I am sure many of you that are involved in outsourcing have been part of the billing war in some form or fashion. Guess who wins every time, it is the outsourced provider. Most of the time the clients just give up or think they have bigger fish to fry so they move on. Like drops of water make an ocean, this adds up.

Most of the IT outsourcing contracts are geared towards ensuring providers have some leeway into protection of their billing. The era of fixed price bids is not a norm anymore solely due to the fact that it doesn’t work well for the providers, many have lost face and money in these type of deals which is again due to a host of factors that I will cover another time. The other billing types lime T&M, Staff augmentation, sole contracts etc. are fodder for billing leakages.

it is advisable to have a robust process to check billing and make sure the outsourcing dollars are spent wisely. Processing of invoices as they come in needs discipline and verification against time sheet data. The source being time sheets, it pays to have people signing off those to do their due diligence. At times there is no connection between those that approve time sheets and those that process invoices which is best avoided. You want both of these folks to be in sync to do what it takes to be accurate in processing bills.

Given the downturn almost all IT outsourced providers have tightened the belt on what they call “Billing Leakage”. Not just that they actively look for measures to see where they can tap out more billing often going for smaller lines. it helps since the clients really don’t look at smaller lines with that close eye it deserves.

Many providers have lost face or lost credibility due to this factor, at time the middle manager at these firms tend to be aggressive to exceed their targets with unscrupulous means. Most of the senior leadership at the providers are not about these smaller moneys coming at the cost of credibility and actually discourage such practices. It is not uncommon to have broken process that benefits providers, they simply refuse to make improvements for obvious reasons

Given the economic situation and the need to account for every dollar spent on outsourcing it is imperative to relook at the billing practices and processing workflow end to end from receipt of the bills to payments and take remedial action. Many firms will benefit from doing a wing to wing mapping using Lean Sigma. There is lot of money to be made here for clients in terms of savings and arrest the billing leakage from their ends.