevention Strategies 

Has your business been a victim of payroll fraud? It’s more common than you might think, resulting in substantial losses, budgeting constraints, and perhaps even loss of trust in the workforce. The main issue faced by employers is – payroll fraud can take several forms and the methods are constantly evolving! 

Businesses across the nation are in a constant strive to avoid payroll fraud. After years of working in the payroll industry, we’ve seen it all by now. Even better; we’ve developed a number of strategies to help identify and prevent payroll fraud, keeping your business’ finances safe and sound. 

What is payroll fraud?  

Payroll fraud occurs when an individual unlawfully secures payment from an employer through deceptive means. This can be through various forms, including counterfeit national insurance numbers, submission of fraudulent documentation, falsely claiming eligibility to work in the country, or identity theft.  

It can also happen through exaggeration of hours worked by an employee or claiming expenses that they are not entitled to. This form of fraud is more difficult to detect than those above, however, it results in a loss of money and severely affects your company’s bottom line. So, how can you avoid it? 

 Prevention strategies 

Background checks  

Perform thorough background checks on all personnel tasked with preparing, submitting, and accessing the organisation’s payroll and accounts. This measure ensures that individuals hired for these roles are trustworthy and maintain high levels of integrity. 

Reviewing payroll reports  

It’s advisable to review payroll reports post-processing to verify that employees are receiving accurate pay. Additionally, cross-referencing employees’ addresses and bank account details is crucial to detect any instances of multiple payments to a single bank account, a common method of perpetrating payroll fraud. 

Limit unauthorised access to payroll information  

In organisations, it’s considered a best practice for individuals with a genuine need to access payroll data to be granted individual login credentials. Each employee should receive their unique login information for accessing payroll data, accompanied by a policy strictly prohibiting the sharing of passwords. 

Separate your processes 

For smaller businesses, it can often be the case that one person is responsible for several functions. Particularly within HR and payroll, where one person is often responsible for managing both. However, we recommend separating the two. This means that payroll processes can be verified by multiple people, rather than one person taking care of the whole process. This will help to ensure all payments are processed correctly and are therefore less vulnerable to fraud. 

Outsourcing payroll  

Lastly, one of the best ways to avoid payroll fraud is… to not do your payroll. While this may sound strange, outsourcing your payroll to a specialised team will ensure your payroll is processed accurately and safely. It’s a more efficient and cost-effective way to keep your employees paid.  

At FTPay, we take payroll out of your hands and into our in-house payroll bureau, staffed by experienced payroll operators. We can assist you in maintaining your payroll, meeting HMRC regulations, and most importantly – avoiding any forms of payroll fraud.  

 And there are our top strategies for payroll fraud prevention. Our help, however, doesn’t stop here. Our team of advisors are on hand to help you with any payroll queries should you need assistance. If you’re looking to outsource your payroll, please get in touch with our Commercial Client Director, Fabrice Legris, at fabrice.legris@fiandertovell.co.uk.  

Importance of Financial Planning: Key Considerations

Importance of Financial Planning: Key Considerations

While owning a business can be rewarding, there’s no doubt that it can be a stressful experience. It can feel like you are constantly putting out fires everywhere you go. While there are lots of issues beyond your control, financial planning is an area which, thankfully, can be managed.  

However, while financial planning can be handled with less turbulence, it still requires a comprehensive strategy. At Fiander Tovell, we can provide you with all the tips to navigate the intricacies of financial planning to establish an effective plan tailored to your business’s needs.  

In this blog, we break down just some of the guidance from our experienced team to steer clear of a financial crisis.  

Separating personal and business finances  

A common mistake we see is businesses using a single bank account to manage everything. Not only does this cause confusion, but you can also end up in legal trouble. This could leave you (as the owner) personally liable for all your company’s debts and liabilities. We suggest creating a separate bank account and obtaining a distinct credit card solely dedicated to your business. This segregation facilitates streamlined tracking of expenditures, simplifies tax calculations, and ensures the maintenance of transparent financial records. This active management serves as a protective measure for your personal assets against potential business liabilities.  

Tracking your money 

Now that you have separated your finances, you will have an overview of cashflow. Tracking your money becomes much more manageable, which is essential for understanding where your business stands financially and for making informed decisions.  

With Fiander Tovell, we can analyse your cash flow statements to identify trends, patterns, and potential areas for improvement. This analysis provides us with essential data for creating financial plans tailored to your business. Overall, understanding your expected cash inflow and outflow allows you to make decisions surrounding investment, expansion, and other strategic initiatives.  

Establish and Review Budgets 

Budgeting is a cornerstone of financial planning, enabling you to allocate resources effectively and prioritise spending. Take the time to establish realistic budgets for your business, and regularly review them to track performance against targets. This proactive approach will help you identify areas for improvement and adjust as needed to stay on track. 

