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How to Avoid the Growing Threat of Billing Scams with Consolidated Billing

Apr 18, 2018 4:07:51 PM

scam

One of the “hot topics” at a recent conference attended by nextSource focused on the rise of some clever scams perpetrated against higher education organizations within their procurement departments. One such organization admitted to being victimized by these proliferating scams to the tune of millions of dollars! Read on to learn about this pernicious con being committed by scammers and how to avoid falling victim to it in any industry.

Here’s how the con typically works. Scammers identify the staffing suppliers, independent contractors (or other service providers) serving a given organization. Posing as representatives of one of these staffing supplier/partners, the con artists contact the organization’s procurement department with a seemingly innocuous request for changes to the payment method currently in use. For example, they might request a change from “paper check” processing to electronic transfer (ACH) into a “dummy” account opened by the scammer. Procurement processes the requested change, and presto! All the invoices submitted by the supplier for the contractors they’ve delivered to the organization are paid into the account of a con artist!

Sadly, the victimized organization gets whacked not just once, but twice. Once by paying the invoices of hundreds or even thousands of contingent workers into a bogus account. Then also, a second time when the actual supplier demands payment for the invoices they’ve still not received. The hiring organization is obligated to pay again making the supplier whole for the resources provided.

What can an organization do to mitigate the risk of being ensnared in one of these brutal schemes? The answer to this challenge comes via the consolidated billing services offered by established, well-capitalized managed service program (MSP) providers. This type of service puts the MSP in between staffing suppliers or ICs and the hiring organization.

The MSP’s consolidated billing service receives and validates all the invoices generated on a weekly, bi-weekly or monthly basis, paying the full remittance to all suppliers and/or contractors. They then deliver to the hiring organization a single, consolidated invoice for the totality of the services spend over the last closed payment period. In this intermediary role, the MSP assumes liability for ensuring suppliers are paid and responsibility for ensuring no waste or fraud happens throughout the settlement process.

The benefits of leveraging a consolidated billing service from an MSP go beyond simply avoiding being the victim of one of these potentially costly scams. There is a hard dollar savings component to consider as well.

As everyone knows, the settlement process for a large contingent workforce management program is complex, with potentially thousands of invoices to be verified, processed and paid regularly. There are always exceptions and changes to invoices that require investigation, validation and execution as well. The man hours an organization dedicates to this function alone often add costs and represent a drain on operational efficiency. Not to mention the inevitable percentage of process errors that occur with so many transactions to be handled each week.

Engaging consolidated billing via an MSP provider frees up finance and HR department personnel to focus on more strategic and mission-critical activities instead of the nitty gritty of billing. It also shifts the burden of maintaining efficient, accurate billing processes onto the MSP. Overall, between the cost avoidance of risks posed by scammers and con artists, and the operational efficiency they deliver, this solution makes sense for larger contingent workforce management practices.

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Topics: Blog, MSP/VMS, Procurement Services, Risk Management, Supplier Management

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