The one question you need to ask yourself about your external labor spend. The answer is guaranteed to startle you and simultaneously present a proven way to unlock a significant cost transformation.

The question: What reliable source do my managers use to confirm external labor timecards are accurate before they are approved and paid?

The Most Common Answer Isn’t the Best Answer

If you are like most companies, the answer is there is no reliable source. Instead, you will find that your business is hoping the honor system is reliable enough. Assuming they are accurate as presented, managers are approving timecards week after week. You will also find your business has a group of process administrators whose primary job is to chase down managers … not to help confirm the accuracy of the timecards, but solely to confirm timecards are approved to ensure a timely payment to suppliers. How efficient is that? What other category of spend exists in your business where receipt of goods/services is not verified and instead assumed received based solely on the honor system? I bet none.

It’s time to take a look at what data you need to help you get the most out of your budget and timeline. What will help you confirm external labor timecards before approval and payment?

Evidence Underpinning Challenges with the Honor System

The proven reality is that over 30 percent of the reported time on timecards is actually not worked. Considering external labor can be one of the largest spend areas, this means businesses that approve timecards without a reliable verification of the hours worked are paying a huge premium to their labor suppliers for the hours not worked.

By way of a non-exhaustive illustration, a quick Google search proves external labor suppliers are struggling to achieve a full day’s work. Wipro fired employees for moonlighting. IBM commented about the same trend in its’ business. During the company’s Q2 earnings announcement, Infosys made it clear that the company does not support moonlighting and some employees with dual employment were fired. TCS is driving its staff to work from the office citing productivity concerns with work from home.

Oftentimes, T&M contracts are used with consulting services. For example, a supplier may provide technical consultants to develop and deploy a new application for its customer. The resources are provided at an hourly rate for each skill type by location (i.e. onshore versus offshore). The supplier invoices the hours on the project times the applicable rate until the project is completed as defined in the contract scope. Many businesses leverage time and material contracts for the:

Flexibility

The agreements are easy to make, extend, and terminate. Companies can hire contingent workers for as long as they need or as far as their budget allows. When demands change, companies can make quick decisions to increase or decrease resources accordingly.

Note: Contingent workers can bill extra hours if the project takes longer to complete or requires extra resources.

Adjustable Timelines

T&M contracts do include expected timelines and deadlines. However, unlike fixed contracts, these are often adjustable—whether a contractor needs more time to deliver a better result, or a client wants to extend the scope of the project.

Note: Without visibility to the actual time being worked, the company is blind to the need to extend a project, which increases overall costs.

Transparency

By hiring contingent workers, companies save on the costs associated with hiring and maintaining full-time employees—while making use of highly skilled professionals to offset a skills gap.

Note: The time submitted is self-reported and companies usually don’t have a system to verify the self-reported time.

There are many benefits to a Time & Material contract. If suppliers and others like them are unable to manage the resources they contract out as external labor, much of the benefits of time and material contracts are lost.

Trust Without Verify Is Proving Costly

What makes you think companies supplying your external labor can control and govern the timecards your business receives? They can’t and are motivated not to. This can hold true even for those businesses partnering with Managed Service Providers (MSPs). The MSP can act as an integral part of a company’s procurement, HR, or other human capital function managing the entire contingent talent life cycle from requisition through invoicing and payment.

Their economic models are dependent upon your business not questioning the timecard and on invoicing you for at least a 40-hour work week regardless of reality. Do you know what percentage of the timecards received are for people reporting less than a full 40-hour work week? My guess is close to zero.

A Reliable Source that is Easy, Accurate, and 100% Automated – Sapience TransparenSEE

In an automated, secure, seamless, and unbiased way, Sapience will collect and provide accurate data as the definitive source for timecard validation for both at home and at office workers. Instantly, you can stop paying your external labor suppliers based on the existing self-reported approach and start paying based on actual time worked. The result … save at least 30% of your external labor costs.

Capital markets are tightening, cost management is increasingly important … can your business afford to continue to overpay its external labor suppliers? If you do the math, what’s your external labor spend times 30 percent?

The right data collection, analytics, and insights platform enables leaders to effectively close the three way match gap. For those leading procurement efforts or responsible for approving costly vendor invoices each month, your own business dashboard that matches the purchase order, services received, and supplier’s invoice eliminates fraud, saves money, and maintains accurate records for an audit trail.

Easily integrate Sapience transparenSEE into your existing systems and transform how you do business and better manage time and material contracts for maximum results. Request your free demo today.