How Vendor Billing Errors Cut into Your Bottom Line
February 26, 20246 mins read
Written by: Sean Fox, Executive Vice President, Professional Services

How Vendor Billing Errors Cut into Your Bottom Line

Companies struggling to save money should take a look at your monthly bills. Whether you’re overpaying for your services, missing out on tax exemption opportunities or incurring accidental late fees, fixed cost bills can quietly drain your financial resources without you even noticing.

Businesses with multiple operational facilities experience frequent billing errors–with staff members stretched thin, it’s difficult to keep track of paper or electronic invoices. Over time, inaccurate monthly bills end up being extremely costly, with billing errors in telecom alone costing businesses upwards of 12-20% of over-spending per month.

Are you concerned monthly billing errors are cutting into your bottom line? We’ve compiled a list of some of the most common–and some of the most outrageous–vendor billing errors we’ve seen.

Common Vendor Billing Errors with Outrageous Examples

1. Meter Reading Errors

Meter reading errors are one of the most common causes for inaccurate monthly utility bills. Whether it’s human error or a glitch in the system, inflated meter readings may end up costing your business hundreds, or even thousands, of dollars per month.

Additionally, some businesses with multiple properties might be paying for too many meters. According to Cost Control Associates , “We have seen many examples where organizations are paying for electric meters not tied to their facilities. For multi-site organizations, it may be nearly impossible to ensure you are paying for only your meters.” Since utility companies are still getting paid for their services, they may not be concerned with checking for any billing error or where the payment comes from.

2. Tax Exemption Errors

Many businesses don’t realize that they qualify for certain tax exemptions. It’s common for businesses such as grocery stores—that are technically exempt from paying sales tax on supplies—to unwittingly pay sales tax on their inventory. Over time these small tax payments add up and hurt your return on investments.

Similarly, when it comes to property tax reduction, businesses may also be missing out on potential exemptions. It’s essential to assess your property tax obligations carefully and explore opportunities for reducing this financial burden, ensuring you benefit from all available exemptions and incentives to optimize your overall tax strategy.

This happened to one of our clients who was charged sales tax, even though it is a credit union that is by definition exempt from those taxes.

3. Contractual Errors

When a business enters into a service agreement with a power company, telecom provider or waste management facility, it is beholden to the terms of the contract. Unfortunately contracts with non-regulated power companies can contain errors and false information, resulting in inaccurate monthly charges and inconsistent rates. Or your company might be unintentionally paying a rate that’s well above market average without realizing it. Research average market rates to see how your expenses stack up.

A linen vendor was charging one of our clients for annual increases of almost 30% for years before we came in to review their expenses–even though their contract specified a cap of 8 percent! With some negotiation, SIB was able to get this contract back on track.

4. Utility Rate Errors

Power companies usually offer clients several different billing structures depending on their budget, operational requirements and size. Although some companies might use the same billing rate for decades, most businesses outgrow their initial billing structure. They are usually better served with a different plan.

One of the most egregious examples we caught was for a national big box retailer with an exceptionally high water bill at one location. As it turned out, they were being billed for the water used by the entire shopping center!

5. Late Fee Errors

Beware of unintended late fees! Utility companies with unusual billing cycles or delayed online payment systems might ding you monthly with an unforeseen late payment fee. Glance back at previous bills to see if there are frequent unexplained late payment fees. Then double check your payment history and billing cycle to discern the cause of those errors.

6. Overbilling Errors

For non-utility expenses such as laundry, cleaning or inventory supply services, watch out for accidental “upgrades.” If your restaurant only needs to pay for basic table linens, be sure you are not accidentally paying for luxury linens at twice the cost. This expense can sneak by unnoticed, damaging your bottom line.

Many businesses don’t realize that they qualify for certain tax exemptions. It’s common for businesses such as grocery stores—that are technically exempt from paying sales tax on supplies—to unwittingly pay sales tax on their inventory. Over time, these small tax payments add up and hurt your return on investments.

Similarly, when it comes to property tax reduction, businesses may also be missing out on potential exemptions. It’s essential to assess your property tax obligations carefully and explore opportunities for reducing this financial burden, ensuring you benefit from all available exemptions and incentives to optimize your overall tax strategy.

This happened to one of our clients who was charged sales tax, even though it is a credit union that is by definition exempt from those taxes.

How to Avoid Vendor Billing Errors?

To help protect your business, here are a few strategic practices that can significantly reduce the risk of overpaying for services or falling victim to inaccuracies.

Establish Internal Controls

Set up a system of checks and balances within your organization to review and approve bills before payment. Assigning specific team members to monitor different types of expenses can help catch errors early.

Regular Audits of Bills and Contracts

Conducting regular audits of your utility bills and service contracts can uncover discrepancies that might otherwise go unnoticed. This might involve comparing contract terms against billed amounts or ensuring that rate increases are justified and within agreed limits.

Adopt Billing Management Software

Technology can be a powerful ally in the fight against discrepancies during invoice processing. Billing management software can automate the process of tracking cash flow as well as reviewing, and auditing bills. Look for solutions that offer alerts for unusual charges or discrepancies.

An Invoice Audit Can Save Your Business Money

Instead of sifting through piles of paperwork and service policies on your own, hire a utility bill management expert to audit your overall expense and reduce costs. Utility auditors conduct a thorough review of all your monthly expenses from gas to electricity to internet and cell phones making utility bill auditing an essential process for identifying discrepancies and reducing costs. Research your billing history to identify discrepancies.

Invoice auditors find billing errors and provide effective solutions for your business. They conduct interviews with service companies and investigate market rates in order to discern whether or not your current payment structure aligns with industry norms.

Once an auditor finishes his investigation, he’ll provide your business with insights on how to reduce your monthly bills, eliminate false fees and charges and navigate future contracts.

SIB offers professional cost reduction services aimed at reducing your monthly bills. We analyze your company’s utility bills for an in-depth report on spending and offer creative savings solutions. We work with you and your vendors to ensure that you receiving excellent services at the best rates possible, usually without changing vendors.

Improve your bottom line by eliminating unnecessary expenses with a closer look at your usage and payment record.

Instead of sifting through piles of paperwork and service policies on your own, consider service providers with exeprtise in utility bill management, telecom expense management, or waste optimization to audit your overall expenses and reduce costs in these hard-to-manage spend categories.