Preparation is Kkey for Effective Bill Reconciliation CLECs use different approach for same billing problem
John L. Guerra
05/01/2000
The person in charge of bill reconciliation at the CLEC is not in charge.
She’s in the middle of converting from manual bill reconciliation to an automated system, and things aren’t working out as planned. She’s caught in a vortex of paper bills and overworked staff, handling phone calls and letters from ILECs asking where their money is. She’s stressed, her auditors are sweating, and the CLEC execs and shareholders are losing patience, waiting for the millions of dollars in dispute victories the bill reconciliation system was supposed to deliver six months ago.
But the reconciliation system, the software vendor and the auditing department aren’t working—on several levels. The software doesn’t deliver the capabilities the CLEC needs, and the vendor doesn’t have enough staff to pull her out of the fire. Boxes of access bills are piling up, and there aren’t enough trained auditors to handle the load. Sure, they know accounting, but this lake of sulfur is not just an accounting department. It’s a place of phantasms—where tax rates, tariffs, state and federal regulations, and ILECs instantly change their characteristics and become unrecognizable.
You are not alone
But worry not, auditing manager, you’re not alone. You can take some small comfort that others in the industry who audit and dispute ILEC bills are having trouble, too—especially when the department is in the midst of converting from paper to an automated system. It is an imperfect world, and very few are doing it perfectly. In fact, it’s fair to say, no one’s getting it all done right.
“Conversion is tough; time doesn’t stand still,” says Pat Lougheed, senior business analyst for resale services and local access at Electric Lightwave Inc. “It created billing backlogs for us, 60 days and longer. What you are doing is moving from one system to the next, and it’s tough to balance. Meanwhile, your business is increasing and your bills are increasing.” Lougheed is in the midst of converting Electric Lightwave’s in-house system, although she’s had an easier time of it than the hypothetical auditor above.
“Back in 1997, we were using our Microsoft Access database, which still used paper bills,” Lougheed says. “We quickly realized that we were outgrowing it. We were doubling in size every year.”
Failure to prepare leads to problems
Deciding to automate bill auditing and reconciliation is just the first step in a long series needed to avoid problems down the road. The first rule for a CLEC—whether it decides to outsource, buy reconciliation software or use a combination service bureau/in-house system—is to know thyself, says Russ Burd, a consultant for Lynch Associates LLC in Vienna, Va. “What you want to look at is, do you have the people in-house with the expertise and availability to run the system and establish that reconciliation function? What state is the rest of your OSS in? Do you have a solid facilities and equipment database and solid provisioning processes? You have to take a look at your development cycle. You have to have those bases nailed down.”
Don’t shop blindly
Burd also recommends that the CLEC evaluate its business model and predict business requirements further down the road, and how they’re going to affect your cost structure. But some CLECs can’t do that with a clear head. The finance or billing department is often too busy to evaluate its own systems and suggest changes. It may be less expensive to hire an outside consultant—with the independence to make useful suggestions.
Without a complete picture of network and software capabilities, Burd says, CLECs will be shopping blindly for reconciliation systems, unclear about the auditing capabilities it needs. It could end up with a system too rigid to adapt to changing tariffs, regulatory constraints or opportunities. “You want a system that won’t quickly become obsolete,” Burd says. “If you’re going to use a tool, you need to have an audit group in place if you’re going to effectively use the tool—not only auditing, but analysis. If you buy a COTS reconciliation package, and it requires a lot of customization, you haven’t made the right selection and haven’t done the homework. The more you customize, the more you dilute the value of buying a package.”
Reconciliation systems fall short
CLECs might begin by buying basic tools for network facilities audits, which track circuit inventory and other provisioning functions such as switched-circuit, rate, quantity, and timing audits, which tracks circuit connect or disconnect dates.
