Revenue assurance to add to the bottomlines in telcos

Revenue leakage of telecommunication firms in the world is estimated at four percent to 11 percent of gross revenues every year and effective revenue management can minimise this considerably, while adding to the companies’ bottomlines, according to revenue assurance experts.

“For many companies even a two to three percent revenue increase could make a difference between success and failure” Prashant Singhal, Director Ernst & Young told a group of top corporates in Colombo recently.

He said that Ernst and Young has found that revenue leakage could be up to 10 percent of the top line of a telecom company. “The extent of such leakage depends on a variety of factors like the telecom operator’s business model, geography, business processes, market competition, service portfolio and the customer mix,” he explained.

He added that rather than reconcile the accounting books, revenue assurance worries about the accuracy and effectiveness of customer- and network- facing systems like billing, mediation, provisioning, collections, and interconnect settlement. Thus, revenue assurance systems proved a perfect antidote for the times, helping telcos plug revenue leaks, clean up error-prone inventories, and boost bottom lines.

Singhal said that the challenge for telecom companies in the new age is to cut costs and invest in next generation technologies, but they need to have a robust revenue assurance (RA) function to better manage their revenues. “A comprehensive RA function will combine organisational structure, processes, technology and information responsible for understanding and monitoring the entire revenue process,” he said.

He explained that such a process would entail ensuring that revenue risks are identified and addressed, while revenue enhancement opportunities are identified throughout the revenue process.

“Companies have a varied perception about what RA is and many believe that it is simply fraud management and a tool to control revenue leakage,” he said, adding that only a few believed that it is a tool for revenue enhancement.

Singhal said that a clear definition of the RA function, its authority and responsibility together with the reporting relationship and independence of the RA function are the major challenges for operationalising an effective RA function. “In a study conducted by Ernst &Young in India, almost all operators said that RA reports to the chief financial officer (CFO), but RA should be by far independent of the CFO,” he said.

Singhal said that any effort to eliminate the loopholes causing revenue leakage will be ensured through a stout and effective RA function.