Telecom Expense Management

Gaining control over telecom expenses, auditing invoices, enforcing service level agreements, performing business intelligence analytics, and reporting are all components of a solid Telecom Expense Management (TEM) process. 

 

For an organization to attain the greatest savings through TEM, three main data sources are required: Inventory, Invoices, and Contract/Tariff Information.

 

Inventory is needed so you can understand what you should be paying for and how your services are configured. Invoices are needed so you can understand what the carriers are billing you for. Contract/Tariff Information is needed so you can verify that the carriers are billing you correctly according to the contract/tariff. 

 

Lose any one of these three pieces of information, and you will be limited to what you can achieve in terms of savings. My first column in this series discussed the importance of managing your inventory to paying the correct amount for your telecommunications services. This column focuses on the value obtained by wringing out the errors from the Telecom Invoice.

 

 

Telecom invoices come in many shapes and sizes. In the early days, they mostly came in paper format. Large customers might receive thousands of invoices each month. Today, things are a little better. There are a wide variety of paper and electronic formats from CDs, to Web Portals, to Excel files, to EDI 811. 

 

In the case of the CD products and Web Portals, carriers will bundle value-added applications with the invoice so customers can do some basic reporting and analysis against their invoice. Unfortunately, there are so many different billing products and that  it is very difficult to learn them all.

 

 

The primary challenge in Telecom Expense Management is to take the hundreds or thousands of paper and electronic invoices and try to find all the errors and get credits back from the carriers. In the case of paper invoices, this can be a challenge. The auditor basically has to manually look through each paper invoice to determine if there are any problems. This process can be very time consuming and a highly human-driven process. 

 

The most efficient form of auditing invoices is achieved by using electronic formats and having a computer go through all the various audits without human intervention. Most of the typical problems with invoices can easily be found by computers.

 

The best thing about using computers to audit your invoices is that those analyses can be performed every month on all your electronic invoices. Unfortunately, you will not be able to get all your invoices in electronic format today. Not all vendors support electronic invoicing. Depending on where you have service, what services you buy, and what service providers you deal, you might be lucky to get 80 percent of your telecom invoices electronically. The rest will have to be audited with humans reading paper invoices. In the near future, however, expect to see some OCR solutions hit the market that can convert those paper invoices to electronic media as well.

 

The following is a list of the most common electronic file types used with many of the major carriers:

 

 

 

EDI 811 is rapidly winning appeal as the standard invoice type for carriers. Most major carriers support the standard; others are following suit. Many people believe that EDI is the “be all and end all” of billing formats. It is definitely a step in the correct direction, but it still has its issues.

 

EDI is one of the easiest file formats for computers to deal with. It is readable by any text processing tool from your desktop. The file can be delivered automatically to your invoice processing software in the middle of the night without human intervention.

 

With an EDI solution, you should expect to have your invoices automatically received in the middle of the night, loaded into your invoice processing software, audited, allocated, and ready for payment by the time you arrive at work the next day.

 

On the flip side, EDI has some issues. First of all, the file is not exactly the easiest format to read by humans. Some of the EDI 811 codes are quite cryptic and it is very difficult to understand the hierarchical billing structure in a flat file. There are also, in most cases, no tools to read the file. You are on your own to analyze the raw computer code. 

 

Another issue with EDI is the level of detail that it provides. You will find that you get varying levels of detail across different carriers and even within a carrier on different billing formats. Said another way…you might gain or lose access to critical data that you need from the invoice to do your invoice analysis.

 

For example, some EDI invoices include call detail… others don’t. Some EDI formats have good USOC level data, others do not.

 

Also, you can’t get EDI from all carriers via secure FTP (basically free). In some cases, you still need a Value Added Network or VAN to get your bill…and these services cost money—sometimes a lot. 

 

The final issue with EDI is that, even though it is somewhat of a standard, not all EDI files are arranged the same with all the carriers. This basically means that you still have to do a different mapping for each EDI file which takes time and money to build and maintain.

 

One important way to save money in TEM is to reduce the total number of invoices you receive. Some companies spend as much as $30-40 per invoice on average to open the mail, route the mail, analyze the invoice, allocate the dollars, route to AP, enter into Accounting system, and cut the check. 

 

If you are a company that has thousands of invoices, this translates into tens of thousands of dollars of savings just in consolidating your invoices down to do a handful. This process can sometimes take a year to complete depending on the number of carriers you have and the degree to which you are already consolidated. 

 

You will also want to look at moving to electronic invoices as you consolidate your invoices. Make sure you have the ability to read the electronic invoice formats in your invoice processing software before you consolidate, of course. Your invoice processing software vendor should be able to help you identify the best electronic invoice format for your needs.

 

The TEM industry is clearly centered around finding errors on your telecom invoices. My  first article talked about the role that a good inventory plays in saving money on your telecom. When it comes to invoices, there are a different set of issues one needs to address. 

 

The simplest one is just making sure you are being billed the correct unit cost for the services you own. In the LEC world, these are called Universal Service Ordering Codes. USOCs should be checked against tariff each month to make sure they are billing correctly. 

 

You will also need every major contractual element checked against your negotiated carrier contract. When electronic invoices are available, you should expect your invoice auditing software to verify a majority of your billing elements on a monthly basis. 

 

Another area you might want to focus on is unusual calling behaviors. Each month, you need to go through your most expensive calls report as well as calls from each of your main corporate numbers to make sure there are not any nailed up modem calls, or potentially fraudulent calls.

 

You’ll also want to remove third party billing, also known as slamming charges, from your LEC invoices. Most times a large enterprise will have a master contract with a major carrier, and 3^rd party charges can come in at much higher costs. Even if they are reasonable rates, you have to consider the impact of losing volume discounts or not meeting your revenue commitment because some of your traffic is being routed to another carrier. 

 

Other types of issues include:

 

 

There are, of course, many other types of audits that can be done. Please refer to the previous article on Inventory if you are interested in learning about the types of savings you can find by keeping an accurate inventory of your telecom assets.

 

By performing the aforementioned telecom invoice audits on a regular basis, you will be looking at saving somewhere in the neighborhood of 5-10 percent of your telecom spending range. This number is lower than some of the industry averages you may have heard, largely because this article is only talking about invoice related savings. The rest of the dollars are attributed to savings that are derived by inventory related problems.

 

In summary, Telecom Expense Management is largely centered on the issues associated with the telecom invoice. If invoices were accurate all the time, nobody would have to spend time auditing them for accuracy.

 

There are advances in carrier billing systems that are improving the accuracy of the telecom invoice; however, expect the problems to continue for the foreseeable future as carriers continue to consolidate and at the same time, offer new types of services that will not only introduce new billing systems but increase the complexity of how telecom services are billed to the customer.  

 

In the next article, we will talk about the role of the telecom contract in helping maximize the amount of savings that can be achieved in a complete Telecom Expense Management initiative.