Common supplier contract errors
A supplier contract sets a price, a scope and a term. After signing, nobody rereads it. Invoices keep arriving, and the gap between what was agreed and what is billed can grow for years. This article lists the errors that appear most often and shows how to check for each one.
Why contracts and invoices drift apart
Contracts are signed by one person and paid by another. The buyer remembers the headline rate. Accounts payable sees only the invoice. If the invoice is plausible, it gets paid.
Suppliers also change their billing systems, rename services and merge accounts. Any of these can break a link between a contract term and a billed line. Most of the resulting errors are genuine mistakes, but you pay for them either way.
Six errors to look for
Rates that no longer match the agreement
A rate card changes at renewal, or a discount tied to volume is never applied. Compare the unit price on three recent invoices with the price in the signed schedule. If the invoice cites a different rate, find the amendment that explains it.
Renewals you did not choose
Many agreements renew themselves unless you give notice before a stated deadline. If you miss the window, you may be billed for a full new term, and the renewal price may be higher. Law Insider's guide to these clauses makes the same two points: check the notice window and check the renewal price. Whether a renewal clause is enforceable can depend on the state. [VERIFY: state rules on automatic renewal for business contracts]
Escalators applied wrongly
An escalation clause allows a price increase under set conditions. Errors include increases applied too early, applied twice, or applied at a larger percentage than the contract allows. Read the clause, then rebuild the increase by hand from the base price.
Charges outside the scope
Facility, maintenance and temporary labor contracts often list included services. Extra visits, after-hours fees and supplies are sometimes billed as if they were extras when the contract covers them. Compare each extra line with the scope section.
Services billed after they ended
A site closes, a service stops, and the billing continues. This is common when a supplier tracks service locations in a separate list from the one your team uses.
Credits that were promised but not applied
A supplier agrees to a credit by email. The email sits in one inbox, and the credit never reaches the ledger. Our guide to reading a vendor credit or refund covers what to look for.
A checklist you can run this month
- List your ten largest suppliers by annual spend.
- For each, locate the signed contract and every amendment, schedule and side letter.
- Note the term, the renewal date and the notice deadline in one shared calendar.
- Pick three recent invoices per supplier and compare rates line by line.
- Check each escalator against the clause that allows it.
- Ask the supplier for a current list of the services and locations it is billing.
- Search your email for credits or concessions that were promised, then confirm each was applied.
- Write down every difference you find, with the invoice number and the contract section.
Keep the list in plain language. A partner firm will ask for it later if you request a review.
When to bring in a partner firm
A spot check catches the obvious errors. Larger gaps usually need a full comparison of the contract, the payment history and a sample of invoices. That is the work behind supplier contract compliance reviews. The partner firm requests the documents, reports its findings to you, and you stay involved when corrections are raised with the supplier.
Whether a firm charges a flat amount or a share of what is recovered is set by that firm. See contingency fee versus flat fee for the questions to ask. [CONFIRM: a partner firm supplies and approves any statement about its fee model]
If you are unsure how matching works, read how matching works at Fairview. If you want to request a review, use the request page.
Sources
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