As published by The Aberdeen Group, the average Fortune 500 Company reported that telecommunications and related network service costs have escalated to the point that they are a top line-item expense and now represent 3.6% of their revenue. Furthermore, the report goes on to state that enterprises forfeit 12% to 18% of telecom expenditures if they “do not have a proactive approach to cost management that leverages technology and process improvements through business process outsourcing…” More than 50% of all companies surveyed have less than 50% of their telecom cost centralized and nearly 60% indicated that their greatest challenge was a lack of visibility into what they were spending and why. All pointed to the benefits of gaining increased visibility into spending.
The report also goes on to describe additional challenges:
- Lack of visibility – only 67% of wireline and 57% of wireless expenses are proactively managed – with entire categories of telecom spend virtually invisible “due to lack of formal policies, poor control of procurement, and weak reporting”
- Decentralized spending, where local service providers are often selling to facility managers at regional offices that are eager to buy telecom services on their own. More than two-thirds of enterprises do not have a program to drive centralized procurement of telecom services
- Continually changing inventory
- Uncontrolled growth in wireless products and services
- Complex billing for a wide range of offerings, and baffling contracts with amendments that are difficult to understand. As a result, many enterprises aren't paying their telecom bills on time: 65% of the survey respondents incur late-payment penalties.
According to The Aberdeen Group, the average Fortune 500 Company spends more than $100 million annually on telecom services – up to 12% of these are erroneous and result in an estimated $8 million a year in lost profits. Supporting this, Gartner Research estimates that billing errors could represent as much as 14% of telecom spend. And, in a recent internal survey of telecom consulting firms, reported that billing errors were discovered in a whopping 81% of their client base – and in multiple cases these errors exceeded 20% of invoice. Yet 85% of a typical enterprise’s telecom bills are not audited internally – they are simply paid in full. And for bills that are validated, audits are only conducted on a subset of invoices associated with the largest spend areas.
Recovering billing errors follows the 20/80 rule says the Meta Group. Finding errors requires 20% of the effort – the other 80% is spent documenting the case, convincing the carrier of responsibility, and negotiating the issuance of a credit. Detailed documentation; a thorough understanding of the carrier’s contract, tariff, and surcharge structure; coupled with a good measure of tenacity and a personal relationship with the service provider are mandatory in successfully recovering credits. Very few IT or administration departments have the time and the knowledge to even attempt error identification, let alone recovery. Rapidly changing organizations – those that have charges for deactivated lines, unused active lines, and duplicate charges for moved lines – are the most likely candidates for savings. With growth rates on the order of 2% of circuits per month, and deactivation rates at about 1% per month, organizations growing or shrinking at 5% or more during the past year can expect to have significant billing error frequency, unless the MACD process has been rigorously managed. In addition, organizations with decentralized procurement processes or those that have grown by merger and acquisition will have a greater likelihood of significant billing errors.
Conclusion: billing errors can be significant. They cannot be ignored and their impact on the bottom line cannot be overemphasized. They are difficult to identify and require a significant amount of time and level of expertise that is best handled by an expert.
