Invoice Management Five Ways to Decrease Telecom Expenses and Increase Visibility

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1 Five Ways to Decrease Telecom Expenses and Increase Visibility Telecom bills are the most complex and error-prone an enterprise receives. The sheer number and complexity of invoices from multiple vendors - each with their own billing formats - creates high invoice processing costs and time consuming cycles. Automated invoice management provides the fastest cost savings for any Telecom Expense Management initiative. This white paper will present insights into the value of telecom invoice management, delivery considerations, a checklist for evaluation teams, and the business case to cost justify a program. May 2009 Copyright 2009 Telesoft

2 Table of Contents Introduction... 3 Current State of Affairs... 3 The Carrier Environment... 3 The Enterprise Environment... 4 Invoice Management: The Enabler for Telecom Expense Management... 4 to Cost... 5 Evaluating Invoice Management Solutions... 7 Determining What You Are Buying... 7 Buyers Checklist... 8 Developing a Business Case for Invoice Management... 9 Cost Justifying Invoice Processing from Savings Results... 9 Conclusion About Telesoft

3 Introduction Telecommunications are a top line item expense for most organizations. Approximately $700 billion is spent annually on telecom services for voice and data services. On average, communications expenses account for 3% to 4% of enterprises annual expenditures. These expenses have a real impact on earnings and profitability. Customers expect to receive accurate bills from suppliers for goods and services, but telecommunications invoices often contain billing errors. These errors result from the fact that telecom services have the most complex bills of all items that enterprises receive. For example, telecom has components that are time-sensitive (such as peak vs. off peak) and volume-sensitive. There are items that are priced based on local calling areas and items that have fixed charges each month. Telecom bills are also subject to highly complex city, state and federal taxes. Organizations spend between 2% to 5% of their telecom budget attempting to manage these expenses with a patchwork of manual processes that fail to deliver the desired savings. Many enterprises are now turning to sophisticated programs to manage telecom bills that produce dramatic savings. This white paper will present insights into the value of telecom invoice management, delivery considerations, a checklist for evaluation teams, and the business case to cost justify a program. Current State of Affairs The Carrier Environment Telecom service providers face a number of challenges:» Due to competitive market forces and complex telecom billing, carriers have a difficult time managing the wide variety of discounts, plans, and services» Government regulations such as local and federal taxes, FCC mandates, and constantly changing laws increase the probability of billing errors» Mergers, acquisitions, and consolidations, have led to many different legacy billing systems with prohibitive costs to integrate the systems» Carriers billing support staffs face the challenge of understanding hundreds of products and services with smaller downsized staffs» Telecom services are impacted by significant changes with the adoption of new technology like Voice over Internet Protocol (VoIP), Multi Protocol Label Switching (MPLS), and Fixed Mobile Convergence (FMC) that drive shifts in the services that need new contracts and pricing models 3

4 The Enterprise Environment Enterprises face a number of challenges:» Consumption of data, mobile services, adoption of smartphones, and home-workers with access to the network for extended work hours are rising» Massive layoffs add to the workload of managing telecom expenses as organizations close sites, requests must be filed to disconnect services, these items must be reconciled with invoices, and verified that they are removed from billing» Since prices for telecom services are declining, billing errors and over charges are likely to favor service providers» Pressed for time and resources, telecom providers are increasingly pushing the responsibility for billing management back to customers The best approach to meet today s challenging environment for carriers and enterprises, is to dedicate the necessary resources to actively manage telecommunications expenses or select a firm that specializes in Telecom Expense Management (TEM). Invoices provide an important starting point that can provide a critical foundation to proactively manage telecom expenses. Invoice Management: The Enabler for Telecom Expense Management Managing the lifecycle of telecom expenses can be thought of as a continuum of issues that must be addressed. These issues include asset management, usage management, invoice management, and dispute management. The best return for telecommunications investment requires management of the entire continuum for total telecom cost management. Invoice management is at the center of the continuum tying everything together. Invoice management is the enabler for TEM because it provides ongoing invoice management and validation and assurance that billing is accurate. Invoices provide a checkpoint to determine if pricing has been applied properly for services that are consumed and reconciled with Move, Add, Change, and Disconnect (MACD) inventory changes. A onetime audit will identify errors for a snapshot review period, but it will not provide ongoing validation for an effective TEM program. Ongoing reviews are critical because services and pricing continually change. Failure to submit timely claims on billing errors can reduce the leverage an enterprise has to resolve disputes. Over time, relationships with carrier account teams, and contracted services change. Billing errors may also be subject to the statute of limitations (typically two years for local billing and 6 months for long distance services).finally, many issues have complex timelines that are difficult to document after a period of time passes. Processing invoices in a centralized database is a critical first step to organize, validate, and report telecom expenses. 4

