The Situation

It is Autumn 2007. You are the CFO of a successful wireless service provider. Recently your VP of Strategy commissioned a consultancy firm to undertake an exhaustive business audit. The aim was “to assess the current direction of the business and compare it to the approach required to succeed in a changing telecoms environment”. You are concerned about how much the exercise cost. Then just as you were about to file the report on your shelf, you quickly scan the findings. Out of the recommendations presented, one highlights the impact of revenue assurance on the bottom line. The level of revenue loss and debt write-off is large. Worryingly it equates to 11% of your company’s annual billings. The report points to credit management policies, fraud, order entry errors, call routing errors, interconnect errors, rating failures and OSS integration problems among the many issues. How could this situation have arisen after investment in staff, equipment, and systems, let alone several revenue assurance initiatives?

This revenue assurance issue represents both measurable and immediate opportunities to improve the company’s revenue situation. After lengthy discussion amongst the senior management team the explanation for this situation is identified:

In the last few years the organization has experienced rapid growth in both revenue and profits, which has diverted senior management’s attention from the persistent growth in the levels of revenue loss, and debt write-off. Today the business dynamics are changing. Market volatility, cost pressures and general economic uncertainty have left your organization facing difficult trading conditions, with mobile penetration rapidly reaching saturation. The focus is shifting from subscriber acquisition to launching new value added services in order to extend revenue opportunities and minimize subscriber churn. Now greater attention needs to be paid to any source of potential revenue loss. In common with the wider service provider community, greater attention needs to focus on the processes associated with “accurately billing subscribers for all transactions, products and services provided in accordance to contracts and tariffs, whilst managing fraud to acceptable levels and collecting all due revenue”1.

Rapidly increasing volumes of mobile content and next generation services compound the risk of fraud and revenue loss. There are complex revenue flows to manage and millions of events to monitor from different sources. Little strategic planning took place for the accounting of revenue assurance across the organization as new services were launched. The company purchased new elements of BSS/OSS to support individual lines of business and services, for example new subscription models, which resulted in revenue leaks between the cracks in the billing chain. In addition the transition to next generation networks and the management of a growing range of technologies has resulted in upheaval in key areas of the access network, service and control planes, systems and services and process and revenue control inefficiencies.

The introduction of content and e-commerce services means there are far more steps in the revenue management, service delivery and partner management chain. A single error in one part of the value chain impacts on the revenues of partners, and staff time is consumed on lengthy reconciliation and disputes. Never has it been more complex to manage wholesale processes, from improving contract negotiations with interconnect partners, to optimizing traffic trading and routing through the network, to accurately billing and settling for all services, to complying with the latest inter-carrier regulatory rates and negotiated interconnection agreements, and to managing a wide range of content producers, aggregators and partners.

Past investment made in revenue assurance audits has tended to focus on quick fixes, associated with revenue balancing and data cleansing. Whilst these exercises yield improvements in specific processes, helping to identify areas that require major focus and developing knowledge about end-to-end process flows and cross organizational repositories, they do not deliver a strategy for a pro-active and sustainable revenue assurance framework.

Causes and Effects of Revenue Loss and Debt Write-Off

As CFO you decide to establish a cross-functional task force to perform detailed analysis of the weaknesses in the organization’s revenue assurance and billing risk management processes. The resulting analysis includes a number of potential areas for particular focus:

