Finding Lost Revenue

Have you ever reached in the pocket of an old coat and found $20? Imagine how happy you would be if you uncovered 100,000 times that figure in lost revenue.

The amount of revenue that leaks out of carriers' billing systems every month not only is difficult to quantify, but most companies refuse to discuss it in public. Off the record, however, one cellular carrier documented up to $1 million in lost roaming charges over a 3-month period, according to KPMG. After two weeks of testing its revenue stream, another carrier discovered that it was losing $2 million. Most analysts agree that without an ongoing revenue-assurance program, between 2% and 10% of a carrier's total revenue might be sitting in the unchecked pockets of its billing system.

"Some of our customers come up with a significant dollar amount that falls into leakage, but they would be embarrassed to go back and give the charges six months later," said Joe Bonocore, KPMG partner and national director of the communications industry. "As a result, if you don't have a system in place, it is lost revenue even if you find it."

PATCHING UP PROVISIONING It is possible that your own employees are poking the first holes in your system. Al Rogers, a business consultant in Logica's customer-care and billing international business unit, said wireless carriers need to create a new behavior pattern across all organizational structures if revenue assurance is going to be successful.

"Revenue assurance starts with customer interaction and doesn't end until you put in a journal entry for the receivable at the other end of the food chain," he said. "Because it touches every part of your company, from provisioning to finance, everybody must understand the totality of revenue assurance and their role in making it happen."

Most people don't think about revenue assurance at the point of sale, he continued, but it is actually the first place where a problem could occur. You need knowledgeable, trained people at the front end who can activate customers without any errors. Karen Merkel-Liberatore, Cellular One Group director of public relations for the upstate New York area, said her company makes sure all systems are in place before it rolls out a promotion. That includes training representatives and salespeople to explain rate plans to the customers.

"We have to be very cognizant of revenue assurance because this industry is extremely promotion driven," she said. "Our marketing representatives work very closely with our billing department to ensure the correct codes are put into the billing system."

CRACKS BETWEEN COMPONENTS Even if your provisioning process is flawless, several other things could happen if there are no controls between the various points of your billing system and your switches, Bonocore said. First, there could be a time lag between the time you initiate or upgrade a customer's service and when that information reaches your billing system. If it takes a few months to link the two, you lose more than revenue; you also could lose customers when you try to charge them for three months worth of service on one bill. What causes this time lag? Bonocore has found that several wireless carriers have a limitation between the service provisioning and billing components of their billing systems.

Glenn Ross, The Board Room director of PAT System development, said that even if you have one simple billing and customer-care system that automates the flow of information, you still could have a problem with the transfer of information between the billing system and the switch.

"No matter how smart the billing system is, data could look correct to it but not actually be correct," he said. "The switch could write incorrect AMA (automated message accounting) records that mean something different to the billing system than the actual type of call that was made. The billing system, in all instances, can't be smart enough to deal with it."

Bonocore refers to these calls as undefined. These calls generally end up in a suspense account because your system does not know whom to bill. It takes time and energy to track down the customers that you should appropriately bill for those calls, and you might not have the people power to do so every time.

Ideally, Ross said, your switch should write a certain structure for each call and also identify the call in the "call type" field. When the AMA record hits the billing system, the system knows what kind of call it is just by looking at the record type. When the wrong type of AMA record is written, calls that were completed do not register in the switch. The call may be treated as a free call, where no record is written at all. In that case, the call is most likely going to be billed incorrectly. In a worst-case scenario, no one would be billed at all.

When a call is completed, he said, a switch on the terminating end gives an answer back to the originating switch, and a field in the AMA should show whether or not it was answered. In some systems, the field does not indicate the call was answered, so the billing system tosses out the record.

"Then there is not even billing confusion," Ross said, "because there is nothing to bill for."

PRO-ACTIVE MEASURES KPMG's Bonocore said many of the revenue-assurance programs carriers use today are reactive measures that they create after they experience significant revenue loss. Best practices stem from implementing a pro-active strategy that detects and corrects key operational insufficiencies before it is too late. Although you must change your assurance process to prevent high revenue loss, he cautioned against changing your whole system immediately. Any changes you make could cause other changes down the line. Fifty percent of carriers can recover 40% of monies just by focusing on 50 customers and making sure they are billed for everything on an ongoing basis, he said.

Merkel-Liberatore said Cellular One continuously monitors its system to ensure that the correct billing codes are taking place. After every promotion, the marketing and billing departments do a random billing sample to make sure that customers who signed up for the promotion have been implemented in the billing systems correctly. The random sampling also verifies that after the promotional period is over, the correct charges are going through.

