Overcharging is more than just a money issue – it threatens trust and transparency between businesses. Learn to detect and prevent overbilling in your business before it becomes problematic.
Advanced overbilling schemes may rely on insiders to help cover their tracks. To reduce the risk, maintain a clear policy on attendance, mileage, and time theft, and use spend management tools with human oversight.
Look for patterns
Overbilling (or overcharging) is when an organization bills for more than they have completed. This can be intentional or unintentional. It can also result from various issues, from input oversights and timing problems to manual errors. In some cases, overbilling may even be part of a fraudulent scheme.
Fraudulent overbilling schemes seek to exaggerate services, materials, or costs to pocket the extra cash. These schemes typically take advantage of lax accounting departments that hope the inflated amounts will go undetected.
While you can’t control external pressures and rationalization, there are ways to reduce the opportunity for dishonest employees to steal from you or claim expenses they don’t deserve. This can be achieved by establishing clear attendance, time theft, and mileage policies, ensuring that your system tracks hours and locations accurately, and requiring documentation to validate expenses before paying them.
Invoices are critical to the project accounting process, and mistakes are costly. Whether caused by an automated system, a math error, or a miscommunication between your team and the contractor, these problems can add up to a hefty bill. Review invoices regularly and closely to avoid them to ensure they are accurate. Scrutinize the hours billed, hourly rates charged, and other costs to ensure they are consistent with agreed-upon terms.
Many large companies use business rules that automatically audit or route specific invoices to accounts payable. These include those over a specified amount, those with a new payment address, or the first invoice from a new vendor.
Automated processes can help reduce human errors. However, it is also crucial to have robust projects with transparent communication and a powerful and effective billing process that includes regular cross-reconciliation to catch discrepancies early. To make this happen, establish clear and transparent contracts that clearly outline the scope of work, deliverables, payment terms, and billing procedures.
Contact the vendor
A standard overbilling scheme involves real or fake vendors submitting invoices for goods or services your business has yet to receive. In some cases, these fraudulent invoices are duplicated and sent multiple times. While one instance of overcharging may be a simple mistake, recurring instances may indicate a more complicated fraud scheme that requires a formal business dispute to resolve.
Advanced overbilling schemes sometimes rely on insiders working with the vendors to conceal the fraud and receive kickbacks from illicit profits. Always raise concerns about billing discrepancies directly with the vendor to protect your business. Choose a vendor committed to transparency. For example, Timeero prevents overbilling related to mileage reimbursement by tracking employees’ location and time from punch-in to punch-out so you can see exactly where and when they use their private vehicles for work. This helps ensure that your team isn’t claiming miles for scenic routes or personal stops.