Service provider controllers, outsourcing coordinators or vendor managers of extensive outsourced services often end up with account books on their desks. Tens of pages document services and positions. Those who dare to check this conscientiously easily forget an important aspect.

Because the mass of information diverts attention away from the crucial question: Is this in conformity with the contract?

Checks that eisq consultants carry out for clients paint a clear picture. Often the operational representatives of contractor and client forget the contractual provisions. This happens. The range for examples is wide:

• Contractual deadlines for reports, invoices and performance records give way to day-to-day business. This sometimes leads to time-consuming, expensive and, above all, very difficult-to-comprehend correction, partial, cancellation and final invoices. This is neither a pleasure in terms of accounting nor in terms of performance control.
• Services that are defined differently in the contract are factually billed incorrectly by the parties. This also leads to incorrect market data with which the client works.
  Practical case: A client remunerated his service provider for years for appointments in the field and so-called care calls. According to the contract, an appointment includes at least one care call to make the appointment. This call is compensated with the appointment. However, since the care calls all showed up on the invoice, the area management believed: "The service provider's field staff would take care of the area much more intensively than the own field staff in the other area does." More is paid for the wrong data.
• Costs are incorrectly allocated. This may not be a problem in day-to-day operations, but it causes mismanagement at the meta-level. According to the contract, a service provider should allocate costs per product line. In practice, the outsourcing service provider simply took over the same template. The client was on the verge of withdrawing an apparently more expensive product line from circulation. The service provider only allocated the costs incorrectly.
• Clients pay for services several times over. Both parties no longer have an overview of how long or what scope has already been paid for according to the contract. An IT service provider charged - without intention - licence fees per user every year. The vendor manager also forgot that according to the contract, only licence fees per device are due. In this case, it was annoying that far fewer devices were in use than employees. The difference was a factor of 4.3!

To make your work easier, use these three tried and tested tricks:

1. Consult the contract more often than necessary and compare the positions.
2. Take turns checking. It is often easier to spot discrepancies if you approach the matter in an unsophisticated manner.
3. If you find that the contract and the service no longer match, update the contract! After all, a contract regulates the cooperation and forms the basis.

Benefit from an expert view from the outside.

Your advisors will provide you with additional recommendations, free of charge, on what to look out for in the next contract drafting to make your work easier.

New month, new account book. Vendor managers, as service provider controllers are called, are aware of the situation. One of their tasks is to conscientiously check the incoming invoices. Thanks to routine, this becomes easier and quicker from month to month.

Yet a great danger lurks in the form of the disadvantages of the routine effect.

Per se, routine offers a lot of advantages....

People become better and better at what they do. The degree of proficiency helps us to be more successful. In other words, routine people do things faster and usually more cleverly. This saves time and can be subsumed under learning curve.

... and costs at the same time.

In colloquial terms, routine leads to operational blindness. In common parlance, this means a way of working without self-criticism, without an eye for one's own mistakes or shortcomings. In this context, psychologists speak in simplified terms of the fact that work can be done without conscious thought.

This has the above-mentioned advantages as well as some disadvantages.

Footballers call this automatism. Pilots train until they can steer an aeroplane without thinking. The disadvantages are obvious:

1. Routine work is considered a demotivator or a motivator.
2. Those who no longer ask themselves whether they are doing the right thing run the risk of making the same mistake over and over again.
3. The pilot who routinely operates the aircraft in rapid succession may make fatal mistakes in crisis situations.

To protect yourself as an outsourcing coordinator from operational blindness as the flip side of the routine effect, these three things help:

1. Take turns with colleagues. It helps immensely if another person takes over the task of auditing for a month and critically checks back.
2. Deliberately break your routine audit processes. Just as pilots periodically renew their licence with simulations and changing conditions, you too can arm yourself. Often it is enough to design one component differently and your brain will think more actively again.
   For example, use a new spreadsheet, rebuild a formula, compare different numbers...
3. Benefit from a neutral, unbiased expert view from the outside.

