Business Issues

Revenue Assurance and Cost Assurance
Understanding Revenue Assurance and Cost Assurance issues and practices in the Telecommunications, Media and Entertainment sectors

In the Telecommunications, Media and Entertainment sectors, as with other complex high transaction businesses, incorrectly billing, collecting or recording of transactions can result in millions of dollars of increased costs and lost revenue, as well as seriously denting a company’s reputation. The sheer amount of data processed by a multitude of different systems and the rapid pace of change in products and technology means that even small errors in reference data or processing rules can have a huge financial and customer impact. No wonder that Revenue Assurance and Cost Assurance have gained in importance and visibility to be recognised by many Service Providers as being of strategic importance from both financial and customer experience perspectives. Various benchmarking exercises have estimated losses to be between 2%-18% of revenue, to an outsider this could seem exaggerated, however, Revenue Assurance audits have frequently uncovered huge revenue leakage issues even at major established and mature operators - in some cases leakage has been known to represent 60% of a specific revenue stream.

So how does leakage happen?
The most common problems leading to leakage are related to incorrect, missing or corrupted reference data, processing rules and network or billing/mediation system configuration. A typical Service Provider will have hundreds or thousands of processing rules throughout their technology infrastructure and many databases and tables containing customer and processing reference data. This data is usually updated on a regular basis by network technicians, customer services, the billing team, automatic processes etc. The systems within which the data is stored and processed are regularly subject to patches and upgrades.

The issues
In the Revenue Assurance and Cost Assurance arena, revenue losses or avoidable cost exposures are usually referred to as ‘leakage’. Many revenue assurance issues start off as minor losses but can remain undiscovered for long periods as they do not stand out in standard financial reporting or other business check-points. The sum of these issues can quickly add up to major proportions. Furthermore, in the case of under-billing or nonbilling, it is likely that the issue will be exploited and can turn into a major opportunistic fraud problem. Over time the network, mediation and billing infrastructure becomes so complex that only a few people (often, no one at all) have a full understanding of the data and financial flows that make up the company’s revenues and costs. Given the limited capability for a complete perspective, and the rapid changes we often see, it is no wonder that some things get out of sync and errors are made.

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Business Assurance | Revenue Assurance | Fraud Management | Receivables Management

Business Issues

Revenue Assurance and Cost Assurance
Understanding Revenue Assurance and Cost Assurance issues and practices in the Telecommunications, Media and Entertainment sectors

How do you know if you have a problem?
Often you don’t, but sometimes there may be indicators that point to revenue leakage, e.g. the profitability of a newly launched product stagnate and/or decrease despite increasing levels of sales and usage. Then again, this can be difficult to detect if usage, revenues and costs are collated using data from down-stream systems. Another indicator of leakage is irregular revenue and usage patterns, most products have fairly regular usage patterns over time, glitches in the data can be a sign of leakage, e.g. previously lowuse services get a sudden and unplanned surge in use as loopholes are discovered and exploited, maybe due to the retail billing rate being incorrectly set below the interconnect/purchase costs being paid. Margin analysis may also uncover such issues, especially if the costs are higher than the end revenue. Finding leakage can be like looking for a needle in a haystack, even if the indicators are there to suggest a leakage problem, pinpointing the underlying issue can become a laborious task unless a systematic and detailed approach is undertaken. The longer leakage goes unchecked the less likely the possibility of recovering the revenue or cost exposure. Unless a leakage issue is discovered within 30 days it is often impossible to back-bill a customer or offset against interconnect or purchase charges. There is a flip side to revenue leakage which is often overlooked: most products used by customers have an associated cost, which means that not only have you forgone revenue but you still have to pay 3rd parties for the usage (roaming partners, interconnect partners, content providers and so on). Furthermore, incorrect network configurations or poor operational practices can result in increased or unbudgeted costs or result in

a hugely inefficient management burden to correct problems. Revenue and Cost Assurance is not only about finding, stopping and preventing revenue leakage, it’s also about assuring margins and overall profitability.

Managing the problem
You will find many different propositions around Revenue and Cost Assurance – vendors selling sophisticated software, consultants selling process improvements and so on. The fact is that there is no single answer to the problems, and a structured and holistic approach is usually best, working towards an integrated cycle of prevention, detection, analysis and r e s p o n s e powered by m eas urem ent a n d performance im provem ent mechanisms. That being said, it is important to justify the spend against the benefits and staged deployment of a strategy is often a good way to proceed, justifying next-stage investment as your strategy takes shape in deployment. In effect, each stage sponsors the next through success measures and returns. Execution of a carefully considered plan should net excellent results and genuinely bring about enhanced profitability. Please refer to the Services, Solutions and Packages pages of our web-site for a more detailed perspective of the components that might be deployed within a strategic plan. Alternatively, Contact Us to discuss your precise needs.

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Business Assurance | Revenue Assurance | Fraud Management | Receivables Management

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