Billing Q&A with Jim O'Neill

Q-I am the billing manager for a small-to-medium carrier, and we use a vendor service bureau for billing support. We are constantly having billing errors. It is very embarrassing to have our subscribers call us to point out errors on their invoices. How can we improve this situation?

A-You haven't described your relationship with your billing vendor, so the action you can realistically expect may be limited. Having said that, you can take any number of steps to protect your company from billing errors. Let's describe the ideal situation, and perhaps you'll be able to recognize what will help in your particular situation. With each and every one of the steps described below, the trick is to focus on each problem, starting with the worst one. Determine what is causing it, fix it, and set up a procedure to prevent it from occurring again. Then go on to the next problem, and repeat the above.

First, you probably have a contract with your service bureau. Ask your legal department or lawyer to get a copy of the contract or service level agreement (SLA), along with any references, attachments or addenda that are in force. Ideally, the SLA will define such things as:

• The specific billing-related functions the service bureau performs on your behalf

• Usage mediation procedures and reports to verify that all calls are received from the network

• Procedures for applying payments to the customer database

• The quality assurance steps the bureau performs before releasing batches of invoices

• Reports and sample invoices that are generated to verify billing run accuracy

• Completion times for each batch after the cycle is released for processing

• The time after approval that each batch of invoices will be delivered to the post office

• Specific commitments for enhancements requested by your company

• The liability the service bureau assumes for failure to perform.

These baseline areas will help you understand what the service bureau could (or should) be responsible for. If it does not assume primary responsibility for any of these accuracy areas, you will have to institute controls yourself. In fact, regardless of what quality analysis the service bureau performs, you should have a comprehensive, detailed procedure of your own. Why? If the service bureau does anything at all, it will be focused on protecting itself from liability, and often only to the extent that it has contractual liability. You, on the other hand, want to ensure not only accurate invoices as perceived by the subscriber, but assurance that you are billing for all services you have delivered to those subscribers. Let's explore some of the items listed above in more detail.

Usage mediation procedures and reports to verify that all calls are received from the network-Typically mediation ensures that all usage that has (or should have) been recorded on the switch has been captured and routed into billing. Some of the reasons for inaccuracies here are:

• Failure by the switch to record usage for a specific block of time

• Failure by the switch to record billable features or enhanced services

• The network applying generic manufacturer software updates or local translation table changes that affect usage records without informing the mediation programmers

• Mediation not providing reports of usage in suspense-that is, records that appear to be billable usage, but which cannot be guided to a working number in billing, or cannot be interpreted (for example, due to new terminating prefixes that have not been added to the database).

Procedures for applying payments to the customer database-Service bureaus typically provide programs that apply payments to the customer database, whether the database is at the client site or at the service bureau itself. Client companies should verify that these programs provide at least the following to avoid billing errors:

• Daily capture of payment files from remittance units or external lockboxes

• Reports to ensure that all files have been received and applied (such as sequence checks and volume reports)

• Reports to identify unapplied payments (remittances that cannot be matched to an account).

The quality assurance steps the bureau performs before releasing batches of invoices-Considering the fact that the service bureau is handling the financial transactions of its clients, one would think that it voluntarily would do everything it could to ensure that its processes are complete and accurate. Some do, but sadly others avoid doing so via carefully worded SLAs. The Statement on Auditing Standards-70 is a set of guidelines for any company that handles the financial transactions of another company, including banks and service bureaus. While complying with it will not prevent every possible error, it does provide a reasonable baseline for controls. Just for fun, call the most senior person you can identify at your service bureau and ask the person when was the last time the service bureau was audited under SAS-70 guidelines.

Reports and sample invoices that are generated to verify billing run accuracy-These reports and sample invoices should be made available to you before bills are released for printing. The samples should reflect a cross section of all your accounts, products, services and types of customer. You should be able to select a sample account, view it on line, and compare the account status to the invoice and the key financial report data. It should all match.

Completion times for each batch after the cycle is released for processing-Promised completion times are a commitment that more and more clients are demanding from their billing vendor. In the absence of such firm commitments, your bills may not get to the customers in a reasonable amount of time. That leads to late payments, which could miss the next cycle and therefore result in an incorrect bill, from the customer's perspective. Most companies have negotiated that processing must be completed within 24 hours after release of a cycle.

The time after approval that each batch of invoices will be delivered to the post office-After your quality assurance review team completes the review and authorizes invoice printing, there should be an agreed interval for printing and mailing functions. It is not unusual to require completion within 24 to 48 hours after authorization.

Specific commitments for enhancements requested by your company-This is a tricky one, but it can and should be managed consistently and carefully. To be fully effective, the service bureau should maintain a separate, static test environment for each of its clients. Once set up, a baseline billing run can be performed and verified as correct. Whenever additional software changes are completed and the programmers have performed unit testing, the whole system should be tested using the new programs against the test database. By performing this step and providing the results to you for final review and approval, a number of things happen. First, by getting to see results, you can compare them to the request and confirm that the enhancement works the way you intended. Second, a full test will uncover any problems that may have been caused by the modified programs. And third, you will have reasonable assurance that crossing the new programs over into production will not cause major problems. By the way, similar testing should also be performed first, using the test database, for any table changes such as new rate plans, promotions, and the like that you or your systems administrator makes.

The liability the service bureau assumes for failure to perform-Liability is a tough problem, as billing companies, whether service bureaus or those that license software, until recently have been reluctant to assume liability for billing errors they cause. The bottom line is that if they have a properly maintained process, they should not be afraid to stand behind their commitments. As a small company, you might assume you do not have the leverage to make that happen. The truth is that you do have choices. With the continuing mergers, billing companies do not have as many clients as in the past. So, if your service bureau is not performing to your satisfaction, start looking around. Good luck!