Manage Accounts Receivable and Payable 

Efficient management of accounts receivable and payable is critical for maintaining a healthy cash flow. Implementing strategies to accelerate receivables, such as offering incentives for early payment, and negotiating favourable payment terms with suppliers can help optimise cash flow. Our team can work with you to develop tailored solutions for managing accounts receivable and payable effectively. 

Planning for the Future 

Successful financial management isn’t just about the present—it’s also about planning for the future. Whether it’s investing in growth opportunities, saving for expansion, or preparing for unforeseen challenges, having a comprehensive financial plan in place is essential. Our experts at Fiander Tovell can assist you in developing a strategic financial plan that aligns with your business goals and sets you up for long-term success. 

By implementing our tips for better financial management and planning, you can take better control of your business’s finances. At Fiander Tovell, we’re committed to helping business owners like you achieve their financial goals. Our team is here to support you every step of the way. 

If you would like to enquire about our services or would like more information, please contact our Commercial Client Director, Fabrice Legris, at fabrice.legris@fiandertovell.co.uk 

Cash Flow v Profit: Why both matter and how to balance them

Cash Flow v Profit: Why both matter and how to balance them

Cash flow and profit; two concepts that may at first seem interchangeable, before realising that they are each distinct metrics of success. Understanding their differences is crucial for establishing financial mastery and we can’t stress their importance enough. 

At Fiander Tovell, our bookkeeping services help you to visualise your business’ cash flow and profits, using each to identify how your business is performing. So, what exactly are the differences? 

Cash Flow

As suggested by its name, cash flow encompasses the flow of money in and out of your business within a defined timeframe. It comprises three primary categories: operating, investing, and financing. 

Operating cash flow represents funds directly linked to the production and sale of goods or services during regular business activities. These numbers gauge whether your business generates sufficient income to meet financial obligations and cover typical operating costs. 

Investing cash flow is the amount of money spent or generated from investment-related opportunities. Often, companies will see negative cash flow within investments, however this isn’t necessarily an issue considering they are for future gains. An example of this would be research and development (R&D). 

Financing cash flow reflects the net movement of cash allocated for both business operations and capital. Unlike operating cash flow, financing encompasses all transactions such as debt issuance, equity, and dividend payments. This metric aids investors in assessing a company’s financial health and managerial effectiveness from a financial perspective. 

Overall, understanding your cash flow is crucial to the success of your company. A healthy cash flow means you can cover all your costs without straining your budget, as well as providing you with the flexibility to branch out for new ventures.  

Profit

Profit represents the financial gain a business achieves after subtracting all expenses from its revenue. There are three key types of profit: gross profit, operating profit, and net profit. Understanding these types is essential for assessing business profitability and overall health. 

Gross profit is the initial indicator of profitability, calculated by deducting the cost of goods sold from the sales figure. 

Operating profit delves deeper into profitability by subtracting operational costs like rent, utilities, and employee wages from the sales figure. 

Net profit, also known as the bottom line, is the ultimate figure obtained after deducting all expenses, including interest and taxes, from sales revenue. It provides a comprehensive view of the business’s true profitability. 

Understanding these profit levels is crucial for obtaining an accurate assessment of your business’s financial health. While a healthy gross profit may indicate success, accounting for operational and net costs reveals the true profitability of your business. 

Key Differences

Cash flow pertains to the inflow and outflow of money within a designated period for your business. On the other hand, profit is what remains from your revenue after subtracting various costs such as operational expenses and taxes. 

A common mistake we see from businesses is the perception that profit is the main indicator as to how their business is doing. We don’t want to burst your bubble, but large profits do not necessarily equate to a strong business. While profits certainly showcase short-term success, cash flow can provide a comprehensive view of how well your business is doing.  

For example, your business can be profitable but have a poor cash flow. Insufficient cash flow can hinder your ability to fulfil essential payments required for producing goods, such as paying suppliers and staff. Even if your business is profitable and your product is in demand, inadequate cash flow may lead to operational stalling. 

On the other hand, a good cash flow with poor profits may indicate that your business isn’t sustainable in the long run. This may make you consider other profitable avenues to seek, such as a more cost-effective way to produce your product.  

Our advice  

At Fiander Tovell, we outsource our bookkeeping services to help companies maintain a healthy cash flow. This is done remotely through our online accounting and data capture software to keep your company on track. Our specialists provide expert and efficient services, thereby adding substantial value to your business. Moreover, entrusting your bookkeeping to external experts significantly mitigates compliance risks.  

You can find out more about our outsourced bookkeeping services here. Alternatively, please get in touch with our Commercial Client Director, Fabrice Legris at fabricelegris@fiandertovell.co.uk. 

