Linking Up Billing and Accounting Another Good Market for Vendors
Susan Helen Moran
05/01/1998
Streamlined, standardized, integrated accounting is becoming a business objective for many telecommunications companies and a burgeoning market for software vendors. "In the past, financial systems were viewed more as overhead than as tools that enhance our ability to compete," says Albert George, vice president of financial systems, MCI.
Now executives like George are looking to increase their ability to access, analyze and manipulate financial data to gain a competitive edge in the local, long distance and international marketplaces. MCI in its effort to streamline its back-office financial activities recently bought approximately 12,000 licenses for SAP's R/3, a client server, enterprise application software for integrated business process solutions.
The sky-rocketing revenues of some vendors is another sign that the market for integrated accounting functionality is booming. The German-based SAP, for instance, increased its revenues from 1996 to 1997, by 63 percent, to 6.02 billion marks, according to company reports. Its competitors, PeopleSoft and Oracle, reportedly are also experiencing increased demand for their financial product suites by their telecom clientele.
Billing vendors also are profiting from this systems revolution. In the past few years, the billing and accounting functions within telecom carriers have become less distinct. There is often an overlap of functions and systems that are considered both billing and accounting, says Judy Gardner, billing and accounting executive, Cincinnati Bell Telephone. Different billing systems may have different combinations of accounting models-func-tionality, depending on the carrier. "One carrier's billing system may include a revenue management capability, but not an accounts receivable module. Whereas another carrier's system may include the accounts receivable module, but not the revenue management capability," she points out. This overlap is seen at several billing vendors that now sell both accounts receivable and collections modules-traditionally seen as accounting functions-as part of their billing solutions suite.
For instance, Cincinnati Bell's sub-sidiary, CBIS, offers a variety of products and services that execute both accounts receivable and collections functions in a service bureau environment that can link up to a carrier's general ledger, says Susan Wayo, product manager, CBIS. The vendor is changing the name of its billing product suite to Pro-Bill and combining components and functions of its traditional services such as Macrocell, with new functionality, services and modules, she says.
To get near real-time reports, however, several changes must be made at the lower levels of the company. First, there must be faster error-free electronic transfer of data from billing to accounting systems. Second, more accurate settlements between their local, long distance and international partners must occur.
Electronic Transfer of Data from Billing to Accounting
Developing a workable electronic interface between a carrier's billing system (multiple systems in many cases) and its accounting system is highly problematic, say several sources from both vendors and telecom carriers. Some vendors go so far as to say it is the biggest obstacle to getting an accurate, fast flow of information from billing to accounting at most carriers.
Typically, after the billing system measures and rates a call, the call detail record is passed along to be posted to the financial system, including accounts receivables and the general ledger. The transfer of this information from billing to accounting at most large carriers is done in some electronic form. There are various levels of electronic transfer. Some carriers pump the information from billing into a spreadsheet and send it to accounting. Others use a more sophisticated form-direct mapping, where the carrier maps out the general ledger codes in the financial system to general ledger codes in the billing system. It's also known as cross-mapping. What allows this to work? One piece of identifying data that does not change from billing through accounting in a cross-mapping environment: a revenue accounting indicator. For instance, every long distance call is assigned this indicator at rating, which follows the call record through the entire system to the general ledger. (Usually after the posting is complete, the carrier produces, prints and mails the invoice.)
Some carriers, however, in the United States and abroad have no electronic interface between their billing and accounting systems yet. As a result, the accounting department manually enters the data from the billing department, and many errors inevitably result. "I've seen environments where information from billing is brought over to accounting and keyed in manually," says Bill Rogers, SAP. Other carriers are just beginning to face the problem and are in the initial stages of implementing electronic solutions, he says. This could be good news for vendors that specialize in software interfacing solutions.
Linquateq, McLean, Virginia, among other vendors has developed open architecture solutions to this problem. "An open architecture approach is essential," says Linquateq's Mike Peterson, "especially at a carrier that has many different billing systems and multiple feeds of account information. This information must be combined at some point so it can flow into one source, usually the carrier's general ledger. Reports generated using figures from the general ledger are some of the most important to the carrier, since these are the reports read by its executives. Executives do not often read reports generated from the billing system or usage and volume alone, but are more concerned with revenue flows, profits and losses, say industry sources.
