Many companies get a flood of invoices for recurring vendor services, invoices that have to be sent to a busy decision maker for approval. There is no internal documentation explaining to accounting what the bill should look like and when to flag it for review. Documentation for bills or purchase orders can save time and catch billing errors.
For most companies as long as the bill looks similar other last months they don’t question it. This can be dangerous if the bill is for:
- A service they no longer need
- Multiple services, some of which were recently canceled
- An amount that varies every month
Let’s use telecom as an example.
We’ve seen clients who pay bills that they think are for expensive voice or data lines they currently use, but they don’t have any documentation so they don’t realize the bills are for unused lines.
We’ve also seen clients who get bills from Verizon for thousands of dollars, but there is no breakdown on the bill listing the services. The clients have no document listing the current services needed and how much they cost individually or in total. Later when they do get a breakdown they realize that they’re paying for stuff they don’t need or canceled already.
Another client’s long distance phone bill had been seeing a steady climb in traffic. When we reviewed the bill we realized that recently included in the bills was thousands of dollar in charges that weren’t for calls, but were new charges for every line the client had. Since the client had no document indicating which section could vary and which could not, they didn’t notice the unnecessary increase in costs.
While nothing is as good as a complete “inventory” of all your services, documentation of what a bill should look like, what it is for, and when to flag it, can catch many expensive errors.
One way to document bills is to create Purchase Orders for those recurring monthly contract charges, instead of just receiving monthly invoices that require authorizing signatures. The purchase order can document what you’re buying and how many and what the total should be. If the bill is different, the bill can be flagged. If the bill matches the PO it can be paid instead of being sent outside accounting for review. For this to work Purchase Orders have to be updated every time there’s a new contract or services are moved added or changed. Periodic review of Purchase Orders that haven’t been updated is advisable as well.