However, no complete systems out there can do it all, Burd says. “For instance, reconciliation systems fall short with their ability to simultaneously audit the different kinds of services and combinations that include CABS, unbundled network element platforms [UNE-P], local resale and IXCs where they handle the wide spectrum of access methodologies out there,” he says. “They also fall short in terms of their ability to be easily integrated with the existing OSS.”
Outsource, in-house or a combination?
CLECs without the money and expertise to buy and install their own off-the-shelf system should consider outsourcing. “You get access to a lot of industry knowledge and an experience base you would find hard to duplicate in-house-experienced people who understand the process, CABS billing and how to deal with an ILEC,” Burd says.
“If you want to bring the system in-house, the vendor should have a process in place to help you do it.”
Another problem: It’s usually not a good idea to pay the service bureau solely on commission from the disputes they win. “You should really question that model,” Burd says. “Are they doing anything other than auditing my bills to lower my costs? Are they helping me think through planning on the regulatory front, helping me manage my cost planning process or network optimization? Are they looking at opportunities and pitfalls on the regulatory horizon? In other words, is it a complete service, or are they just auditing your bills and taking a cut? At the end of the day it ends up costing you more.”
Burning bridges
Not only that, but a service bureau or third-party reconciliation vendor can burn bridges for the CLEC by disputing every inconsistency on the bill, with or without documentation. This can lower the CLEC’s reputation and ability to win future disputes with incumbents. “They’ve got to help you manage that vendor relationship for the long run,” Burd says. “I’ve seen it happen in a couple of situations where the outsourcing firm is driving every small issue and has damaged a carrier’s credibility with the ILEC, and it takes time to fix relationships and credibility.”
Check the vendor’s credentials before signing any contracts, he says. “Check references, the background of the people working there, find out if they’ve run telco operations before, see if they know the regulatory issues and if they are familiar with the LECs. Ask for bios, call their existing clients. Call some of the executives at the ILECs and ask them their opinion of your outsourcing candidates.”
How about a combination of the outsourcing and in-house billing reconciliation? Not always a good idea, Burd says, because if part of your bill auditing is under your roof and the other is 150 miles away at the service bureau, you can’t see the entire reconciliation process. “You could lose sight of the cost structure and how that drives margins in your business,” he says. “If you’re handling one side of Bell Atlantic, and the outside vendor is handling the wireless portion of Bell Atlantic—some carriers even break it down by city—unless you consolidate those things, you’re hurting your ability to manage the ILEC. Not only that, you have too many people coming at them [during disputes]. It makes it difficult to consolidate the issues you have with the ILEC as a whole.”
Where are good bill validation databases?
Electric Lightwave Inc. (ELI), a CLEC that provides backbone for data and voice, as well as residential and business phone service, hired consultants to prepare for its conversion. “We decided it was going to be a pretty big job,” Lougheed says. ELI hired a consulting firm to document its processes and determine which systems the CLEC needed for effective automated network cost management.
“The difficult part is there still aren’t enough people with good bill validation databases,” she says. “That was our requirement: what kind of network or billing information were we looking for, where were we going to get it, and what were we going to do with it? We couldn’t have done it without the consulting firm; it still took us a year and a half. The conversion is gruesome, because this department has one foot in accounting, one foot in finance, one foot in operations and one foot in marketing.”
Juggling multiple formats
Lougheed also laments the lack of reconciliation systems that can handle multiple bill formats. “I have not found one system that will handle all the bills: CRIS, CABS, UNE-P, etc. Our system is dedicated to CABS on the electronic side, and on the other types of bills, we still use paper. About 75 percent of our bills are paper.” With paper bills, new customer information is keyed in manually, “then all you have to do is maintain the bill by changing the information in the database—by adding or deleting the circuit that was connected or disconnected, for instance,” Lougheed says.
