INITIATING COMMUNICATIONS COST MANAGEMENT

Communications cost management (CCM) should be initiated or approved by a senior executive or officer equivalent responsible for ensuring organizational expenditures and accounting are in compliance with accounting and financial rules applicable to the organization. This individual should request or be provided with a briefing on known and suspected level of expenditures directly attributable to telephone service (i.e., data communications, website development, deployment, web publishing, content distribution, delivery, e-commerce, two-way radio, satellite, cable television, and any other service that could be deemed to be or directly support the organization’s internal and outside communications).

Communications Cost Management Executive Briefing Content Preparation

An executive briefing should be prepared for by researching basic facts and parameters of the organization’s communications cost accounting and operating practices. The following list of high level actions, analysis, and summary outlines what and how to prepare and present the information:

• Gather all known contracts and billing agreements for voice, data, video, and Internet equipment, facilities, and services. If there are bills being paid according to tariffs on file with the FCC or PUC, obtain a copy of all the tariffs referenced in each billing. If it’s convenient and easy to get, include postage meter usage and overnight shipping, especially departments whose work output is not something physical other than paper documents. Every paper document is a candidate for electronic transmission at a fraction of the cost. And don’t forget that compact discs and other magnetic or optical media contain files that go quicker through the network at a similar fraction of the cost of paper.
  
  
• Gather up at least 3, preferably 6 months worth of paid bills. Each bill should show circuit identification or other deliverable being billed. If the individual items on the invoices are not clear, get an explanation of the item, function, or purpose from the service provider. This should be a written service description that provides greater detail than what is included on the invoice. Usually the invoice references some kind of service description. If the unit price of the deliverable is not included on the invoice or in the service description, request this information from the service provider specific to each invoice.
  
  
• Make a list of all billed deliverables paid for and include department, location, and name of the employee using the item. If it is a common item, such as a data line, list all the computer applications using the facility. Accounting might be able to provide a file or printout with this level of detail.
  
  
• Find out how the organization acquires or otherwise commits to pay for communications services. The two best places to start are purchasing and accounts payable. Is there a central source for coordinating and consolidating service ordering and terminations? Does each department just order a telephone line or other service or facility when they need it and then pay the bill when it comes in?
  
  
• Make a list of all equipment owned or leased and include year acquired, current book value, or unpaid lease obligation, monthly depreciation or lease payment, monthly maintenance cost, and planned replacement date if any. Some or all of this information may be available from accounting asset records or inventory files.
  
  
• Summarize all known vendors by service, equipment, and estimated annual unit and dollar volume.
  
  
• If cost management is an internal function, summarize headcount, professional specialty, and job responsibility of each individual directly attributable to CCM.
  
  
• If a significant level of expenditure is attributable to outsourced or vendor-provided CCM exists, summarize the specific vendors, term of contract, monthly or annual cost, list of work activities and deliverables, and names of key individual contributors responsible for the deliverable, their professional specialty and job title, pay grade, and responsibilities.

The briefing should provide a complete picture of how much money is at stake, what it’s being spent for, and the value of the assets attributable to communications functions by department and organizational function. For example, if a set of server hardware and software exists that is used by a single department in engineering, marketing, sales or other area, make sure that department and the function for which it is used is very succinct and clear.

In addition to being clear and succinct about the cost and use of communications assets and expenditures, it is critical that the process and practices being followed be equally clear. This knowledge and information can be used to rationalize next steps and characterize current status. The outcome should be a realistic assessment of the process and practices with respect to compliance with applicable accounting and reporting rules under which the organization operates. Recognition of potential savings is important because real money is at stake. If changes need to be made in operating practices or procedures to improve the competitive or strategic position of the organization, this is the time to get that on the table for consideration as well.

Next Steps

By the time the work in the executive briefing is completed, it is highly likely that additional steps will have been taken, but not included in the briefing. What needs to be done is to take the high level work items, and expand the details of each to gain deeper insight and understanding of how much money is at stake, potential savings, improvement in service levels, better use of human resources and assets, and the limits of flexibility as represented by spare or unused capacity for growth.

Once you have an overall picture of how much money is at stake, and what it’s being spent for, you can consider and decide the level and timing of effort appropriate for further work because you are now ready to take constructive, proactive ownership and management of communications cost in the enterprise you’re part of. Here’s a high-level list of topics and an explanation of what needs to be done, how to go about it, and a view of value or impact on the organization’s ability to accomplish its mission.