Breaking down the hard and soft costs that impact business.
Small- and medium-sized business owners know that attention to detail can make or break their success. While the leadership team and upper management is focused on the processes, products and people that make your company great, unattended details can negatively impact the company’s earnings.
It’s in this grey area that IT managers and accounts payable specialists become the unsung heroes of a company’s bottom line. Particularly with telecom and datacom fees — the surcharges, taxes and assessments hidden in a communication system.
Breaking Down Telecom Fees
Most businesses don’t know they’re likely paying 50 percent more than they need to be for telecom and datacom services. Almost 80 percent of all telecom bills are incorrect and include charges that companies should not have to pay — including tariffs, late fees and charges for abandoned phone lines.
Why do these unnecessary charges go unnoticed? It’s because 85 percent of these bills are paid without an analysis, audit or scrutinization by accounts payable personnel simply because the bills are inherently complex and carriers are unresponsive and uncooperative.
While it seems trivial — it’s not. Telecom expenses are anywhere between the third- and fifth-largest expense for most organizations. For a major bank based out of Oregon, the numbers are staggering. With help from Ruby+Solberg’s telecom expense management (TEM) services, the bank added more than $600,000 to its bottom line. Here’s how.
Hard Cost Savings
Companies can avoid dealing with dozens or hundreds of telecom invoices by using five tools/services that affect a company’s hard costs. These tools ultimately save money by avoiding the audits, disputes and negotiation of unnecessary charges, and with continued support, can eliminate the expenses of annual cost creep.
- One-Time Telecom Cost Audit — This financial analysis reviews a company’s telecom services and invoices and recommends ways to reduce costs and save on a contingent fee basis — meaning fees are only accrued when savings are uncovered in the audit. These audits often find erroneous equipment charges for equipment that wasn’t ordered or had been returned, disconnected lines still being paid for or even lines that the business doesn’t own. The audits also serve as a means to adjust wireless plans mid-contract and negotiate better long distance rates.
- Validated Telecom Billing® (VTB) — A monthly TEM service which reviews all of a company’s telecom invoices. Once reviewed, the TEM disputes and resolves overcharges, validates and approves all other charges, allocates internal accounting codes and can even pay bills on the company’s behalf. This service also provides companies with a customized general ledger (GL) report which seamlessly uploads into any accounting system and prevents any needed reconciliation by companies.
- Private Contract Negotiation — Professional telecom consultants can evaluate and negotiate vendor proposals and contracts and engage with service providers directly so that the company never has to review contracts which contain complex terms, rates and conditions.
- Services and Associated Costs Inventory — A telecom cost consultant can consolidate all invoices for voice lines, long distance, networking, data, conferences, calling cards and more into a single database. This database helps companies prepare for long-term planning, budgeting and negotiating with vendors.
- Consultation Services — Telecom experts can provide invaluable advice when a company upgrades their network, implements new technology, changes carriers and adjusts budgets.
Soft Cost Savings
Soft cost savings can be difficult to uncover as they aren’t directly related to telecom services. But once discovered, these savings enable a company’s internal staff to focus their efforts on the company’s profitability and productivity.
Just as payroll is increasingly handled by services like ADP, so too should telecom invoice management be outsourced. By outsourcing these tasks, businesses can save 10–24 percent each month in the following four soft cost categories.
- Direct Labor Costs — Tasks include incoming mail processing and data entry processing.
- Indirect Labor Costs — Tasks include checks and report control processing, exception item processing, scanning and archiving paper bills and customer service.
- Equipment Costs — Items include data processing hardware, postage and supplies and bank/lock box fees.
- Administrative and Overhead Costs — Positions include supervisory overhead, systems/programming support, personnel training and occupancy expenses.
With help from telecom/data auditors and analysts, accountants and legal experts, businesses can avoid fees that are hidden in the details and improve their bottom line.