Why are interfaces needed in the first place? Different systems can have differing record formats. The format for integers, dates and time can differ, as can the content including information values and ranges. Records can have differing structures including fixed and variable and different contexts such as hierarchies, segments and transmissions.
Interfacing two systems is relatively easy, according to Peterson. The problems arise when a carrier needs to interface between three or more systems. Just three systems would require six interfaces between them. And the number of direct system to system interfaces grows exponentially the more systems a carrier has.
Linquateq's interface management system (IMS) mediates and manages the conversion and flow of data streams between information systems. IMS combines an engine with plug-in message interfaces, development tool kits and a JAVA GUI management system. The IMS acts as the centerpiece to which each of the carrier's systems is linked. This means that five systems need only six interfaces-each one going between the system and the centerpiece. Whereas, if direct interfaces had to be built so that all five systems could talk directly to each other, 20 interfaces would be needed.
Several vendors, including SAP, work with the carrier's billing vendors in establishing the interface requirements. SAP's business application process interfaces (BAPIs) are based in part on the carrier's billing platform, often already in place at the carrier. Different BAPIs are used with different vendors, and are but one component of SAP's large product suite, R/3 business framework solution, which includes independent business components, integration technologies and open interfaces.
Settlement: Another Aspect of Billing and Accounting
Another area that telecom carriers are trying to improve is in their settlement accounting practices. Revenue assurance and reconciliation of traffic are two aspects of this. "Carriers need to start attacking the problem of settlements though financial systems and billing systems," says Rogers. "You must attack the problem at the infrastructure level. If the networks cannot record the necessary information and provide it to these carriers, it is a huge industry issue," he says. Billing managers must look at their accounting reports and be able to reconcile them against usage reports.
Recently, many telecommunications executives have focused on the financial and accounting processes-both automated and non-automated. A recurring problem, says Rogers, is that "some switches are basically blind, because some infrastructure cannot carry the information, which is a technological limitation." Some carriers are under such pressure to quickly switch and process calls that reporting and housekeeping become impossible, he says. In this situation, carriers use factors to determine what the settlement amount will be.
However, more and more carriers are looking more closely at the wholesale billing data they receive and are accounting for it more carefully. After installing new accounting interfaces and software solution, billing and accounting managers at some carriers can see some problems without intelligent switches-just by beginning to analyze this kind of data more closely, says Rogers. For instance, data analysis could show that the carrier is being charged for a trunk group that it is not even using.
Each manager must weigh the cost against the benefits to determine how much they want to scrub this data. For some carriers, the return does not outweigh the cost. "In one case that I saw, it would become cost prohibitive to manually go and reconcile the data," says Rogers. "Some carriers resort to taking samples and if they are close to what they are being billed for, it's fine. If not, then the carrier would expand the sample base."
Yet, the cost of having an inefficient accounting and bill reconciliation process can sometimes be enormous. "Some carrier right now has a backlog of hundreds of millions of dollars worth of CDRs that have not yet been processed for settlement and are between 60 and 90 days out from the time of service," says one industry expert.
Some are pushing switch manufacturers to expand the call detail record, which has happened in some cases. But, this expansion can become self-defeating. "You have huge volumes of CDRs already, and when they are expanded, they are processed even more slowly," points out Rogers.
These problems seem particularly visible in the local arena. In the deregulated local marketplace, LECs cannot support all their internal requirements, never mind support all the new requirements imposed on them by regulatory bodies, says one industry expert. By law, LECs must extend their internal capabilities to their competitors - especially to non-facilities-based CLECs.
International Angle
Multinational carriers struggle with similar issues. They must be able to report on their financial results. For global telecommunications providers, integrated business framework and architecture may be even more important, especially for the integration of the applications themselves, the multiple currencies and the multiple languages. Supporting all these on a single logical and/or physical database would be the key, says Rogers. The ability to pass financial information between countries is becoming more and more germane to the business of telecommunications carriers throughout the world. "Also, when doing business in some countries, you must be very sensitive to currency fluctuations in financials," says Rogers. Because accounts receivable and regulatory requirements in foreign countries can be much more complex than those in the United States, several vendors bring in industry and software expertise from both their home offices and the local country.
If trends continue, telecom carriers across the globe increasingly will streamline their billing and accounting functions as part of their strategic plan to compete in deregulated telecom marketplaces.
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