Is Billing Fraud Hurting Your Bottom Line?
The number of independent contractors and freelancers is growing rapidly. According to MBO Partners, the market consists of approximately 16 million now and is expected to hit around 20 million in the next two years.
The shaky economy is responsible for much of this increase in independent workers. People who can’t find jobs eventually recognize the need to create their own income opportunities. Plus, businesses that don’t feel comfortable adding permanent employees to their teams are using independent workers on an as-needed basis.
The Downside of Hourly Billing
Typically, independent contractors bill clients by the hour. Since they work independently, however, how do you really know if you are getting what you’re charged for? Over-billing is a significant cost to businesses and government agencies. Experts believe over-billings cost taxpayers, corporations and small businesses tens of billions of dollars in bogus charges every year.
While I’m sure we all want to believe the independent contractors with whom we work are honest, good people, with these staggering numbers in mind, it’s smart to be cautious and aware. As they say, trust but verify.
6 Ways to Avoid Billing Abuses
Ask for Detail. It’s common for independent contractors to bill for a certain number of hours worked without indicating what work they did. A more detailed description of the work and time billed will help you review the invoice. Vague descriptions of the work done may be a red flag.
Do the Math. Add the amount of hours listed and make sure they equal the total amount invoiced. Believe it or not, mistakes can and do happen.
Unusually Long Days. If a freelancer regularly bills you for 8-10 hour days, but you know he or she also has other clients, then it could be a sign of double billing. In other words, he or she is multi-tasking and billing more than one client for time worked.
Pressure to Meet Commitments. If the freelancer knows there is a budget for work performed, they may feel pressure to inflate hours in order to get the full amount allotted. (Of course, this often works against an independent who winds up working more hours to complete the project than the allocated budget.)
Lack of Clients. If the independent contractor you’ve engaged depends primarily on your business, he or she may undertake unnecessary tasks in order to increase the amount of billable hours.
Financial Situation. Today’s economy is difficult, and there are many people who are suffering as a result. If you know the contractor you’re working with has serious financial problems, stay alert.
Working with independent contractors is an excellent way to manage your operational needs. However, as my mother always use to tell me, “It’s better to be safe than sorry.”