ELI automated the auditing of the leased circuit side of the reconciliation model first. “It was the bigger bucket, the bigger dollars to go after, so it was automated first,” Lougheed says. “In the end, it is the most complex for us. When you get a bill from an ILEC, it’s one piece of a total order. For instance, if our customer is in Seattle and we want to take his calls down to L.A., he would ride on PacBell, U S West and GTE’s network, so we actually get charges from three separate vendors for that one customer. That’s what makes bill validation more complex. We are still, unfortunately, using our old system to access the database to link those systems together.”
All my children
It’s time-consuming to track all of the carriers in a linked network when a customer disconnects service, she says. After sending the ILECs a disconnect order, Lougheed and her staff have to ensure that GTE, PacBell and U S West all disconnect the service or those charges can continue to pop up on the ILECs’ access bills sent to Lightwave. Under the CLEC’s system, such ILECs are considered “children,” and ELI is the “parent.” The CLEC’s auditors can dip into the Access database to see if one of the children has fallen off; they then has to search the database to determine if each of the other carriers have disconnected, she says. The CLEC’s reconciliation vendor is trying to design a system that will automatically indicate whether disconnect orders are completed all the way down the line and link that information back to the parent order. ELI plans to begin using a system to audit usage later this year, she says.
Getting other departments involved
“Billing reconciliation and dispute resolution still depends on the bill analyst,” Lougheed says. “You have to know the bill, the product. You have to know how collocation affects your local access charges. If you don’t know collocation, you’ll never know if your bill is correct. It really takes a special personality with a passion for it, and it’s difficult to find that kind of person. It’s 10 skill levels above accounts payable, by far. It’s the most technical accounting position you’re ever going to hold.”
ELI instituted its own training program, again using an outside vendor to help. “We re-trained our department, wiped the slate clean. We told them, ‘Forget what you know, we’re going to start over,’ she says. ” The training documentation is updated as the industry changes, to keep the 20-member staff apprised of new system developments. Lougheed also meets with billing and regulatory affairs staff to get an understanding of state-by-state tariff and back-billing rules, to ensure that jurisdiction-related billing disputes are not missed.
ELI hopes automated reconciliation systems will help them hold back the flood waters, because they’re still getting incorrect bills. “Eighty percent of what we get [on the bills] is in error,” Lougheed says.
VarTec: Lessons learned
VarTec Telecom Inc., of Lancaster, Texas, is switching to automated reconciliation, but chose a combination of in-house and service bureau systems. Events have not been kind to Daniel Rogers, access auditor for VarTec, and his staff. When he came aboard at VarTec in 1999, the company, primarily a dial-around service with a lot of PIC customers, had already researched a few bill reconciliation companies, “but the project kind of languished for a while,” Rogers says. The company put him on the case, again started looking for a vendor and chose one in July 1999. VarTec did not hire an outside consultant to look at VarTec’s business plan, its system setups, staffing and other determinants for buying a reconciliation system. Rogers, who has 14 years experience with an ILEC, including a “great deal” of access experience, and other staff members narrowed the search down to two companies.
Auditing, reporting requirements
Rogers wanted to purchase a system to process and audit bills, including network audit control that could manage its CDRs, and summarize the data and compare it to the LECs’ bills. VarTec wanted to generate reports on bill aging, trending, total disputes by vendor and type, including tax, circuit and usage. The plan was to handle the largest RBOC bills in-house, and let the service bureau handle the rest of the LEC and IXC bills, he says.
The third-party vendor that won out had the ability to take CDRs and put them into meaningful buckets and compare them to the IXC and LEC bills, Rogers says. “We wanted to summarize interstate, intrastate, originating versus terminating, etc., through a service bureau. We had the capability, not the time,” he says. “If you’re going to share [the data], you need to have a service bureau that understands the project and software you have,” Rogers cautions.
Learning curve too steep
The service bureau also served as project manager for the conversion. The project plan addressed security issues surrounding sharing of data between carriers; training, both initial and ongoing; installation of hardware, software and network for the new system; and bill approval levels to safeguard company assets. In other words, someone had to sign off on the bills before they were paid to the LECs.
