[IMGCAP(1)]Telecommunication expenses are one of the top five expense items for most organizations. However, it is also a category of spending that is poorly understood and often mismanaged. Now more than ever, it is vital that accountants and tax professionals gain more visibility into telecom spending to help organizations save money and improve business processes.

Telecom expense management, or TEM for short, has evolved from a reactive approach of bill auditing to a more proactive approach of managing expenses, which now covers the entire lifecycle of telecom expenses. This includes asset management, invoice management, telecom auditing, optimization reporting, call accounting and wireless management. TEM programs seek to find the optimal level of spending for telecommunications services, improve business processes, foster compliance to financial standards and centralize control of network communications. As an accounting professional, it is important to be aware of the telecommunications functions that need to be managed including:

•    Asset Management: the management of service orders with telecom providers, tracking of service fulfillment and centralizing inventory. Telecommunications assets are constantly changing with moves to new locations, additional services to support new personnel, changes from new communications technology, and disconnect activity due to downsizing. This is referred to as MACD. 

•    Invoice Management: the standardizing entry of paper and electronic invoices into a single database, streamlining invoice approval, eliminating late payment penalties; and integrating telecom expenses with accounts payable and enterprise resource planning financial systems.

•    Telecom Auditing: validating charges against contracted rates to identify billing errors, filing claims and resolving billing issues.

•    Optimization: the review of service rate plans, inventory and call accounting traffic reports to develop cost savings from disconnecting unused or underused services, changing the ways that lines are set up to direct calls to providers with better rates, and disconnecting corporate-paid zero usage mobile devices and devices associated with people that no longer work for the company.

•    Reporting: tracking consumption of telecom assets and allocating fixed and variable charges to business units and departments primarily from information on bills.

•    Call Accounting: capturing more granular information primarily from recording, and assigning the costs to departments’ and individuals’ consumption of services for outbound and inbound calls, call ring-outs, call routing, abandoned calls and other call activities.

•    Mobility Management: all the functions listed above for fixed services applied to mobile services, with additional capabilities for enforcement of mobile policy and a help desk for employees’ wireless services.

The Neglected Part of Managing Telecom
Most enterprises have multiple groups that get involved with telecommunications services, including IT, finance, procurement, operations, facilities management and human resources.  These functional areas often rely on different applications, spreadsheets and manual processes to manage telecommunications.

This puts them at a disadvantage when negotiating contracts, ordering services and managing expenses. The split workload makes it difficult for one central person to take charge of managing expenses. Accountants can serve as a catalyst to establish the agenda for cost-cutting and drive improved accountability for expenses. 

As an accountant, it’s your role to help bridge the gap between these different groups and get involved in setting up systems to monitor expenses. This is critical because, despite a general trend in lower costs for telecommunications services and assets, enterprises continue to increase their spending each year for telecom.

These increases are driven in part by the growing consumption of data and mobile services.  In many cases, conferencing is growing as a way to fill gaps created by cuts in travel budgets. This adds to the communications costs. Finally, employees are demanding more services, including remote access accounts, unified communications, conferencing and video communication services. 

Accountants can help these groups by creating a framework to drive better results through measuring performance. They can play a central role in applying corporate standards and business rules for measuring and accruing charges and recognition of savings. Accountants are often in a unique position to help people understand telecom costs in the context of the company’s current revenues and profits. They can also help to ensure that both formal and informal communications channels exist between operational personnel and executives that are capable of instituting organizational change relating to spending.

Help Find Billing Errors
National studies have found that telecom taxes average 18 percent of an enterprises overall telecom bill and can be more than 30 percent of the bill for wireless services alone. Carriers must interpret continually changing rules for local and federal taxes on their bills. Usually their interpretation favors collection of the tax from customers. As a result, the potential for error is often very high, as are the dollar amounts associated with those errors. This is an area where accounting and tax professionals can add value. A good first step is to ask the service provider to explain the taxes on bills and how the values were calculated.

In some states, telecommunications equipment, including services, scheduled maintenance and repairs are tax-exempt. Potential refund opportunities include services taxed with incorrect rates, errors in the calculation of rates, services billed in error due to expired fees and taxes. Some services may cross into another state or jurisdiction (such as wireless) during a billing period. As a result, enterprises may find excessive taxes for service in both jurisdictions without apportionment.

Proficiency in technology management does not always translate into the skill and knowledge needed to manage equipment expenses. It is strategically important to separate the functions of day-to-day technology and network infrastructure management from expense management. Appointing an accountant and tax professional as a cost champion to drive efforts to capture savings is an effective strategy.

Kevin Donoghue is president of the telecom expense management company Telesoft.

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