Changes to Companies House Fees

Changes to Companies House Fees

Yesterday, 1 May, 2024, Companies House implemented fee hikes affecting both established and newly formed UK businesses. These changes come in the wake of increased expenses incurred due to the implementation of expanded powers, as outlined in the recently passed Economic Crime and Corporate Transparency Act. 

Fee Increase 

The rise in prices is likely to present obstacles for many entrepreneurs currently operating or intending to establish businesses in the UK. While incorporation costs still stand competitively against those in other European Union nations, this upward shift could impact perceptions of the UK’s business-friendliness. 

Companies House has stated that the fee revisions are essential to offset the expenses linked to service provision and the enforcement of new powers detailed in the Economic Crime and Corporate Transparency regulations.  

The changes to fees span across several aspects of incorporation and registration for digital, software, and paper transactions. These include re-registration, name changes, and voluntary strike-offs amongst other things – the full breakdown of all the new fees can be found here. 

 What are the likely effects? 

Businesses are confronted with financial planning challenges following substantial fee increases across company registration and filing services, necessitating a reassessment of financial strategies. This includes budgeting for higher costs related to incorporation and regulatory requirements under the Economic Crime and Corporate Transparency Act 2023.  

Additionally, the disparity in costs between paper and digital filings could lead to operational adjustments, prompting a shift towards cost-effective digital channels. However, this transition may also exacerbate compliance burdens, particularly for smaller enterprises, potentially requiring additional time and resources to meet regulatory deadlines.  

As Companies House implements further compliance obligations under the new law, these challenges are expected to intensify. 

Our proactive advisory services and tailored financial planning expertise equips us to help you adapt with evolving regulatory changes and maintain financial resilience. 

For further guidance navigating changes to Companies House fees, please don’t hesitate to get in touch.

Auto-enrolment for workplace pensions

Auto-enrolment for workplace pensions

Automatic enrolment into pensions is a crucial aspect of employment, placing duties on employers to enrol eligible workers into a workplace pension scheme. The incentive is designed to ensure workers have access to a workplace pension scheme, allowing them to save over the duration of their career, working towards retirement.  

How does it work?  

On their first day, employers must automatically enrol all employees who meet the following conditions: 

  • Aged between 22 and the State Pension age (you can work out your State Pension age here) 
  • Working in the UK 
  • Earning over £10,000 a year (2024/25) 

As an employer, you are required to write to all eligible employees explaining: 

  • The date they were added to the scheme; 
  • The type of pension  
  • How much they will contribute; 
  • Advising that they can opt out whenever they want to. 

Postponement of Pension Scheme  

Employers have the option to legitimately postpone offering a pension scheme to their staff for a period of up to three months. Postponement can be utilised in various scenarios, such as: 

  • From the date an employee first becomes eligible for auto-enrolment (e.g., when they turn 22), or 
  • On the first day of employment. 

If opting for postponement, employers should notify affected employees in writing. This communication should inform employees of the postponement period and their right to opt into the pension scheme during this time. 

Postponement can offer flexibility for employers in managing their pension obligations and ensures compliance with regulatory requirements. 

 Opting out and re-enrolment in Pension Scheme 

Once automatically enrolled, employees have one month to choose to ‘opt out’ of the pension scheme. If they opt out during this period, contributions made should be refunded. However, if they opt out after a month, contributions typically remain in their pension pot. 

Employers should be aware that employees have the option to ask to re-join the scheme at a later date. However, employers may choose to limit re-joining to once every 12 months. 

Additionally, employers should note that even if employees do not ask to re-join, they will be automatically re-enrolled into the scheme by the employer every three years. This process, known as re-enrolment, ensures ongoing compliance with pension regulations. 

Penalties for non-compliance 

Employers failing to meet their legal obligations may face enforcement measures from The Pensions Regulator (TPR). TPR possesses various enforcement powers, including issuing warning letters, statutory notices, and imposing financial penalties. These penalties range from a fixed penalty of £400 to daily escalating fines ranging from £50 to £10,000, depending on workforce size. In severe instances, criminal prosecution may be pursued by the Regulator. 

Advice  

At Fiander Tovell, our outsourced payroll services include making sure that your company complies with auto-enrolment regulations. We understand that automatic enrolment for pensions is not straightforward. Our team can help you to manage automatic enrolment, specifically making sure you comply with the requirements to avoid any errors or compliancy matters. This includes help with the maintenance of records which enable you to prove that you have complied with your duties as the employer.  

 If you feel as though you need assistance or guidance, don’t hesitate to contact our Commercial Client Director, Fabrice Legris, at @fabrice.legris@fiandertovell.co.uk for more information.