Confirmation bias is one of the most impacting behavioural fallacies. It makes us collect data, notice evidence, and develop theories that make us stay on the side of our historical beliefs. And that is one of the key reasons why companies face agency problems – the interests of the shareholders and the employees may vary.
Timesheet fraud underpins each of these challenges into a tangible problem. It can go undetected for years and pose a threat to the business’ bottom-line by risking the integrity of the enterprise’s productivity. While a subset of employee fraud, timesheet fraud deserves special attention because it can happen practically in any company – including yours.
Understanding Timesheet Fraud
1. What is Timesheet Fraud?
Timesheet fraud is a deliberate practice to create a difference between the punched time in a timesheet and the actual work hours. This can be done to hide under-productivity or absenteeism or for other forms of malicious intentions. It is relatively easy to make an honest mistake while using timesheets and most budgets have room for small margins of error. However, timesheet fraud becomes a concern because it is systematic and slowly makes a hole in the firm’s budgets without being highlighted for a long time.
2. Understanding the Depth and Reach of Timesheet Fraud
In North America, close to 50% of the employees in both the USA and Canada stated that they had ‘stolen time from work’ by compromising timesheet data inputs’ integrity. If these were one-off events, they would not be a systemic problem in the first place. But, companies are actively losing over $11 billion in unrealized revenues because of timesheet fraud. Timesheet fraud exists on both the employees’ and the employers’ sides as both of them try to manipulate timesheet data for different incentives.
3. Types
Here are the most common forms of timesheet fraud techniques used by employees:
1.Inflated Work Hours: This is the most common form of timesheet fraud. The employees manage to change their arrival time or leave and hence punch inflated hours, resulting in inflated payrolls.
2.Data Inconsistencies: Some businesses are still using legacy timesheet systems where the data must be manually entered into a payroll system. This makes the entire system vulnerable to honest mistakes in data-entry and also creates room for data inconsistencies between the actual hours of work and the hours reflected in the payroll sheets.
3.Favouritism: Such issues are exacerbated by the fact that the managers are often involved in enabling them. The problem arises when a manager allocates tasks to a favoured employee who might have finished overtime for the month, even when other resources are available.
4.Personal Time Abuse: All employees have some form of designated breaks available. However, some employees can abuse this by asking their colleagues to punch in for them and extend the break while getting paid as per the payroll data.
5.Unauthorized Overtime: While working beyond one’s hours in a day should not pose a problem in the firm, it can become a sizeable issue if it becomes the norm. Generally, companies allot authorized overtime hours and pay for the same. If all the employees start breaching these limits, the firm’s productivity and profit per employee will both go for a toss.
4. Impact
1.Unreliable Business Intelligence Data Since the very data punched in timesheets and payroll systems is fraudulent, the management team cannot analyse it to derive considerable insights.
2.Increased OPEX and Decreased Operating Margins: The data inflates the Sales, General, and Administrative expenses for the firm and reduces its operating margins. This can look bad for investors, even if they own an otherwise healthy business.
3.Decreased Cashflow Available for Reinvesting: Since employees are paid every month, inflated salaries will lead to a greater degree of cashflow leaving the business every month.
4.Industry-Trailing Performance : If the issue goes unchecked for a while, the firm will start to witness its performance trailing the industry averages.
VeriDoc HR: How Can Blockchain Prevent Timesheet Fraud?
VeriDoc has created a patented Blockchain technology that prevents document fraud. One of the most prominent use-cases for the technology comes in the form of timesheet fraud prevention.
1. VeriDoc HR Two-Factor Authentication
Firms can use biometric systems to stop employees from punching in the time for their colleagues, but such systems are expensive and still have room for compromising. Instead, VeriDoc HR provides two-facto authentication. Each employee has to punch-in her time along with a mobile device. This ensures that her colleagues cannot punch the time on her behalf.
The mobile device authentication works based on a QR Code. Each QR Code is unique to an employee. This way, when the data is being entered, the timesheet’s integrity is maintained.
2. Proof of Concept
You can click here to understand the proof of concept. The link has a sample report of a weekly timesheet. In this document, you will find an employee ID, link for Blockchain verification, and a preview screen that lets you physically verify the QR Code. If you want a more comprehensive proof of concept, click here.
3. How Does It Work?
Your management team begins with creating a timesheet. You can then use VeriDoc HR platform to generate a QR Code that is embedded in the timesheet. Now, the VeriDoc Global platform will generate a PDF and store it on one of your internal servers. The platform will then generate a unique hash value for the timesheet and store it in the distributed ledger, i.e., the Blockchain.Eventually, a hash value database, the Blockchain-based transaction record, and a link to the original PDF are created.
4. Benefits
Using the VeriDoc HR platform allows you to generate value with a multitude of benefits:
1. Comprehensive Security for Timesheets
The solution provides end-to-end security for timesheets. Right from the initial stages of creation, data-entry, data-retrieval, and then the consistent availability of data, each touchpoint is secured. The unique hash-values ensure that the hash value changes to reflect the tampering every time the timesheet has even a bit of change. And then, the management team can decide whether the change should be flagged or not.
2. Reduced OPEX
The solution ensures that the working hours registered in the timesheet and eventually in the payroll system reflect the actual hours at work. This aligns employee productivity with the salaries payable every month, eventually shaving off the excess operating expenses resulting from inflated working hours & salaries.
3. Systemic Solution
Instead of working on the timesheet system’s interfaces by focusing on employee data input, data transfer from the timesheet to payroll database or aggregating data across a timeline, VeriDoc HR serves as a systemic solution. It ensures end-to-end security of the timesheet and makes each bit of punched time reliable with traceable changes.
4. Increased Profitability
The streamlined Salaries, General and Administrative expenses ensure that the firm has more cashflows available on a monthly basis as the excess outgoing cash is trimmed off. This allows the managers to reinvest more actively into the operations and grow profitability.
In Conclusion
Timesheet might seem to be an implicit challenge for the business. It leads to continuously inflated expenses that compound with time as the business loses the opportunity to use them for reinvesting in the business. This can be solved by having VeriDoc HR at the centre of the timesheet management system to make it tamper-proof and traceable for the management team. For more information on how you can use VeriDoc,click here.
