Checking service provider invoices - 21 tips for service provider taxpayers
Service provider managers, outsourcing managers or vendor managers of extensive outsourced services often receive books of invoices. Month after month. Many, many pages contain lists of appointments, time sheets, IT positions and the like. Tamper-proof invoices are either on paper or in PDF/A format.
This very often prevents clients from mathematically checking all the values shown. In other words, have the values been added up correctly? Checks that eisq consultants carry out for clients show:
- Errors in the additions on 10 pages and more performance records are the rule rather than the exception.
- The errors are largely to the detriment of the client.
- Time statements prove to be particularly susceptible.
Before you start manually recalculating everything, here are three practical tricks:
- It is best to scan paper invoices. Modern office scanners almost always have OCR software. OCR stands for "Optical Character Recognition". This gives you values that you can check with the help of Excel.
Take enough time to deform your file correctly.
- Request the performance records in parallel to the invoice, e.g. directly in Excel. This is the easiest way to check. Unfortunately, only a few outsourcing service providers provide this transparency.
Check the forms and the cell references meticulously.
- PDF invoices, for example, can be exported very well into Excel with the paid products from Adobe. Unfortunately, we are not aware of any free software products that really work. Again, take enough time to enter the formulas correctly.
- Check the invoices before you pay too much. The mathematical recalculation shows how correctly your service provider works.
Or use the practical service of eisq's specialised consultants at a fixed price. This invoice verification usually pays for itself. This allows you to focus on the important issues in the taxation of your service providers.
Anyone who controls twenty or more invoice pages a month as a service provider controller, partner manager or vendor manager knows the dilemma only too well.
Intensively studying the pages and meticulously sifting through the individual items costs a lot of working time. Time that is lacking elsewhere for taxation. That is why it is often not noticed, or only very late, that one or the other item in the service provider's invoice is out of place. Often it is a considerable amount of money that your partner has wrongly included in the invoice.
Examples that eisq's consultants identify in audits for clients are:
- Items such as invoicing, travel expense accounting, preparation of quotations or holiday planning for project managers come up again and again. These are - exceptions prove the rule - internal work for which a client does not pay extra.
- In the case of call centre agents, our consultants identified positions for internal call minutes, hygiene training (red-hot in the age of Corona) or recruitment test interviews.
Something similar happens with IT or agency services. This adds up quickly. Before you permanently recognise services without a real audit, a critical check is worthwhile.
You can identify three types:
- Non-billable services -> Reject these.
- Questionable services -> Question the positions.
Practical case: An IT service provider put an additional ½ hour of IT 'customer file' per processed ticket on the invoices. The consultants from eisq found out that this was the internal working time record of the contractor's employees. This is definitely not an item that a client pays extra for. Rather, it is an internal management problem of the company.
- Indisputable billable services -> You really pay for these items.
- Meticulously sort through the items in the invoices and receipts. This will prevent you from recognising services that do not exist. In addition, you avoid that your outsourcing service provider solves internal management problems at your expense - see practical case.
The help provided by eisq's specialists pays for itself in the projects we know. This takes place either discreetly in the background or quite openly as a signal to your service providers.
If commissioned projects fail to achieve the desired results, outsourcing, partner or vendor managers often request more data. This also applies to the invoice. The natural need for transparency and the desire to know what the problem is and what one is paying for lead to this. At the same time, experienced service provider representatives know: the more data, the greater the lack of transparency. Negative results can easily be hidden behind this.
The client and the contractor of a service centre were swinging each other up. The periodic accounts submitted to eisq comprised 139, in words one hundred and thirty-nine, A4 pages. Each sheet neatly filled a detailed table. Call minutes, net working time, agent hours for training, trainers, IT, back office, fulfilment, postage costs, storage fees, licences, the abundance of items and evidence knew no bounds. At first glance, more transparency is not possible. At the same time, the accessibility of the service centre was already at an underground level at that time.
Viewed from the outside, it is easy to see where the problem lies. The contractor hides poor accessibility under a mountain of numbers. The client's vendor managers can't find the time to take care of anything else because of all the invoice documents. Conversely, the client and its vendor managers tie up important capacities in the management of the partner. It takes time to produce 139 pages of invoices. This means that an important resource for the real issue - controlling the service centre - is missing.
Therefore, ask yourself the self-critical question: Can you still see the wood for the trees?
- Weigh up how much and detailed information you need.
- Limit the number of invoice items with your service provider to a level that is practical for both sides.
- Discuss with your organisation which records are mandatory and which are only produced for the data graveyard.
This prevents you from focusing your and your partner's capacity on controlling instead of invoicing.
Your eisq professionals help you to work more effectively and in a more effort-optimised way with your service providers. Achieve more results.
The bill rolls in and covers dozens of pages. Checking it takes time. Service provider controllers, outsourcing managers (or vendor managers) of large outsourced services struggle month after month with this dichotomy: spend time checking the invoice or deal with the operational issues at hand?
Often, the departments that approve invoices and the accounting departments that process them rely on each other for a formal check. Too often, this remains incomplete. Specifically: Are the invoice details correct? Invoices that eisq consultants check for clients are surprisingly often full of incorrect information. Three examples illustrate what is at stake.
- Performance periods differ or are simply wrong. Accrual-based allocation often turns out to be a lottery. Accounting can only handle this in certain constellations. Sometimes invoices are issued late, in advance or retrospectively.
