Telecom Expense Management – Who owns it?

According to Aberdeen in the report titled The Challenge in Total Telecom Cost Management, 74% of mid market enterprises report that one department has primary responsibility for managing telecom costs. They report 38% of the time it’s the CIO and the telecom/IT staff that’s the sole department leaving the CFO and finance team the sole department 62% of the time. This tells us in a majority of mid market enterprises the CFO and finance team owns the telecom expense outright and in a minority of cases the telecom/IT staff may have sole or partial ownership.   

Lets look at a few ways finance and IT may be dealing with the 10-300+ invoices a typical mid market enterprise receives in a given month.

Finance handles the telecom and wireless expense and processes the invoices

• Invoice validated by finance by checking to see if the cost was similar to prior months. If so it’s submitted for payment.
• Invoice validated by finance by verifying service items on invoice are in use. If believed to be accurate then it’s submitted for payment.
• Invoice validated by finance by conversing with someone in telecom/IT to see if any moves, adds, changes or disconnects were made and if so notating what should be paid and what should be disputed prior to submitting for payment.

Positives

• Invoices remain with finance allowing for payments to be made quickly and eliminating late fees.
• Cost allocation based on whole or percentages of invoice amounts for quick reconciling.   

Negatives

• The finance accounting systems do not keep an up to date inventory of telecom and wireless services
• New services and MACD’s (moves, adds, changes and disconnects) for employees and locations are not communicated to finance in real time.
• Lack of tools to charge back services to departments beyond basic percentage cost allocation.
• No visibility into total employee expenses or expenses for locations based upon all carriers and services.
• The invoices are not being validated to verify contract compliance.

Telecom/IT handles the telecom and wireless expense and processes the invoice

• Invoices are reviewed for discrepancies and may be cross checked against new orders and MACD’s and then submitted to finance for payment.
• Inventory may be extracted from the invoices by manually inputting into it into spreadsheets. The spreadsheets then act as a repository for MACD’s and gives a way to provide reporting and track billing discrepancies.

Positives

• Having the department responsible for ordering services and MACD’s allows for better validation and more accurate payment of invoices.
• Managing inventory using a spreadsheet allows for better reporting and cost allocation of employee and site location costs across all carrier invoices.

Negatives

• To complete the validation and manually extract the data from invoices without late fees kicking in the invoice must be processed within 15-20 days. For more on this click here.
• Invoices may be directed to individual telecom/IT personnel via e-mail, CD and web download eliminating visibility of the expense across the work group.
• The invoices are not being validated to verify contract compliance.

As Aberdeen states ““Enterprises need to think more strategically about their telecom and network investments. As a result of inefficient processes to manage telecom expenses, late payment penalties, carrier billing errors, incomplete comparative benchmarking of sourcing, and inadequate visibility into spend, mid-market enterprises are forfeiting opportunities to reduce telecom expenses by an average of 3% to 10% of their spend.”

If that is the case enterprises should look to acquire Telecom Expense Management Software along with partial or full management of processing, validating and auditing of invoices. This may yield substantial savings.

Which department implements a solution may depend upon your point of view. According to the Aberdeen report The CFO’s View of Telecom Cost Management, “CFOs and financial executives bring different perspectives in how they view the world compared to CIOs and IT executives. For example, 75% of financial managers identify lack of staff expertise as the top challenge to effective management of telecom costs while only 33% of IT managers see staffing expertise as an obstacle. 70% of IT managers point instead to not having accurate inventory as their primary challenge”.  

Communication between finance and telecom/IT is a key requirement to achieve the best results when implementing a TEM software solution. A solution that addresses the finance departments concern of staffing expertise, and visibility of expenses and gives telecom/IT the inventory information they need through automation and/or business process outsourcing is likely to get the best results.

At Vocio we designed our software to address these concerns. All paper, web, CD-ROM and EDI invoices are loaded and mapped into V-Vision to automate the processing of invoices. The software then examines all invoices, compares them against existing contracts and tariffs, and systematically identifies errors. It also inventories all of an enterprises telecom assets — lines, circuits, and wireless devices — and ties them to site locations or employees and then identifies usage patterns for internal cost allocation.

Both the CFO and CIO will benefit from a dedicated centralized application that will reduce operational costs for managing telecom and wireless expenses. This will free resources to focus on higher value projects such as upgrading to newer technologies, refining procurement processes, sourcing and other areas of the telecom environment.