Small Fees, Big Problems: The Destructive Potential of Telecom Late Fees

The enterprise has embraced Telecom Expense Management (TEM) not only for the insight and control it offers but, understandably, because it can save money. In the first months of implementation this is especially true, as TEM providers begin auditing contracts to ensure carriers are adhering to agreed-upon rates. Auditing inventory for accuracy is an area, too, where TEM vendors can find immediate savings, as many large businesses are paying for lines that are no longer in use and, in many cases, unnecessary features.

There is another area, however, where savings can be realized—savings that have a greater impact on the enterprise and extend beyond those initial months of a TEM contract.  That area is late fees. While potentially smaller in dollar amount, late fees can be disastrous, as they can result in disconnects. Among other things, disconnects can result in lost business, and there is little that’s more disruptive to a business than phones that don’t work or an Internet connection that’s down.

Despite the importance of avoiding these sorts of disconnects, however, many companies accept late fees as a part of the normal course of business. And there are even some companies, because of poor reporting from their TEM provider, that wrongly believe they’re not paying late fees at all.

The truth, uncovered in a recent study by the Association of Telecom Management Professionals, is that the average enterprise—even when using a TEM vendor—incurs late fees in the range of 0.65 percent—1.1 percent of their telecom spend. While those percentages might not seem like much, if you spend just $2 Million per month on telecom services, according to this study, you’re probably paying almost $200,000 each year on late fees. And those are numbers that should get everyone’s attention.

Four Simple Practices That Reduce Telecom Late Fees.

While there is no failsafe method for eliminating every single late fee, and you should be wary of anyone telling you differently, the following four proven practices can reduce the percentage of your telecom spend devoted to late fees to a miniscule figure:

1. Consider Electronic Payments. By using electronic payments, such as the Automated Clearing House (ACH) network, businesses can reduce the time between approving payments and issuing payments, which reduces the likelihood that payments will applied to the account after the due date. It also compensates for lag times imposed by the carriers with paper bills and provides for better overall payment tracking. Importantly, electronic payments to your carrier can quickly and easily be confirmed, which provides clarity—as in irrefutable evidence—regarding claims made by carriers pertaining to late payments. If you can’t issue ACH payments directly, consider using a TEM services provider who can.
2. No More Paper. Most carriers offer invoices via electronic data interchange (EDI). Utilizing EDI reduces the chance for errors and shortens the invoice processing timeline. Not to mention, it has proven to be the most efficient method for regularly auditing bills, validating charges and lowering processing costs. Be sure your TEM vendor is using the industry standard format, ANSI ASC (News - Alert) X12 Consolidated Service Invoice/Statement (ANSI EDI 811), which allows for detailed, charge-level invoices that are supported by the major carriers.
3. Know Your Assets. Though this advice might be more closely related to audits, it affects late fees, as well. When a dispute arises over amounts owed to telecom company (for instance, if a line was not disconnected as agreed), businesses may decide to pay less than the total that’s reflected on the monthly bill. This has the potential to cause problems later with the next billing cycle, though, as carriers may reflect that unpaid amount as late. It’s critical that these sources of conflict are avoided altogether and an accurate inventory will go a long way toward that end.
4. Outsource Your Payables. In the end, the surest method to virtually eliminate your late fees is to outsource your telecom payables to a TEM vendor who is willing to guarantee (in writing) that they will be responsible for any late fees you incur.  When you do so, make sure you will receive clear reporting so that you know when you’ve been assessed late fees.  And make sure the vendor you choose has the processes, security and financial strength to pay your bills even if you haven’t funded them. 

Unfortunately, there is no cure-all that ensures every bill is accurate and paid on time. With that said, if the four practices listed above are followed, businesses can lower the amount they spend on late fees and greatly reduce the chances their operations will be negatively affected by them.  

 As Vice President of Sales and Marketing for the Expense Management Division of Cass Information Systems, Josh leads the global growth strategy of the managed services provider, which includes responsibility for all channel and direct sales, marketing and strategic partnerships.  With nearly 20 years of strategy and management experience building services companies in sectors including telecom, energy and high tech, Josh leverages a broad background to help Cass expand its leadership as the only holistic solution for BYOD, enterprise mobility and fixed communications management.