- Contractors use the same purchase order number, or P.O., for different projects. Admittedly, this is hardly something that an accounting department can do for a department. This makes it difficult to control costs later on. Such costs may end up in the wrong cost centres.
- Differing contact persons on the invoice also make checking more difficult. Sometimes documents wander through companies until someone, exasperated, presses the famous "release" button in SAP.
To help you keep track of everything, here are three concrete tricks. If you look at a similarly structured document month after month, it is easy to overlook if, for example, the same performance month is mentioned for the third time in a row. The authors of the invoice probably feel the same way.
- Build a checklist for the essential fields. This will remind you month by month and you only need to tick them off. That's it. And suddenly the aforementioned error "repetitive performance month" is noticed.
- If you work in a team, take turns checking. This prevents the routine effect.
- Or use the practical service of eisq's specialised consultants at a fixed price. This audit usually pays for itself. So you can focus on the important issues in your service providers' taxes. Check the invoices before you pay too much. The mathematical recalculation shows how correctly your service provider is working.
With eisq you can manage your outsourcing partners more effectively and with optimised effort. Achieve more results with outsourcing. Rely on eisq.
The amount of the incoming invoice matches the previous months and the budget. Press the "release" button and then take care of the day-to-day business? Admittedly, this is a very abbreviated version of the situation that many vendor managers, the new term for service provider controllers or outsourcing managers, know well. Intensively checking an invoice requires time that is lacking elsewhere.
Whether it is, for example, acquisition projects, the renewal of telephone systems or regular changes of electricity meters, the devil is in the detail. From a consultant's experience, checking whether the bill matches the progress of the project is a crucial activity.
Complex and thus expensive, as well as labour-intensive activities tend to migrate from month to month in the activity plans of some service providers. The outsourcing service providers prefer simpler steps bit by bit. These dangers result from this:
- Operational risks: The project goal, such as renewing the telephone infrastructure by the end of the year, is wavering.
- Legal risks: Legal requirements, such as the regular replacement of electricity or gas meters within certain deadlines, threaten to be broken by the commissioning network operator of a meter replacement service provider.
- Financial burdens: The likelihood of the service provider making a subsequent claim for unexpected things later increases towards 100 per cent.
- Time frame: The above-mentioned examples certainly exceed this.
If you, as a service provider taxpayer, remunerate your partners according to units/transactions/results or fixed partial amounts, these four steps, among others, will help you:
- In addition to the amount, compare the status of the service content with the agreed implementation plan every month.
- Keep a separate and, above all, your own backlog list. It is hard to believe the creative new titles your consultants from eisq have already come across in the market. Some service providers use these new titles to turn a backlog into a new activity.
- Extrapolate the outstanding activities in terms of costs and time. Compare the result with the agreed framework. This will make it easier for you to take countermeasures in time and, above all, more effectively.
- If you don't have the time, use the professionals ateisq. We check the invoices for you before you pay too much or miss project targets.
With eisq you achieve more results in outsourcing. Your benefit is our mission.
Rechnungen von Dienstleistern prüfen – 21 Tipps für Dienstleistersteuerer
You might think that it goes without saying that the invoice and the report match. Or do you? Service provider controllers, vendor managers, service partner consultants or outsourcing coordinators know a thing or two about this problem. In (too) many cases, the monthly reports do not match the monthly invoices 1:1.
Typical operational reasons for this are, for example:
- Real-time reports always show the current point in time. Subsequent corrections, different time periods for data sources, etc. result in differences. Sometimes employees of a service provider document transactions from the 31st of a month only on the 4th or 5th of the following month. In between, there may be a weekend and the monthly statement.
- Monthly values and billing periods often differ.
- Invoice performance records sometimes use different data sources than the client report.
It is precisely because of these operational reasons that it proves highly useful to meticulouslyreconcile the invoice annexes with the reports.
The key question is:
- How is the monthly statement derived from the report?
This work is worthwhile in several ways.
- As the client, you gain more transparency about what is happening with your service provider.
- You have a better operational understanding of how the results are made up.
- You signal that this is an important service for you.
The consultants at eisq have already encountered the following practical examples in this regard when auditing invoices for clients:
- Process errors at the service provider: The client agreed on up to 5 delivery attempts with his contractor. These are to be billed together as one delivery. Since the deliverers in other projects only make 3 delivery attempts, they handled it that way. The report showed the value for "5 unsuccessful delivery attempts", but in reality there were only 3. This only became apparent when reviewing the performance records, which were fed from the employees' logs.
- Handover errors in-house: In a sales project, the client supplied partially incorrect data. Since all the figures in the report were always correct, this was not noticed. The delta only came to light after an intensive comparison of the invoice values with the reports. Nota bene: The service provider was not at fault or even negligent.
- The service provider shifts the management of its own team to the client: In a field service project, the outsourcing service provider invoiced the number of appointments month by month according to the travel expense accounting of the employees. The report showed the number of visits made. If, on the last Friday afternoon of the month, three visits were "surprisingly" not taken by the contact persons, costs were incurred. As long as no one at the client says that a field staff member is not working correctly, the service provider simply settles the account and saves himself the annoying feedback discussion with his employee.
Meticulously check the invoices against the reports. It's worth it for you. If you don't have the time, use the expertise of eisq.
Because with eisq you achieve more results in outsourcing. You control your service providers more effectively and with optimised expenditure.