Are You Leaving Money on the Table?

Posted: 10/2003

Are You Leaving Money on the Table?
By John Konczal and Mike Devine

Today, revenue assurance most often
is considered a set of processes that monitor the multiple operational functions
that can cause revenue leakage for example, reconciling service usage
generated by the network with that which actually is billed to end-customers.
Many service providers say up to 5 percent of yearly revenue is at risk due to
revenue leakage, and naturally, considerable resources are aimed at tackling
this problem. But the astute CFO is beginning to look beyond revenue
leakage. Many now recognize that a more complex revenue-assurance problem may
exist just below the surface, which can result in an additional 15 percent of
lost revenue per year a considerable number in todays every dollar
counts telecommunications market. That problem is revenue collection.

Revenue collection consists of the processes centered on
collecting revenue from customers for services rendered, and for treating
customers who are late on payments. With such a significant portion of revenue
at stake, several progressive service providers now are combining revenue
assurance and revenue collection into one revenue maximization process. The end game is a new, end-toend approach that
combines revenue assurance and revenue collection into a proactive system of
strategies, processes and controls that are centered solely on improving
bottom-line cash flow performance through revenue responsibility.

Over the last decade CFOs have focused their attention on
revenue assurance because its an easy win from a process and systems
perspective. For example, the majority of infrastructure changes necessary to
implement revenue assurance controls, such as usage monitoring, can be
implemented without a major impact on existing systems or processes. In
addition, revenue-assurance control systems typically interoperate with current
systems without major integration efforts (or large operational expenditures). This easy to implement concept could not be said for
revenue collection. Historically, the functions for revenue collection have been
embedded in a service providers billing or receivables management processes.
This environment has made it difficult for changes to be made because of a high
impact on other business processes, such as billing.

Image: Next Generation Revenue Collection Tools

However, many new solutions are being made available that
model the non-intrusive implementation methods and the situational analysis
approach of revenue-assurance solutions. Fueled by progressive technologies, such as Web services for
interoperability and rulesbased processing for configurability, these solutions
work in harmony with existing collections and billing systems to drive the cash
flow improvements required for a service providers success.

As a result service providers are beginning to apply the best
pieces of the revenue assurance process approach to revenue collection. In this updated
approach, service providers are using the situational analysis function
native to revenue assurance and applying it to revenue collection, but with one
distinct difference. Instead of analyzing macro business processes, they are
analyzing each individual customer in an effort to increase cash flow, reduce
the number of days sales are outstanding and reduce churn.

New systems employing this approach can help service

  • Profile customers during acquisition in order to apply
    special handing to those customers who may have a propensity to pay late or not
    at all;
  • Anticipate customer behavior in order to determine how to
    treat customers when they pay late; and
  • Motivate late or non-paying
    customers to pay.

Two critical components of these nextgeneration solutions are
customer decision and payment arrangement management solutions:

Customer Decision Management solutions
provide service providers with the rules-based customer data evaluation
capabilities needed to accurately assess the initial and ongoing financial risk
of each customer. Such capabilities directly improve a service providers
ability to make financial decisions that will lower customer bad debt and
improve cash flow.

Such solutions use rules processing to continually review,
evaluate and classify customer data gathered and summarized from multiple
customer data sources, such as existing collections systems. For example, on a
monthly basis, analyze a customers payment history, billing history, and
fraud profile to determine overall customer risk for nonpayment. These solutions use an exploratory method of data analysis to
study customer data and suggest risk-assessment actions based on the studied
data. The end result is a solution that can access and evaluate data and show
the natural classifications of customers. These classifications can then drive
risk-assessment actions such as payment method suggestions.

Payment Arrangement Management solutions
help service providers introduce automated tools for constructing payment
arrangements to allow subscribers to pay down overdue balances. Such solutions
use rules-based engines that determine the customer risk assessment in real time
and suggest acceptable payment terms and necessary actions. An example of this
approach in action would be to analyze the customers payment history; amount
currently owed and forecast service suspension date in order to suggest a
payment schedule for the customer to avoid suspension. Further, integrated
monitoring systems are provided to track whether customer obligations are met.
Such solutions use a Web services integration layer to enhance the user
environments of existing collections systems.

Todays savvy CFO realizes revenue loss can occur throughout
the entire revenue cycle. Implementing revenue maximization strategies that combine
revenue assurance and revenue collection processes into a productive, cash-flow
generating program that focuses on a service providers entire business, is
more than a sound strategy. With up to 20 percent of a service providers
revenue at stake per year, it may well be a business imperative.

John Konczal and Mike Devine lead Telution Inc.s
Collections Systems Team. They can be reached at

Telution Inc.

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