I got started in this business in 1996 when I went to work for Larry Sisler, the owner of Procom, a small but fast growing telecom provider based in West Virginia. At the time, Larry was planning to expand into the long-distance wholesale business and tasked me with creating a wholesale billing platform as well as running the company’s retail billing operations.
Larry, whom employees, channel partners and industry colleagues affectionately called “Killer,” demanded a lot out of his team. For me, as the guy responsible for billing, that meant I had to account for every single call record before I was allowed to release billing to the printer.
Being a cocky 26-year-old programmer, I really hated that requirement because it was tedious to account for literally millions of call detail records (CDRs), most of which were short duration and individually represented a very small sum (a penny or less). But Larry “patiently” explained to me that it was unacceptable to leave any money on the table. By patiently, I mean that keeping my job required that I bill every possible penny.
Over time, I came to understand why Larry was so adamant about accurate usage processing. You see, millions of small transactions (fractions of a cent) add up to be significant revenue.
20 Years Later
At Precision, we encounter numerous service providers that are not using a proper billing system or are rating their own usage. Often times, they simply bill out of QuickBooks and perform manual calculations. That’s fine for a startup, but it almost always costs them dearly. First, manual rating is difficult and time consuming. In the real world, this means it either doesn’t get done or isn’t done correctly. Second, most providers sell calling plans that include some type of free/included usage. This can lead to a false sense of security.
Taking an average of Total Minutes / Number of Customers can make it seem like free usage appears to be in line. Upon close examination, we almost always find a handful of individual accounts that abuse the provider and have gone unnoticed.
Here’s a common scenario: A provider sells a plan that includes 1,000 free minutes per month. The average minutes per customer looks good but we discover several accounts that used an average of 1,300 minutes per month for two years. Those customers were never billed for the overage but the provider had the underlying costs for those minutes!
In a competitive business environment such as telecom, margins are often razor thin. It’s important that companies small and large tightly manage usage processing to ensure they are maximizing revenue. If they aren’t paying attention, a small number of customers can “blow them up.”
We recommend four common sense steps to manage usage processing:
1. Have a system in place to ensure that all files are collected. Ideally, file retrieval is automated and processed at least daily, and pattern recognition is used to ensure there are no missing files. Also, make sure to account for duplicate files and records. Sometimes the file name is different but content is duplicated, for example. And be especially careful at the beginning of each year. In January 2018 we received a few January 2017 files.
2. Regularly process all usage and identify errors. We recommend processing records at least daily. Each record should fall into one of the following statuses: No error, unassigned or unrateable.
Unassigned and unrateable records are “money left on the table.” Unassigned could also include records your carrier should NOT be billing to you.
3. Perform a Quality Assurance review with two types of reports: Trending and Data Issue.
Trending reports allow you to easily highlight missing records and possible spikes (fraud), ensure all files are collected from all carriers, and provide insight into usage at the line level. Extra credit for data analytics to highlight the differences outside of the norm (e.g. show me all products that have more than a 10 percent difference compared to the average for that product.)
Data issue reports uncover unassigned and unrateable records, calls after disconnect date (your customer left but the service wasn’t properly disconnected at the carrier/switch), and calls on non-billing cycles (the customer is suspended due to seasons or being in collections but usage is still being produced).
4. Ensure carriers are charging you correctly (the carrier reconciliation process). Errant carrier charges can have a HUGE impact on your margins. An example: One of our clients bills about $500K in monthly usage revenue. The underlying cost for this usage is around $350K. On average, we find 5 percent or $17.5K in rating errors across all of their carriers, representing $210K in annual margin.
Carrier reconciliation can be performed manually but your billing system should automate many of the processes. The biggest challenge is committing the time and resources to this effort. But it’s worth it. As Killer would say, “That’s a lot of beer money. Don’t leave it on the table!”
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