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On the record
The kind of detailed data analysis that revenue assurance can offer, gives operators have another tool to demonstrate they meet the new financial disclosure and reporting requirements of the Sarbanes-Oxley Act, argues Nick Milner
The Sarbanes-Oxley Act of 2002 was passed to restore shareholders' "trust in the executive leadership of companies and to protect investors interests". To make this a reality, the Sarbanes-Oxley Act established guidelines to ensure financial information is reported accurately, and that processes and information on which the reports are based are accurate and under strict control.
While the long-term effects of enforcing Sarbanes-Oxley will create an overall stronger base for industries, putting the required controls in place and ensuring they are functioning properly presents a challenge to many corporations. The telecoms industry is a prime example of this, due to the complexity of the revenue streams and the vast amount of transactions operators undertake.
Revenue-assurance practices have recently been evolving from manual, point-based solutions to more automated, enterprise-wide applications. For many telecom operators the need for the change was one of economics. The sophistication of new networks, coupled with the challenges of maintaining and modernising the back-office OSS, has resulted in substantial revenue leakage that has adversely affected the bottom-line.
As operators continue to strive towards both reducing losses and increasing revenues, the issue of revenue assurance continues to move up the corporate agenda. Indeed the latest research Azure commissioned from telecoms analysts, Analysys, has estimated average revenue losses in the telecoms industry globally to be 10.7 per cent of turnover. However, the same survey said operators are expecting revenue losses to increase again as a result of the introduction of new IP-based products and more complicated pricing programmes.
On the other hand, developments in revenue-assurance programmes have helped to offset the cost of increasing competition and shrinking margins, and a new set of benefits has emerged that reach beyond billing and collecting revenue for services. With improved "data integrity" running throughout the OSS, critical functions like customer service, network maintenance and service repair have been streamlined and made more efficient. The result being indirect cost savings due to increased operational efficiencies.
Now, an additional benefit of implementing revenue assurance throughout the enterprise is emerging. Through the detailed data analysis revenue assurance offers, operators have another tool to demonstrate they meet the new financial disclosure and reporting requirements of the Sarbanes-Oxley Act.
Important component
Revenues represent the most important component of an operators' financial reporting. The Sarbanes-Oxley Act drives the need for operators not just to monitor the health of their networks but also to monitor their vital revenue streams. Most revenues can be categorised as one of two major revenue streams: usage or recurring.
The usage revenue stream details records that represent the financial transactions that makes up the usage revenue stream. Examples include the usage detail records for mobile airtime, most long distance calling and carrier interconnect. The recurring revenue stream is made up of flat-rate, monthly-billed subscription fees that represent the financial transactions that make up the recurring services and features revenue stream. Examples include monthly calling plan charges for mobile, optional features like voice mail and caller-ID, and flat monthly mobile subscription charges.
Already a lot of work has been done to control these revenue streams under the banner of revenue assurance. Although revenue assurance has traditionally been focused on revenue leakage, the inherent identification and correction of errors in operational and usage data directly impact the accuracy and completeness of financial reporting which relies on this data as its source. The problem with most revenue-assurance initiatives to date is that they have been one-time audits. However, revenue assurance has been moving towards automated, ongoing initiatives, which will help meet the control and certification requirements of Sarbanes-Oxley.
To better understand the role that revenue assurance can play, it is necessary to take a closer look at these two major revenue streams separately.
Usage revenue stream
The usage revenue stream involves moving millions, if not billions, of usage detail records each month from the network elements where they are generated into the billing system where they are rated and invoiced. Usage records flow continuously down the stream, every hour of every day. The records pass through many systems, interfaces and organisational boundaries, increasing the risk of record loss or corruption. Errors in this stream are usually systemic, meaning that a single problem, such as a switch translation error, can often affect many customers.
Control of the usage revenue stream requires a solid yet continuous monitoring capability that assesses the completeness and accuracy of usage detail records at each control point in the process, or the points at which a record passes from one system to another, or one department to another. Ongoing monitoring addresses two important aspects of Sarbanes-Oxley's requirements:
First, it allows for early detection and correction of problems impacting the revenue stream. This helps ensure completeness and accuracy of the usage transactions that ultimately become an element of financial reporting.
Second, it verifies that process controls are in place and functioning properly. Reporting of the reconciliation process as usage data records pass through control points supports process control certification.
Recurring revenue stream
The recurring revenue stream involves creating and keeping accurate customer records so that all flat rate services being provided are accurately billed. Functions supporting this revenue stream include order entry, service activation and billing. Errors in this revenue stream are usually pervasive in that a single problem affects a single customer, although such problems may be widespread throughout the customer base. For example, a customer may have a service bundle of fixed-line and broadband, but is only being billed for the fixed-line service.
Control of the recurring revenue stream requires detailed audits of each customer's service record. It requires comparing vast amounts of data from multiple sources (i.e., network element configuration to billing customer service records) to identify and correct discrepancies and can therefore be a huge challenge. Furthermore, Sarbanes-Oxley requires that control must be signed off by an external auditor annually and certified on a regular basis. This means that a one-time audit of customer records is not sufficient since customer records change periodically.
A double benefit
evenue assurance provides an end-to-end framework to ensure the validity of data underlying the recurring services and features and usage revenue streams, which in turn is the basis for a significant portion of a telecom carriers' financial reporting. Revenue assurance programmes are therefore able to rise to the challenges of Sarbanes-Oxley. The benefit of the revenue assurance systems talked about in this article will help ensure that operators are not just compliant but that they are also collecting all the revenue due to them. n
Nick Milner is Chief Marketing Officer at Azure Solutions tel: +44 (0)20 7826 5300 e-mail: info@azuresolutions.com
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