How Your Vendors May Be Overcharging You (Without You Knowing)

Every business needs the services and support of vendors and contractors to ensure smooth and seamless business operations. Vendors often provide businesses with goods and services they cannot produce or perform themselves. 

Vendors can also provide you with access to specialized equipment or tech that they may not have otherwise. Thus, this can help businesses to save time while delivering high-quality products and service offerings to their customers. 

Business executives are currently dealing with rising production costs in the face of inflation and are already considering raising wholesale and retail pricing on their goods and services. 

It is easy to write off increased pricing from vendors as “moving with the times.” However, your vendor may take advantage of the inflationary situation to overcharge you. Our previous article discussed how Vendors Are Raising Costs Because They Can. 

Your vendor may have agreed to supply services and products for a particular time for a fixed price. You start purchasing from them until you notice the increase when reviewing the invoices. 

If you do not take decisive action, you may be tricked for a long time. While this may be unintentional, it is important to nip it in the bud. So, how is your vendor overcharging you without your knowledge? Let us look at the options below:

Exploitation Due to No Contract/Agreement on Prices

Vendors may change their prices at any moment if there is no written agreement between your company and them. An understanding that both parties can abide by is crucial. It is not always advisable to reach agreements verbally. Using eSourcing for Reverse Auctions to select the best vendors for your company is one of the tactics we use.

Charging For Services or Goods Not Provided

It is essential for business executives and procurement officers to take a look at the invoice they receive after orders have been delivered. One reason is that they may charge you for services and products not provided. 

These items added to the invoice were not ordered. Thus, their services were not performed. You should cross-check this sneaky habit and stop it in its tracks. 

Charging for Items at a Higher Price

Another way vendors may be overcharging your invoices is by billing you for items at a higher price. Most business executives establish a relationship with their vendors because they offer pricing that is relatively cheaper than the rest.

Contracts are signed on that fact, and services and products will be delivered on that contract. However, vendors can decide to increase the price of items and fail to communicate the changes to their clients. If you do not spot this early, they will keep overcharging your business without your knowledge.

Billing for Phantom Items

While small businesses may not be subjected to this from vendors and contractors, large corporations and ventures are subject to overcharging without their knowledge. Large corporations with massive warehouses are prone to supply chain management flaws.

Vendors who know the situation use it to bill businesses for phantom items. Items that do not exist or were never ordered or delivered. Without proper invoice review, many phantom items go unnoticed for a long time.

Thus, conducting background checks on a vendor before hiring them to supply your business with inventory and other itineraries is essential.

Double Billing

Another way your business can be overcharged by vendors is through double billing. This happens when you request specific items, and the vendors double the bill while forwarding the ordered items. 

This could be an unintentional act. For instance, if you run a bakery and typically request 30 bags of flour monthly, that amount will be ingrained in your vendors’ spreadsheet. If, by economic circumstances, you do not need that many bags of flour and request a smaller amount, your vendor may continue charging you for the previous amount. 

To avoid overcharging, review all contracts before paying and compare prices and terms with other vendors to ensure you get a fair price.

If you suspect you are being overcharged, you must raise the issue with your vendor and try to resolve it before paying the invoice. We have also discussed How to Select and Manage Your Vendor Partners. You should check it out.

Conclusion

As covered in this article, there are many different ways your vendor may be overcharging or taking advantage of your business. It is important to be diligent when going over business expenses, as well as when choosing vendors.

Expense to Profit is a leading cost-reduction consultancy created to help businesses to improve their profit margins while lowering expenses. We can improve your bottom line with proven and tested strategies tailored to your needs

Call today for a free consultation and expense reduction analysis.