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FYI: Common Payroll Risks

PTS is an expert at Mitigated Risk Assessments. Below are some helpful tips at avoiding common problems associated with payroll.

1. Collecting Tax Fund

Most bank will underwrite you instead of your clients to see if you are credit worthiness for the amount that you are collecting. For example, to collect $100K in taxes, you have to have a net worth of $100K. Unlike a wire transaction, ACH transaction is risky because there is no finality to the funds until atleast 48 hours later to know for sure whether there is a return item or not.

2. ACH Processor

For ease and efficiency, ACH transaction is the only option to streamline the operation for both payroll and taxes. Having a reliable, stable and dependable ACH processor is of utmost critial for the lively hood of a company. Because of the risks associated with the whole ACH process, from the ACH processor to their sponsoring banks and up to the Federal Reserve and including all the other parties, they all can and have changed their policy without giving you proper time to adjust your operation. Your ACH processor could stop processing ACH for you or change their policy suddenly because
  • 1. They consider you too risky.
  • 2. They have issues with their sponsoring banks.
  • 3. They decided to hold on to the funds for more days than you have time/money to send out the tax payments.
  • 4. They decided to credit certain transactions and not other and therefore create a reconciliation nightmare. Lastly, your ACH processor's employees/system screwed up on processing your file and therefore your client's employees not getting their direct deposit timely and/or the taxing authorities not getting their money timely. Your ACH processor could put you out of business easily.

3. Your Employee

So many taxing authorities are so far away from being automated to help mitigate the risks of human errors whether intentional or not intentional on the employee's efforts. Therefore, the burden of responsibility to have systems, processes and procedures in place to addresses many concerns such as:
  • 1. Client's Privacy & Security
  • 2. Disgruntle Employee related issues
  • 3. Intentional Sabotage
  • 4. Employee Distraction & Lack of attention to detail.