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Four common excuses used by Resellers for not implementing Revenue Assurance

1)  “There isn’t an issue with revenue leakage; we (the Reseller) don’t get billed for it anyway.”  The assumption made by the speaker is that the Service Provider does not incur the costs of the service if the Network Operator does not invoice the Service Provider for it.

Given that the business model for a Service Provider includes both fixed and variable costs, and the revenue is variable cost plus mark-up, if we reduce this statement to its logical conclusion, there is no revenue but still fixed costs at the bottom end.  It therefore follows that the Service Provider does have an interest in ensuring that all traffic his customers generate is billed.

2)“The Network Operator’s interest and ours (the Reseller’s) coincide; therefore he is always likely to act in our best interest.”  The assumption made by the speaker is that the Network Operator’s revenue and costs are linked to the Reseller’s revenues and costs.

The Network Operator has his own objectives, some of which are directly opposed to those of the Service Provider.  For example, provisioning a customer migrating from one Service Provider to another, if both Service Providers are on the same network, the operator incurs cost but no additional revenue for the Network Operator.  There is no incentive for him to migrate this customer, and if the customer is already live on his network, many of the not-provisioned alerts will not operate.

3) “We (the Reseller) don’t have a cash-flow problem because we bill monthly and are invoiced monthly.”  The assumption made by the speaker is that all invoices from Customers will be paid in full and on time and the invoices from the Network Operator will be paid on time.

Cashflow is the lifeblood of any organisation, all parties within the supply chain will be looking to maximise their cashflow.  The difficulty arises when customers delay payment through raising queries on their invoices, resulting in an outpayment to the Network Operator  occurring before the customer settlement has been received.  

4) “Fraud management is not an issue; we (the Reseller) rely on the Network Operator to handle the problem.”  The assumption by the speaker is that the Network Operator will absorb any losses incurred by the Service Provider as a result of fraudulent use of the services.

There is confusion between having a fraud management strategy and a fraud monitoring system.  The Service Provider needs a strategy of which part is the use of a fraud management system, which is where the Network Operator fits in.  The Network Operator will have a system that utilises the traffic on the network to generate alerts against traffic irregularities.  The Network Operator is not responsible for the customer vetting and approval process or the bad debt that arises, particularly if an End-User’s PBX is hacked.

Each of these myths leads to the inevitability that the bottom line will be adversely impacted to some degree through the failure to implement reasonable, cost-effective steps in revenue assurance.

 

Introduction

Revenue Assurance means different things to different people, from reducing leakage in revenue streams to giving Senior Management information on how complete and accurate are the reported revenues, costs and margins. 

Effective Revenue Assurance gives confidence to the Finance Director or Chief Financial Officer and therefore the Board of Directors when reporting the financial affairs of the company.  In this day and age this is crucial, as failure by the Board to adequately protect its revenues may well lead to serious consequences.  The absence of Revenue Assurance may be viewed as a lack of adequate controls.

Take from the book those things that are relevant and applicable to you (the Service Provider) and your situation – the actual name doesn’t matter, ensuring your business survives does.

We, the authors, provide a starting point and subsequent ideas to help organisations wishing to adopt revenue assurance practices and procedures.  You should be able to identify the details required from each system, based upon the records that your system contains.  The disparate nature of the systems involved prevents more specific information being given in a general publication.

You do not need to buy dedicated Revenue Assurance tools to be effective.  The suggestions can be implemented utilising industry standard products.  The main limitation is the ability to extract raw data from your systems, which will as a minimum require the assistance of the IT support teams.  The philosophy we expound is that the analysis and investigation should not be performed on live systems, but on data extracted from those systems so that the performance of those business critical systems is not impacted.

The book utilises the concept of a potential multi dimensional control system to manage the revenue leakages.  The dimensions being:

1. completeness of revenues and costs,
2. accuracy of revenues and costs,
3. margin improvements
4. cashflow improvements. 

For convenience, the book separates out the one and two dimensional revenue assurance activities for usage and non-usage revenues.  The third dimension is common to both types of revenue stream.  The fourth dimension does not use revenue streams, focussing instead on credit notes and payment methods.  There is a further dimension which is customer specific not product specific, covered separately.

We have chosen to divide the approach into a number of distinct parts.  The first part looks at the retail billing activities starting from a data collector or mediation device.  This approach should be common to all Service Providers, irrespective of whether they manage their own network.  It uses the term Wholesale Provider rather than Network Operator as some Resellers offer the wholesale product to their customers.

Part two considers the range of possibilities for those instances where the Service Provider is also the Network Operator. 

 

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