05 smart ways to combat cost overruns in offshore partnerships

Nearly 68% of businesses suspect they’ve been overbilled by vendors at some point, but less than 50% take action against it.

In a world where every penny counts, inflated invoices by vendors can quietly drain valuable resources and cause cost overruns. Yet, many digital agency owners, possibly like you, continue partnerships with these vendors.

Why? 

The answers vary.

• They do not wish to let go of comfortable familiarity with current workflows.
• They dread the unknown repercussions that could come with switching partners.
• They hope that costs will eventually fall in line with budget expectations.

They fail to realize that outsourcing is prized for its promise of cost-efficient growth. That promise fades into a costly illusion when inflated invoices from offshore vendors keep piling up, often leading to cost runs.

If you’re sticking it out with a vendor and the invoices seem to outweigh the services—you’re at risk of losing more than you aim to save.

This blog aims to guide you on preventing inflated invoices in offshore partnerships. It’s time to take the reins back, make informed choices, and ensure that every dollar you spend on outsourcing returns its due value to your agency.

How your misconceptions could be causing inflated bills and cost overruns

You might unknowingly hold beliefs that inadvertently empower your offshore vendors to add those extra, unwarranted charges leading to cost overruns. Let’s debunk these misconceptions to clip their wings and keep your costs in check.

You Think: If I Hire More People, I’ll Get Better Results

Reality: More isn’t always better. Allocating too many resources can lead to redundancy and overbilling. Each extra hand adds to the cost and could potentially slow down the project with overlapping efforts.

You Believe: A Fixed Plan Will Keep My Costs Under Control

Reality: Flexibility can often be the key to cost-efficiency. A rigid plan might overlook the dynamic nature of projects, leading to costly adjustments and, ironically, overbilling and cost overruns when the scope changes.

You Assume: The Lowest Bid Will Save Me Money

Reality: It’s tempting to go for the lowest bid, but low initial bids can lead to a classic overbilling case as vendors tack on extra charges down the line.

You’re Convinced: Once the Budget is Set, It Won’t Change

Reality: A budget needs to adapt just like your project does. Not revising estimates can lead to a lack of transparency and, eventually, overbilling as vendors add costs that weren’t accounted for initially.

You Figure: Every Task Costs the Same to Outsource

Reality: Different tasks require different levels of expertise and time investment. Overbilling often happens when vendors apply a blanket rate to all tasks, ignoring the nuances of each activity’s actual worth.

Actionable Tips to Shield Your Agency from Overbilling

Your Billing Process Must Be Crystal Clear

Insist on receiving detailed invoices that break down costs and hours spent. Regularly review these with your vendor to understand the detailed descriptions of services rendered, hours worked, and any other charges. Regularly compare these invoices against the contract terms to ensure all charges are justified and within the agreed scope.

Regularly Monitor Your Deployed Resources

Keep a close eye on the resources your vendor is utilizing for your projects. Are there more people working on a task than necessary? Are resources being stretched too thin, leading to inefficient billing? Are you getting billed for senior-level resources while getting services from junior resources? This constant oversight helps you to spot any discrepancies early and address them before they turn into overbilling.

Define a clear project  scope

Crafting a well-defined project scope that outlines every aspect of the project, including expected deliverables, deadlines, and specific tasks. A clear project scope acts as a safeguard against scope creep – a common cause of cost overruns. When both parties have a mutual understanding of the project boundaries, it becomes harder for vendors to justify extra charges for tasks outside the agreed scope.

Insist on Quality Control Checkpoints

Quality issues can be expensive if they require rework. Insist that your vendor applies stringent quality controls at every stage. This reduces the need for costly reworks and cost overruns, which can be a common reason for cost overruns.

Understand the Complexity Inside Out

Make certain that your vendor fully understands the project’s complexities before diving in. When your partner is as informed as you are about what the project entails, they’re more likely to provide accurate estimates and fair billing.

Wondering if any offshore vendor can truly meet all these stringent requirements?

The quest for a vendor who aligns perfectly with your values understands your needs, and fits within your budget can seem daunting.

That’s precisely where our One Partner Plan comes in. Developed from over two decades of expertise, this plan is custom-crafted to alleviate the operational burdens and cost overruns hindering your agency’s growth and client satisfaction.

• Quick, easy and no-cost onboarding
• Senior resources with 5+ years of experience
• No invoices without timesheet approval
• Timezone flexibility
• Weekly meetings with project managers
• No minimum contract term

We Want to Hear From You!

As we wrap up our discussion on navigating the challenges of offshore vendor relationships and combating overbilling, we’re curious about your experiences and thoughts.

How do you manage your vendor relationships? What’s your biggest challenge in managing offshore vendor relationships? Would a service like our One Partner Plan interest you in managing these challenges?

Schedule a consultation with us to delve deeper into your specific needs.