5 to Cost There are five key areas of invoice management that will result in a decrease in telecommunications expenses and greater visibility to costs. 1. Consolidate billing Enterprises need to gain control of voice and data spending for the following reasons:» Invoices rarely come to one centralized location making it difficult to accurately determine the total expenses with each vendor.» A single telecom carrier may have more than a dozen billing platforms for its services.» The sheer number of vendors providing a large enterprise s voice and data services can lead to fragmented views of expenses.» Varied billing frequency and intervals make it hard to determine whether all relevant invoices have been processed.» Late payment penalties and uncontrolled service disconnects for failure to pay bills can be costly. The solution to these problems is to consolidate invoices and have the carrier provide billing in an electronic (i.e. EDI, CD-ROM, web) media. This will provide a clearer picture of spending and reduce the expenses to process invoices. 2. Validate invoices on a monthly basis It is necessary to automate the steps to validate thousands of line items for each bill that an enterprise receives each month. Invoices should be validated and reconciled with valid vendor contracts to ensure rates and discounts are properly applied. Error rates range from high volume, low dollar value invoices to more costly bills for data and inventory items. With the cuts in personnel, technology changes, and changes in billing platforms, telecom carriers do not have the resources to validate billing. This has resulted in the need for enterprises to proactively audit and resolve billing errors with their vendor. 5

6 3. Reconcile network inventory with billing on a regular basis Today s networks are constantly changing. Comparing MACD information with invoices will help to ensure that the circuits are being billed properly and are indeed active. Inaccurate MACD information can result in two major errors that can affect an enterprise s total network spend.» Disconnects not removed from billing: An enterprise requests that the carrier disconnect a particular circuit; the circuit is disconnected but the charge remains on the billing» Non-working circuits: An enterprise is paying for the circuit, but when it s tested, it s not working Discrepancies in this area generally occur because telecom providers maintain two separate databases (provisioning and billing) that are not linked. This often leads to bills being issued for a service that has not been installed or continued billing for a disconnected service. Carefully documenting provisioning activity and reconciling it with billing inventory can resolve this problem. 4. Allocate costs accurately to achieve accountability Allocations help identify where voice and data dollars are spent and improve budgeting. They increase financial visibility in four primary ways:» Simplifying the budgeting process» Increasing managers awareness of their departments spending» Showing individuals how they are impacting the budget» Increasing P&L visibility When cost centers are held accountable, demand is tempered by price. Call Accounting can be added to the solution to provide a proactive total cost management solution. Call Accounting provides a more granular view of telecom expenses with expense allocation charge-backs for actual usage by individuals. 5. Provide managers with reporting to understand what s driving expenses Reporting pulls everything together. It provides managers with detailed explanations of expenses; it contributes to improved vendor management, and it promotes accountability among employees. Web-based reports can be an especially helpful tool. With their sorting, filtering, and hyperlink drill-down capabilities, they make it easier for managers to take action. Reporting also helps demonstrate compliance to Sarbanes-Oxley mandates for expense accountability. 6

7 Evaluating Invoice Management Solutions Before beginning an evaluation of Invoice Management solutions, enterprises should examine their current capabilities and challenges. Determining What You Are Buying In the project-planning phase, organizations must develop a clear understanding of goals for Invoice Management and map these goals to measures that will define the program. For example, if the business objective is to gain an ROI from reducing costs by eliminating billing errors, streamlining labor intensive invoice processing, and cutting late payment penalty fees, then baseline values must be established for current performance and threshold values must be set to measure results in each of these areas. Delivery Considerations Next, enterprises should determine what additional technology or resources are needed. At this stage it is important to determine which delivery option (outsourced, hosted Software as a Service SaaS or licensed software) is best for their particular situation. Skipping this step or deferring the decision for later is one of the biggest mistakes in evaluating solutions. Determining how the solution will be delivered will help to speed the selection by limiting the evaluation to those suppliers that can meet the desired approach. Often the decision is simple because an organization has a corporate culture, past experience, managers, resources, or lack of resources that will dictate which approach they will select. Business process outsourcing appeals to organizations that do not have resources to manage the program or prefer to focus on other areas. Hosted/SaaS delivery can allow the enterprise to manage some areas and the supplier to manage other areas of the program. Licensed software appeals to organizations that wish to manage the program themselves. 7

