CONTINUING THROUGH TO OVERALL COMMUNICATIONS COST MANAGEMENT

Machine-based invoice validation is a required first step in successful, long-term continuing cost management. Don’t forget the first objective is to reduce expenses and at the same time build a system to maintain good expense control. Overall, the work involves good accounting practices to analyze, classify, and quantify direct and indirect expense and capital investment in areas such as each of the following:

• Cable TV service
• Cable modem service (Internet access)
• Cellular telephone service
• Conferencing services
• Content distribution and delivery
• Fax machines
• Hosting facility use
• Internet access facilities
• Pagers
• Private line data services
• Telephone service
• Website developers

Although it’s tempting to make judgments about the value of each while making and completing a list, resist this inclination in favor of focusing on defining the details of how many, how much, how used, and by whom on the first pass. Try to make the list as complete and definitive as possible in terms of equipment, stand-alone application software, facilities, and services. Another important point is to capture the function or functions of each, and do your best to map that function to a business process because sooner or later it will be time to evaluate its impact on the business compared to other expenses or investments.

Get answers to the following questions:

• How are communications circuits, equipment, facilities, and services being used?
• What are the components of each circuit, piece of equipment, facility, or service?
• What are the units of usage and attendant cost?
• What is the volume and total cost of use/ownership?
• Is the cost fixed or variable, and if it’s variable what is/are the variable parameters?

Once the answers are placed into a spreadsheet and understood, consider them in light of other questions such as:

• What business are we in, or what’s the mission of our enterprise?
• What is each department’s role in that mission?
• What is the responsibility of each head on the payroll?
• How does their use, or lack thereof, impact communications cost?
• How can current communications unit cost be reduced?
• How will any considered change impact the ability to deal with suppliers and customers?
• What are the potential risks and rewards from any proposed change?

Satisfactorily addressing the above landscape puts you in a position to consider and undertake several next steps. These include:

• Validate monthly billing (i.e., make sure specific items of equipment, facilities, and services being billed match what is actually in use or in accordance with an appropriate service agreement, contract, order, tariff filing, or whatever caused the billing).
• Make a list of all circuits and facilities terminated in the telephone room. This is a room in each building where telephone company wiring enters the building from the outside. Sometimes there is more than one such room in a single building. More often, one room in a single building serves multiple nearby buildings on the same or directly related owner’s property. Prepare the list so it shows unused capacity. For example, in the case of copper cable, the telephone company typically installs what it calls an entrance facility, which is a terminal block on the wall with every single pair of wires in the cable connected to the terminal block. The other end of the cable is terminated on a block in a cabinet, or spliced into a larger cable connecting it to the nearest wire center or controlled environmental vault. In the case of fiber entrance facilities, there will be light wave terminal equipment mounted in a rack or on a wall. This equipment can be used to provision T1, DS3, OC3, or OC12 transmission capacity. Record circuit identification details and get an explanation of the amount of capacity in use and available for future use.
• Compare the circuit list with the items being billed. Many times service is disconnected, but the billing continues. If circuits, facilities, or service is being billed but not delivered (i.e., billing for a fax line, but the line is physically disconnected), you are due a refund. Getting the refund can be challenge without a disconnect order. It is not unusual to find billing errors. Be cautious about use of the term disconnected. A telephone line, which may serve or have served a fax machine, may not be disconnected from the service provider’s perspective. However, it is an entirely different matter for billing for the line to appear on the bill, and the line not available for use because service was interrupted or discontinued at some point in the past. If a valid disconnect order exists and service was not discontinued, the refund is due.
• Recognize and understand the importance, relationship to, and difference between unit cost and departmental and enterprise wide expense. How expenses are classified and tracked by a department and then rolled up into the overall picture is important because it’s easy to lose sight of duplication and individual item unit cost. For example, it is a common practice to include volume discount from basic pricing in contracts for most all equipment, facilities, and services in use. Don’t be surprised if this escapes the attention of the person who writes each service order change or the person who pays the bill each month.