This Industry Viewpoint was contributed by Will Saybe, Director, Audit Services, Alsbridge
Network and telecom expense audits have traditionally been the go-to-method for uncovering billing errors and invoice discrepancies. In recent years, however, the increasing complexity of telecom services, combined with the competing priorities of driving transformation and supporting business growth, have caused telecom audits to take a back seat. In response to a variety of factors, enterprises today are expressing a renewed interest in telecom expense auditing as an essential practice to drive significant cost savings and transparency.
While the enterprise is responsible for properly governing its telecom usage, telecommunications carriers are notorious for overstating charges on a regular basis; analysts estimate that 10 percent to 20 percent of telecom charges are billed in error. And the financial impact of billing discrepancies can range from a few dollars to tens or even hundreds of thousands of dollars per month.
A fundamental challenge lies in the fact that telecom environments are characterized by ongoing change and constant commissioning and de-commissioning of circuits and other assets. As a result, effectively tracking assets and utilization becomes an elusive moving target. Moreover, when enterprises migrate to new technologies, myriad legacy circuits can remain on the books.
So what can companies do to ensure that they’re not being over-billed, or worse, being billed for lines that have been inactive for years? The most important thing to do is to scrutinize and understand the bill.
The Billing Quagmire
In a typical monthly statement a customer receives from a telecom provider, over-billed items can include charges for invalid circuits, billing disputes, contractual issues, fraudulent charges, set-up fees and improper rates. These charges can appear on the invoice or can be buried within the bundled services comprising monthly recurring charges.
Over-charges, to a large extent, reflect the byzantine complexity of telecom agreements. While carriers don’t intentionally falsify their invoices, they’ve done little to improve their billing and invoicing processes or to facilitate a customers’ ability to identify and recover costs. Customers that attempt to recover credits from overbillings and resolve billing anomalies, meanwhile, face huge challenges. One is documentation. In past years, carriers provided written documentation detailing charges for utilization, physical inventory and circuits installed and decommissioned. As services became increasingly complex, the documentation has moved to offline formats and has become increasingly difficult to access.
At the same time, carriers have experienced significant turnover and today lack account reps with the expertise to navigate the vagaries of invoices and billing platforms. This has led to a buyer beware mentality, where customers increasingly bear the onus for ensuring that statements are accurate and that negotiated discounts are actually applied. Specifically, many carriers are putting contractual terms in place to limit the amount of money that customers can recover from overcharges, as well as a window of time in which they can recover fees.
To further complicate matters, several factors significantly increase the risk of billing discrepancies. One is organizational change—geographic expansion, as well as any merger, acquisition or divestiture within an enterprise drives disruption and can result in circuits, lines and services that a customer no longer uses, but that continue to appear on invoices and the company inadvertently continues to pay for.
Another factor is the migration to new technologies, such as SIP, which frequently results in legacy assets and services falling through the cracks. Following a network transition, existing PSTN services often remain in place and continue to be billed. In addition to driving unnecessary cost, this undermines the business case and lowers the anticipated savings of the migration initiative by reducing the amount of cost savings realized.
The combination of organizational and technological change, along with carrier intransigence, has wreaked havoc with telecom charges. In this climate, customers are recognizing the need for vigilance and turning to thorough and systematic audits of telecom statements to manage costs and support their network strategies.
New Approaches to Telecom Audits
Approaches to telecommunications audits have evolved in recent years. Initiatives originally focused on validating carrier invoices before payments, and involved experienced telecom professionals reviewing bills and manually peeling back layers of billing to identify the root causes of billing discrepancies. Over time, third-party Telecom Expense Management (TEM) providers gradually moved to a more profitable cost model of deploying automated software tools and processes. This automation-focused approach, however, tends to be limited to surface-layer issues and often misses significant errors at the sub-process level.
Today, customers are aiming to conduct more effective telecom audits by leveraging a combination of automation tools along with industry knowledge of billing practices and contract mechanisms. This combination is being recognized as necessary to ensure that all proper discounts are appropriately applied, that charged rates reflect the governing tariff or contract, that services and/or charges are applicable and that services being used are in working condition.
In terms of timing, a third-party audit of telecommunications spend should be conducted every two to three years. The exercise offers a low-risk opportunity to drive savings and maintain a clean and error-free billing environment. An audit can ensure that services being paid for are actually utilized, deliver refunds for over-billing situations and optimize the billing environment to the best pricing options with current providers. And by providing visibility into overall telecom spend and contractual portfolios across the enterprise, an audit can support overall network strategy regarding growth and transition to new technologies.
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Will Saybe, Audit Director, Alsbridge