Achieve better results in outsourcing. Manage your service providers more effectively and with less effort with eisq. Your benefit is our mission.

Your 4th tip briefly touches on the topic of "accrual-based allocation". This aspect holds further pitfalls for people who check invoices from service providers. In order to prevent you as a vendor manager, service provider controller or outsourcing coordinator from this, this tip focuses on relevant points for you.

What are the pitfalls of out-of-period invoices? Business economists refer to non-periodic invoices as invoices that do not match the performance periods.

If "accruals and deferrals" and "accounting" are the keywords that come to mind now, you know the dilemma of your colleagues in the finance department. Determining the so-called accrual-based profit (simply put: what does your division, your department, your company really earn?) sometimes mutates into a barely solvable task.

Operationally, there are also traps. Practical example: A client received invoices from his service provider for 468 installations at customers in January, 454 in February, 441 in March and 612 in April. At first glance, it seems as if the client was particularly successful in April. In fact, however, 251 were retrospective figures for the first quarter. April thus went badly and far below expectations! Although the service provider's invoice stated "performance period = April", this was not true in operational terms. The invoice details lead to wrong decisions.

And then there is tax fraud/balance sheet manipulation. In this case, there are two sides. One is that of the principal and the other is that of the contractor. Both actors can theoretically "optimise" their respective balance sheets with off-period invoices. A vendor manager certainly does not want to have anything to do with that.

So that you, the reader of these tips, are immune, these four steps will help you:

• Check the invoice values each time for plausibility with your own data.
• Meticulously browse the performance records to see whether they correspond to the correct period.
• Ask for missing performance records or information.
• Take enough time to carefully check and approve the invoice. Assignments that do not correspond to a period are rarely apparent at first or second glance.

Achieve better results in outsourcing. With eisq you manage your outsourcing partners more effectively and with optimised effort. Achieve better results with outsourcing. Rely on eisq.

Invoice books are sometimes also created because the attachments for so-called transitory items turn out to be extensive. Mileage allowances, travel expenses, tickets, hotel accommodation, postage, fees, telecommunication expenses, etc. The list of possible expenses includes even more items. At first glance, many of the so-called transitory items merely serve as a means to an end.

Experienced service providers know that these services sometimes represent more than a nice extra income for the outsourcing partner. Some marketing and event agencies earn more margin from pass-through items than from their own services! Thanks to kickback payments, commissions or so-called handling fees. This quickly raises the question of what is in the foreground for your partner. Their own performance or the earnings from commissions?

As a rule, service providers rarely choose the best economic way for the client, but for themselves. The management consultant might choose the flight instead of the more environmentally friendly and cheaper rail connection. The call centre service provider may send all letters for the client with Deutsche Post instead of an alternative service provider with lower postage and input tax deductibility. Transitory items thus quickly develop into an incalculable cost block.

As a vendor manager who checks and approves these invoice attachments, five concrete steps will benefit you:

1. Apply rule of thumb: If the expenses/pass-through items exceed 5% of the invoice total, it is worth taking a closer look.
2. Question the expenses from time to time. This sends two signals: on the one hand, you show that you are paying attention. On the other hand, taking a closer look, for example, at the question of why no alternative postal service provider delivers the letters, is beneficial for active cost management.
3. Use your company's own cost structure as a benchmark. If the external costs for the so-called throughput items are higher than those in your company, bring the corresponding service to you.
4. Use an extra income only selectively. If you know that your agency is making an extra cut on a print job and you want to pay out a one-off reward, that's one thing. If you do this on a regular basis, your service provider will quickly have a conflict of interest.
5. Identify shadow areas once a year. This includes units that build up and maintain parallel structures independently of existing central units in your company. This causes double costs and inhibits your entire organisation in the long run. The company within the company slows down and creates risks.

Check invoices specifically or use the professionals at eisq. Only pay as much as you really have to. Control more effectively and optimise your expenditure.