The service bureau, about 35 miles from VarTec, is linked to the CLEC’s systems via a T-1 line. “There was some customization to interface with our accounts payable and our CDRs, which are different than other CDRs,” he says. “We have some additional fields and data that we’ve added to our network decision-usage process. In order to make it meaningful, someone had to analyze our data layout and link to it.”
But alas, things did not go smoothly. Rogers says that VarTec paid some LEC bills twice, hardware installation did not go as planned, and poor communication led to confusion and interruptions in the implementation. Not only that, VarTec fell months behind in paying its LEC bills.
Paper and electronic don’t mix
During the conversion, VarTec was receiving paper bills from vendors, while the service bureau was receiving the same bills electronically. As a result, the service bureau and VarTec were paying the same bills twice, or neither was paying them. “The zeros in the BAN were being recorded as the letter O and the paper bills were showing zeros, and the system was not recognizing them as duplicates,” Rogers says. Lesson: Don’t send bills in the middle of a transition to your service bureau until the bugs have been worked out, he says.
As for the installation, Rogers says, “it was very labor-intensive and stretched out over some period of time. We had trouble installing the server [Sun Microsystems 3500]. The server was to be used to process CDRs, bills and workflow. But we didn’t know we needed 220-volt power to run the disk drive, didn’t know what parts we needed, such as a second SCSI port for the Hewlett-Packard jukebox for optical storage. We did not deal with Sun directly, and I did not communicate that back to the service bureau. There was no time when the service bureau, Sun, VarTec, and the Sun reseller were talking at the same time. We never had all the parties involved on a conference call at the same time. There were some configurations of the drives that the service bureau wanted one way, VarTec wanted another way. That was rework.”
Bills keep on coming
Meanwhile, the bills from LECs and IXCs kept on coming. “We had a huge backlog of bills that were past due,” Rogers says. At one point, VarTec had two months of unpaid bills from its largest vendors sitting around. “We have one vendor that has refused to do additional ASRs because of poor payment history, but the information they have regarding that payment history is bad. There was some poor payment, but not to the extent they said. We just have to persuade them otherwise. We have had calls from other vendors asking for an explanation on late payments, but we worked with the account management teams and proactively approached the vendors,” he says.
A spokesman for the service bureau admits things did not go as planned, but says VarTec was in a hurry to get the system going. “They weren’t ready in some aspects, but they wanted it done quickly, so we threw the resources at them and worked out the problems as they came up. It was a ‘ready, fire, aim’ situation,” the spokesman says. “We found that they didn’t have room to put in the server after we signed the contract, so we are hosting it at the service bureau for them. Also, they don’t have a history of disputing bills with the carriers, so they didn’t get much response at first. But we are working with them to get relationships going with those LECs.”
Situation getting better
Many of the bugs have been worked out, Rogers says. “We are raising disputes on a growing basis. Most of the disputes have been pointed out pretty easily by the system.” Although VarTec has won only $10,000 in disputes since December 1999, the system in February generated more than $2 million in disputes—some of which surrounded back-billing issues. And VarTec has taken on more sophisticated audits. “There are some disputes that take more work. For instance, if we do a rollover from a T-1 to an SS7 conversion, we were getting charged for disconnects instead of rollovers. We have to research those very carefully.” Rollovers are services that have not necessarily been disconnected, but rolled over to an upgrade or higher-priced service. Some LECs charge a disconnect fee, others don’t.
Finally, key VarTec and service bureau personnel meet weekly to resolve conflicts and smooth out the final stages of the implementation. “We are approaching stability now,” Rogers says.
Any advice for CLECs considering automating their systems to handle billing reconciliation? Rogers thinks for a moment. “I would say that there would be definite value in hiring a consultant for setup of hardware and software,” Rogers says. “You can buy the hardware and software and not know what the setup should be for your business plan. You need a professional who has done this before.”
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