8 Buyers Checklist Capabilities Invoice processing Continual Audit Dispute management Invoice processing Optimization Interfaces Allocation expense charge-backs Document Management Contract Tracking Reporting System Administration Security Support Implementation Validation How will billing paper and electronic (EDI, CD ROM, , HTML, Magnetic Tapes, FTP, Web downloads) be processed? Does the system reconcile product inventory and invoice components against actual inventory? Does it validate billing with customer service records, contracts, addendums, tariffs and service guides? Does the system create dispute letters, vendor notification, and tracking of disputes with online reports? Can the system electronically route invoices for multi-tiered approvals? How does the system optimize expenses? How does it interface with accounting systems for cost center updates and General Ledger feeds? How does the system perform complex allocations with fixed, percentage, and usage based schemes? How does it scan invoices and contracts? Can these scanned items be linked to invoices? Does the system track and alert users for contract expirations? What reports are standard and how are custom queries created? Does the system allow users to schedule vendor feeds, allow users to schedule reports, establish web settings for connection and idle time? Can controls be set to determine which cost centers managers can access? What support is provided for implementation and steady state? What time is needed to implement the program and when is functionality available? 8

9 Developing a Business Case for Invoice Management Refunds and savings from Invoice Processing can be used to create a Return on Investment (ROI) business case to cost justify the expenses for a program. Cost Justifying Invoice Processing from Savings Results The average enterprise can expect to save 1% to 10% of its telecom expenses with invoice management and the related benefits of streamlining Accounts Payable (AP) processes, improved accountability for expenses through allocation chargeback reporting, expense validation, and optimization. Feature Benefits Savings Invoice Management Streamline AP Expense Allocation Chargeback Expense Validation and Dispute Management Expense Optimization» Reallocation of staff to core functions» Invoice consolidation, electronic receipt of bills & scanning of paper bills» Archiving of bills for electronic access» Automation of workflow approvals for invoices» Reduction of payment activity» Delivery of a single, consolidated view of expenses across hundreds of invoices, multiple locations, and service providers.» Eliminate late payment penalties and uncontrolled service disconnects» Improved accountability through chargeback & web reporting» Reconciliation of contracts to billing & MACD inventory activity» Templates streamline submission of disputes & claims tracking» Identification of better rate plans» Grooming of circuits (e.g.: T-1s to higher capacity DS-3, OC3, OC12 circuits) for a lower overall cost» Optimizing services to consumption Staff cost 1 BPO cost Processing telecom invoices can range from $63-$70 per invoice 2 1%-3% 1%-3% 1%-10% 2%-5% 1 Salary, Benefits, & Indirect Costs: IT support, real estate, office supplies, etc. 2 Aberdeen Group: The Cost of Not Acting: The Total Telecom Cost Management Benchmark Report 9

10 Conclusion Tracking telecom expenses for an enterprise is quite challenging. Organizations need a specialized solution designed to manage these expenses. Enterprises must adapt to processing telecom bills that are received as paper, EDI, CD ROM, , HTML, Magnetic Tapes, FTP, Web downloads. Voice, data, and mobile services are constantly changing and costs are often managed in a decentralized manner. Decentralized locations provide little to no control on who places orders with carriers and how they are placed. Processing invoices in a centralized database is a critical step to organize, validate, and report expense information. Leading organizations are now taking a structured approach to managing telecom invoices to gain control of these expenses. Enterprises should use invoice management as a foundation to launch a more comprehensive telecom cost management program that will proactively manage expenses. About Telesoft Trusted experts in Telecom Expense Management (TEM) software and services for over 25 years, Telesoft reduces fixed and mobile telecom spend to improve your bottom-line. Telesoft automates the telecom expense management lifecycle from management of telecom invoices, usage, and cost allocation, through provisioning and inventory to lower telecom expenses and improve efficiencies. Our solutions are used by hundreds of commercial and government organizations including the largest and most complex telecom environments in the world. Offered as a hosted, software licensed, or outsourced solution, you get total visibility into your telecom expenses to reduce cost. Telesoft Corp E. Camelback Road Suite 300 Phoenix, AZ P: F: info@telesoft.com 10