Telecommunications billing is a complex and dynamic area with large volumes and great potential for lost dollars through overpayment. With all the phone companies and systems, services and taxes, plus the constant change that defines the industry, telecom is often considered a prime candidate for outsourcing.

But in order to manage telecom billing well, outsourcing is not necessarily the only answer. In fact, Rob Keough, telecom analyst for Aquila, says his company can maintain better control over the telecom budget by managing it in house.

Keough acknowledges that it can make sense for some companies to outsource the entire management of their telecom, "but for us, we tried that route, did not have a lot of success with it, and found we really could maintain better control over our telecom budget if we managed it in-house by ourselves."

Aquila is a gas and electric utility company serving seven states, including many rural areas. Its telecommunications is widespread with facilities throughout its seven-state service area. Consequently it has a large number and variety of telecom service providers. Change, growth and the deployment of new technology are facts of life.

Keough says, "Because we're an energy company, we have to have some means of control over our infrastructure." They have that control by virtue of thorough knowledge of their systems, which is aided by the close link between their infrastructures of telecommunications and power distribution.

"If you've ever driven down a country road by a sub-station, there are probably a few different types of telecom infrastructure connected to that location for control and communications purposes. Usually those types of sites will have a little control shack. There's probably a phone line in there, and maybe one or two frame…point-to-point circuits in there for control purposes," Keough points out.

"… We have a pretty wide array of telecom services that we have to employ, depending on what's available, what providers are available in order for us to maintain operations, so it's [a] mixture, it's [a] diversity of all the vendors and all the different types of services that we use."

If the diversity and complexity of Aquila's system makes it a challenge to manage, Keough's convinced that it would present too much challenge for an outsource service provider. Aquila knows exactly what it has -where and when it is making changes.

"Because of all the different types of technology we employ, we're constantly making changes -moving things around, maybe deploying newer technology as it becomes available, that type of activity," Keough says. "Our company has always been pretty dynamic. We've had to deal with a lot of growth … all the moving and changing proved difficult for an external organization to keep up with."

Managing telecom

Effective management of your telecommunications begins with understanding what you have -what type of service it is, who is responsible for the asset, what they use it for, and whose budget it is in.

Aquila's guiding principle is that it pays to know more than your vendors about your telecom infrastructure. "And we pride ourselves on that," Keough notes, "because we do."

Aquila began with simple spreadsheets, and then evolved to an Access database which documented every phone line, its location, to whom it belongs, the department that is hit when its invoice is paid, and the identity and contact information of the vendor. In other words, Aquila built a complete database of the telecom infrastructure inventory, "every single line we have out there."

Initially this database did not communicate with Aquila's PeopleSoft accounting system. It was just a reference database that had to be consulted separately. While this was a real asset, Aquila discovered it was missing opportunities.

"Say for example, there was an issue with a given telecom invoice that we should have been proactive with and either short paid it, or put it in dispute with the vendor. Well, because the two systems didn't communicate, there were bills that were getting paid when we really should have been disputing the charge. We were having to go back to the vendor and get refunds after the fact."

In order to be proactive rather than reactive, Aquila determined that the accounting system and telecom inventory database had to be able to communicate. A third-party software application, Winbill® by Telemanagement Technologies Inc., gave them the ability to close the gap. "It operates much like our old database did," Keough says, "but … we put our expenses into this application and the application sends a batch to our accounting system, which generates the payment voucher and pays the bill. … In that way, Winbill has become our accounting mechanism and PeopleSoft has become our disbursement mechanism.

"So now if we have an issue with a particular invoice, we tag it in our system and we withhold payment until we are comfortable."

Review the bill

Keough describes the method of managing telecom bills as the "ham sandwich principle." When you are out to lunch and the waiter hands you the bill, you look at it to be sure that what you're paying for is the ham sandwich you had, and not the roast beef with cheese, tomato and extra pickles.

