As more and more small businesses work with independent contractors, they’re also more exposed to billing abuses. Over-billing is a significant cost – experts believe that over-billings cost taxpayers, corporations, and small businesses tens of billions of dollars in bogus charges every year.

Independent contractors typically bill clients by the hour. But as the term “independent” infers, freelancers or for-hire contractors work independently, so how do you really know what you’re being charged for? While I’m sure we all prefer to believe that we’re working with honest good people – and the majority are – it’s smart to be cautious and aware. Here are six ways to keep your contractors on the straight and narrow:

6 tips to avoid billing abuses

  • Ask for detail. It’s common for independent contractors to bill for a certain number of hours without indicating what work was done. A more detailed description of the work and time billed will help you review the invoice. Vague descriptions of the work may be a red flag.
  • Do the math. Add the amount of hours listed and make sure they equal the total amount invoiced. Believe it or not, mistakes can and do happen
  • Unusually long days. If a freelancer regularly bills you for eight to ten hour days, but you know he or she also has other clients, then it could be a sign of double billing. In other words, he is multi-tasking and billing more than one client for time worked.
  • Pressure to meet commitments. If the freelancer knows there is a budget for work performed, they may feel pressure to inflate hours in order to get the full amount allotted. (Of course, this often works against an independent who winds up working more hours to complete the project than the allocated budget.)
  • Lack of clients. If the independent contractor you’ve engaged depends primarily on your business, he may undertake unnecessary tasks in order to increase the amount of billable hours.
  • Financial situation. Today’s economy is difficult, and there are many people who are suffering as a result. If you know the contractor you’re working with has serious financial problems, stay alert.

Working with independent contractors is an excellent way to manage your operational needs. But as always, that old adage holds true: “It’s better to be safe than sorry.”