1. Tariff table integrity. Excessive and constant invoice disputes. The reason for this was because sales were engaging in too many special deals with some of your enterprise customers combined, with incorrect and delayed input of tariff changes into the billing system. The effect was incorrect invoicing and revenue reporting, excessive invoice disputes and poor cash collection. This resulted in a loss of $8 million in additional revenue booked and billed and a subsequent negative adjustment of $5 million.
2. Suspense and error file management. Inconsistent revenue reporting by product compared to product sales. This was due to limited people, processes or end-to-end event balancing reports to manage events dropping into suspense and error files. The effect was inaccurate analysis of revenue trends, unbilled and unbillable revenue and reduced cash flow. This resulted in a lost revenue, valued at $10 million.
3. Product development. Unable to invoice customers for use of new products. This was caused by inadequate product development processes and billing solution testing. The effect was that customers were not being invoiced for some services and it was difficult to evaluate the success of products after their initial launch. This resulted in a revenue loss estimated at $10 million.
4. Customer data configuration management. Customers continued to have access to services while unresolved account/invoicing issues were dealt with. This was due to sales requesting billing suspension while disputes regarding quality of service were resolved. Further untimely billing lead to further disputes. The quantified loss from this was $9 million unbilled revenue held in suspended accounts.
5. Product testing procedures. Nil usage recorded against live customer accounts. This was because some live services were not switched from test mode. The effect was live account usage was held in suspense unbilled. The quantified loss was $6 million. Some customers exploited unbilled services by a factor of ten, compared to accurately billed services.
6. CRM / Order Management integration. Some customers were able to access services but the billing system did not recognize these customers. This was caused by inadequate order entry, customer care and billing systems integration. The effect was live services were not being correctly billed, with a subsequent loss of $1.5 million.
7. Event data reconciliation. Some billable events remained unaccounted for and were never billed. This was due to reconciliation gaps. The effect was unaccounted records. Quite apart from the general loss of confidence in the system and processes, the quantified loss was $1.46 million of unaccounted revenue.

Strategic Objectives for Revenue Assurance

In today’s world financial rigour and strategic insight need to be tightly coupled. Your organization needs to evolve from tactical responses to revenue assurance (including both cash acceleration and revenue recovery) towards more comprehensive strategic alignment and control (focusing on revenue creation and margin maximization). The answer is not as simple as signing-up to consulting services to identify and correct revenue leakage, or purchasing a system based revenue assurance software application (despite the promises on many software vendors’ websites). You must embed revenue assurance disciplines, tools and processes at the heart of your business strategy and systems architectures. This means adopting continual BSS/OSS business process improvement and automation between apparent organizational silos and throughout the network-to-bill process flows:

• Providing monitoring and reporting of operational processes through the use of statistical trending and analysis
• Focusing on business cycles rather than discrete software applications
• Allowing users to exploit accurate benchmarks and metrics that identify process weaknesses and prioritize improvement on an ongoing basis, thus eliminating a dependence on batch based data analysis and comparison
• Allowing users to exploit accurate benchmarks and metrics that identify process weaknesses and prioritize improvement on an ongoing basis, thus Ensuring continuing development of BSS/OSS reconciliation points and process integration

By taking a continual, end-to-end revenue assurance approach, you can also effectively meet the financial control requirements of regulation and legislation.

In this context the typical revenue loss points in processing traffic (whether Voice, Web session, Data or Video services) on the network, can be individually identified and comprehensive strategies put in place to address the many sources of potential revenue loss:

• Events lost in the network that never reach mediation
• Events dropped in mediation for some reason, that do are never rated
• How to deal with late receipt of events
• Errored events, or events with insufficient data to guide and rate
• Incorrectly rated events
• Incorrect order management and provisioning issues
• Ineffective credit management and debt recovery processes
• The many types of fraudulent use of your network, including subscription fraud.

Providing the ability to monitor, in near-real time, business critical processes to improve revenue assurance and maximize cash flow ensures that revenue is pro-actively managed. Of course detecting errored events and correcting rated events pre-bill are just two areas associated with this paradigm, others benefits associated with pro-active revenue management include more accurate pricing of product and services, estimating churn probability for different types of customers, identifying network upgrade and maintenance requirements and improving cash flow through a reduction in days sales outstanding (DSO) are all elements that go to make a more comprehensive revenue assurance strategy.

In short, you decide the priority is to move beyond tactical approaches to revenue assurance such as trending and analysis of events and source data integrity correction. To achieve strategic insight and control you must automate revenue assurance controls across your mediation, activation, retail and interconnect billing, real-time charging and customer/partner management systems; to enable business processes to execute emerging value added business models and eliminate exposure to financial risk. The verification and control of the end-to-end revenue cycle will not only play a key role in reducing revenue leakage, debt write-off and maximizing revenues but will also provide the added benefit of improving customer relations. And as different types of services are added the revenue assurance framework should be freely extended in synchronization with the BSS/OSS stack to ensure services are authorized, transactions are captured, rated, discounted and charged, and settlement is made to third-parties, according to business policies.

These are the hallmarks of a modern revenue assurance and billing framework.

Author: Simon Dadswell, Advanced Solutions Marketing Manager, Intec.