5 Keys to Managing Telecommunications Expenses

David Cram
Director

One of the most challenging vendor invoice sets for IT and A/P (Accounts Payable) functions to review, validate and approve on a monthly basis are telecommunications invoices.  The invoices arrive in varying formats, are often hundreds or thousands of pages deep and yet surprisingly shallow with information about the service being invoiced. 

As a result, invoice review is neglected, dedicated to an “available” internal resource or outsourced.  While typically an accounting function, this process can provide a solid foundation for category management needed to halt the increasing telecom costs in your budget. 

The following five steps lay out an operating framework for building a “Center of Excellence” around your firm’s telecom invoice review, validation and overall category management.  Each step has its own complexities, but followed sequentially, they each provide the foundation for the follow on step. 

1.  Build and Maintain a Detailed Service Inventory

The foundation for any process improvement initiative in this area is the creation of a comprehensive service inventory with line item detail.  What if you don’t currently manage a detailed service inventory?  You aren’t alone.  A vast majority of firms we work with do not have a trusted and comprehensive service inventory. 

The reason is availability of the information.  At its most basic level, carriers rely on some level of mystery around what need their services fulfill and what the impact would be if a given service was disconnected.  Information needed to build and maintain a detailed service inventory is not included in the monthly invoice.  Supplementary sources are required to fill in the gaps invoicing leaves behind.  Without a detailed service inventory, you cannot even begin a proper invoice validation process. 

Key question: Do I know exactly where every budget dollar is going in my telecommunications spend?
 

2.  Maximize Utility of Online Portals

The next key is to maximize the online portals provided by your vendors.  Most of these portals are provisioned on the account basis, meaning information is only loaded into the portal if the account is associated (and compatible) with the portal recognizing your User ID.  The reality is only a portion of the environment is visible in a given portal interface. 

The result is a “shadow inventory”, comprised of overlooked or unnecessary services, existing outside of the firm’s electronic management tools.  A/P and IT should collaborate with the vendor to bring as much shadow inventory into the light as possible, this will help to make the monthly invoice validation process more streamlined.

Key questions: Is the firm utilizing online portals? How do we know the portals are comprehensive and include all services provided by the vendor?
 

3.  Invoice Validation

There are two primary frameworks for thinking about invoice validation—comparison to prior period and comparison to contract.  A firm needs to look at the invoice validation process at the line item level from both of these perspectives in order to avoid exposure to overcharging and rising expenses.

Finding an electronic tool you can leverage for comparison to prior periods is critical.  Housing this information in a dashboard providing insight to how current invoice expense compares to any custom prior period (e.g. prior month, same month prior year, etc.) will provide oversight often missing from the process today.

The increasing trend in this area is to outsource to a partner who can better focus on validation.  Whether your firm is ahead of the curve or lagging on this front, keep in mind that outsourcing a headache can lead to migraines later on if you do not retain the required transparency and visibility into your service footprint.

Key questions: What is current invoice validation process?  What percentage of overall line items in the invoice are being reviewed?
 

4.  Vendor Credit Obtainment

Telecom vendors earn the reputation for poor billing systems and process like no other supplier vertical.  Some vendors do better jobs than others, but at the end of the day nearly all of them struggle in one aspect or another.  Why should carriers invest in improving systems when, if successful, it will have a negative impact on revenue and profitability?  Credit resolution teams at these vendors are understaffed and long credit resolution times are the norm.

The best practice to minimize the waiting game is to complete invoice validation monthly.  The earlier an issue is identified and disputed, the less time the problem has to compound.  Smaller credit amounts can be approved more quickly with fewer escalations for approval.  Time efficiency is essential; do not wait for the problem to correct itself because it never will.

Key questions: For the time the firm is spending pursuing credits, are the results worthwhile?  If not, are credit opportunities being missed? Or are disputes difficult to resolve quickly?
 

5.  Contract Management is Required

Managing contractual commitments for these services is challenging.  Some services have a specific term commitment (e.g. your mobile phone contract) and others have a revenue commitment either over the year or other time period (monthly, quarterly, contract term, etc.).  It is important to understand each line item in the service inventory and its respective contractual commitment.

Vendors will leverage upcoming contract expirations and resetting rates to “tariff” or “undiscounted” rates.  This tactic is particularly useful on “shadow inventory” as you are asked to sign multiple agreements each year to extend PRI at one location and internet at another location.  Each contract executed in this ad hoc manner kicks the can farther down the road and prevents the realization of any contractual co-terminus objectives.  Achieving this goal can be a long journey but well worth the flexibility, freedom and contract negotiation leverage you maintain into the future.

Key questions:  How many contract surprises do we have per year? How much better could we negotiate if we didn’t have to react to services with rates resetting to tariff costs?
 

The foundational concept of these five steps is straightforward.  However, the execution is complex and the primary reason why more organizations do not place a larger emphasis on keeping this side of the house clean.  Implementing these steps will begin to remove the dread of telecom invoice review and validation, and start the process of creating a constant out of the unknown.