Our customers and partners tell us that on average between 10 and 25 percent of an invoice's value is disputed on a regular basis.
Our own data indicates that the average cost of a repair is between $800 and $1,600. Do the math and you quickly see we're talking real money when you factor in the number of invoices a fleet receives from its outside service providers.
And this is just the hard dollar cost of estimate-invoice mismatches. What about the administrative time spent trying to track down whether an estimate actually was approved? Plus, there's the frustration and anger at having to argue with a service provider about what you owe for a particular repair when the invoice and estimate don't match.
Fortunately, you have the power to eliminate estimate-invoice mismatches. Follow these five tips:
- Insist that all initial estimates be approved, including a purchase order (PO): This gives you early and clear visibility on costs. Also remember to only approve estimates with clear estimated time repairs. Using an electronic system to document and capture these approvals creates clear transparency and accountability. If you don't use an electronic system make sure that there is clear documentation on who approved what and when. Issuing a PO after the fact can cause confusion as well as financial surprises at the end of the month.
- Insist that all changes to the estimate are also approved including, updating the PO number if required: Make sure that your service provider issues revised estimates for your approval each time additional work is being requested. As above, using an electronic system to document and capture these approvals creates clear transparency and accountability. If you don't use an electronic system make sure that there is clear documentation on who approved what and when. This is one of the most often missed steps in the process that leads to invoice/estimate mismatches.
- Ensure checks and balances are in place to provide visibility into high-cost repairs: You should have an escalation chain so that repairs over a certain dollar amount (or of a certain type) are viewed higher up in the organization. This ensures visibility to large dollar repairs but also real-time visibility to other types of repairs that you may be concerned about – before they are undertaken. This visibility can also help ensure that repairs are not done on assets that may be time to retire.
- Have a financial compensation incentive tied to people making repair decisions concerning estimate-invoice mismatches: Anyone with the authority to approve repairs needs to follow your estimate protocol and insist on initial and revised estimate approvals with POs. They're more likely to do so if a portion of their compensation is tied to compliance with that process.
- Switch to an automated process: With a manual process invoice-estimate discrepancies inevitably end up in a “he said, she said” argument. It's also difficult to know how long the repair will take, which hinders proper asset scheduling. Trying to dispute an invoice after the repair has taken place is nearly impossible. How do you prove that you didn't approve a repair? With an automated system, all communication about a service event – including electronic tracking of all estimate approvals – is kept in one place so you'll have an easy way to prove exactly which repairs were approved and by whom.
Remember there are no shortcuts to good fiscal responsibility when it comes to managing outside repairs. Overpaying for a repair or paying for a repair that you didn't approve has a direct impact on your total cost of ownership. You can reduce TCO by making the above changes to your estimate-invoice process.
Take the Next Step
Look at the process you currently use for estimate approvals. If you're not in alignment with the five tips listed above, now is a good time to start.
Did you know that for most companies, maintenance is the third-most expensive aspect of operating a fleet, after fuel and asset acquisition? It's time to gain an understanding of the real cost of your maintenance and repair operations. For tips on how to analyze and improve your maintenance TCO, watch the on-demand webinar, "Fleet TCO Analysis: The Real Cost of Service & Maintenance."