"That's the first thing everybody does," Keough says. "But when it comes to our telecom bills, for some reason, companies prefer to just hand it off to somebody else to worry with, either because they don't understand it or they're intimidated by it. … To our company, it just doesn't make sense to do it that way, especially when it's pretty simple.

"All we are really doing is creating an inventory [by which] we know where it is, what it's used for, who it belongs to, and how to pay for it. We know if anything goes wrong."

Of course, Aquila must maintain that inventory database, which means IT has to be on board. "If they make changes out there -deploying new circuits, removing circuits, deploying new technologies to replace existing circuits -if they don't tell you about it, you have no way of auditing that bill. That bill will change the next time you see it and you won't know why.

"That's been a key to our success. Our IT group really supports us in this effort. They do provisioning, but they also inform us of every change they make before we get the bill so we're ready for it when it arrives."

So keeping inventory and having the necessary support elements have been the key to how Aquila accomplishes its telecom payables processing.

Cellular phone billing is an exception. Cell phone bills are simply expensed by the employees, though Keough suspects that at some point they may want to centralize cellular procurement and payables.

Procurement

When it comes to procuring telecom services, knowing the system and its usage provides a significant advantage in negotiating with vendors. At Aquila, long distance and data telecom procurement are centralized and the database provides spend data that gives Aquila leverage in negotiations. It has changed the way Aquila approaches contract negotiations.

Local service by definition is decentralized. Keough says, "Local is still kind of a wild-West show," and negotiations are more challenging because of less competition.

Vendor selection isn't only about price. Level of service is an important component.

"For example," says Keough, "one of our requirements for our local providers is that they provide us with electronic billing. I have a very small group of folks that handles all the bills for the company. I am the sole telecom analyst. I've got two senior AP clerks that pay just telecom bills, so just the three of us will audit the entire company's telecom expense every month.

"We have a number of call centers (customer service centers for our energy customers) so call volumes are in the millions every month. We audit about 1,400 bills every month. Some of these electronic bills include literally hundreds of individual phone lines. Obviously automation is very important to us."

With the exception of some vendors in rural territories, most of Aquila's vendors submit bills either on CD or via a Web interface, with an increasing number moving from the former to the latter.

When Aquila went to Winbill, Keough estimates that they reduced their total processing time by 30 percent. Contract provisions are put into the system. The application does basic audits, flagging items outside of tolerances to be looked at more closely. "If we get something that is billed incorrectly, outside of our contract provisions, it's very apparent when you are processing the expense." If there are no problems with a bill, it pays the bill and codes it appropriately.

Adding value

The point of it all is not just to process the bills in-house, but to ensure that what is processed is correct, avoiding overpayment because of billing errors.

"Whenever we find an error, we record the net impact to the annual budget for that year. Think about it. What's your phone bill at home? Fifty, sixty bucks a month? We have thousands of phone lines out there."

Sometimes they find something mis-priced not just on one line, but on every line. "Multiply that times thousands of lines and look at the annual impact to your budget by correcting it," says Keough. It adds up. "Every year we've contributed enough in refunds and corrections and avoided expenses to more than off-set the loaded cost of my group and part of corporate IT.

"There are always going to be billing errors, just because of the nature of our business. We're more successful dollar-wise now than we were in the beginning, when you would think all the low-hanging fruit was to be found. We've just set records for … [our] value contribution."

Keeping track of that value should be expected. "Any group that does this," advises Keough, "[should] keep track of what they contribute. External vendors sure do, and bill you for it!"

Keough has been proactive and believes that because his group has made an issue of keeping track of its value recovery and publicizing it, the paradigm has shifted for the rest of accounts payable as well.

"You should be tooting your horn about this," he says. "No one knows you are proactive when you manage the company's financial matters. We're not just clerks that crank an adding machine all day long and pay bills. We manage the company's cash flow -that's a very, very important process, and people need to know that. It's happening, and it is very rewarding."