Ross said some carriers avoid pro-active revenue assurance because without the right tools, testing switches and billing systems can be a tedious, error-prone, expensive process. Usually they just wait until something prompts them to conduct a manual test. He explained there are two key points to pro-active testing: establishing a test plan and setting up a schedule. He advises you to test the fundamental types of calls -- local, long distance, international, toll and directory assistance -- for each switch and that you test your switches in large metropolitan areas more frequently than in rural areas. Any time the switch goes through a change, such as when an area code is added or if the switch software is upgraded, you should run additional tests.

PROSPECTING TOOLS Some companies have developed pro-active solutions for the revenue assurance problems that wireless carriers face. Ross said one type of testing system can verify AMA records to ensure that all calls are properly recorded because switch translations change constantly. The system consists of hardware located at the central office and software located in a centralized location. It provides company-wide testing from a single point and eliminates the error and tedium of manual testing, enabling more frequent verification without an increase in labor.

Rogers added that other products test provisioning, messages and rates. For example, software can determine what functionality has been enabled in the switch for a particular customer, looks at the billing system to see what rate plans have been enabled for the customer and compares the two. It ensures the service provisioned matches the service billed, that all provisioned features are on the bill, and that a customer's recurring charges accurately reflect the services he receives. Rogers has seen carriers with 200,000 subscribers recover $250,000 in revenue after the first go-around with this type of product.

A network-monitoring tool can make sure that all messages that come into your billing system are being billed, Rogers continued. It sets up a historical reference point for the call detail records that come in. You can put that information into a database and set thresholds around it. If there is a significant deviation around those benchmarks, an alarm will signal someone to investigate.

"Surveillance over the network is very important because when a failure occurs, it has the potential to have a significant hit on revenue," Rogers said.

A billed-usage-analysis tool can help your company make sure the units charged are the same as the units recorded. It takes raw messages that come in the front door of the billing system so you can rate them externally. You take an extract from the presort bill file, put it into a spreadsheet and compare the two. This product can show you a 3- or 4-second discrepancy, which might seem inconsequential at first. If you multiply that by the number of customers you have on a particular rate plan, however, it adds up. If you let even one or two seconds slip away unbilled, it could cost thousands of dollars, Rogers warned. In some situations, wireless carriers may record calls in 6-second increments and hand traffic to a long-distance carrier that rounds to the nearest minute. The long-distance carrier sends a bigger bill than is necessary back to the wireless carrier, which may never know the difference.

David King, Deloitte & Touche senior manager of the national telecommunication and media practice, focuses on revenue assurance and said that although the above-mentioned products will identify problems on the front end or at specific points of the revenue stream, there still is a number of other points of exposure. You can check those points through process work and a variety of analyses, such as performing different trend analyses and looking for anomalies. If something does not look right, you should drill down and figure out the problem. Deloitte & Touche defines revenue assurance as a process to verify the end-to-end completeness, accuracy and integrity of the capture, recording, billing and reporting of all revenue-producing events or transactions, from order entry through collection. Like Rogers, he said that carriers need multifunctional teams of people with financial, accounting, operations, billing, information technology and switch call record skills. The key is finding the appropriate balance between not covering revenue assurance at all and devoting too many resources to it. If the right people in your organization are not communicating with one another, you run the risk of losing revenue.

"Problems can occur for a multitude of different reasons," he said. "There is no such thing as a simple solution. It isn't just a systems issue or an operational issue; you need to look under a lot of stones."

Revenue assurance is not at the top of any carrier's to-do list, and perhaps you would rather spend your money on expanding your network than on products to help you find revenue escape holes. Ross pointed out that regardless of whether you use revenue assurance products, you should constantly and pro-actively check for leaks in your billing system. If you don't, wave good-bye to thousands, maybe even millions, of your hard-earned dollars. After all, he said, you provided the service. You may as well get your money.

How do you know if your current revenue assurance program needs an overhaul? Joe Bonocore, KPMG partner and national director of the communications industry group, suggests that you ask yourself the following questions:

*Can you account for every call record that enters the revenue stream?

*Can you ensure that the criteria used to classify call records is valid?

*Do you know the acceptable percentage of calls being removed or filtered from the revenue stream?

*Do you know how much potential revenue is locked up in your recycle pool?

*Can you ensure that every customer who is supposed to get billed is sent an invoice?

*Do the active subscribers and services reflected in your network match up to those activated in your billing system?

*Do you know when a switch sends an abnormally low volume of calls/minutes to the billing system for processing?