8/14/2019 Revenue Assurance and Cost Assurance

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Business Issues

Revenue Assurance and Cost Assurance

Understanding Revenue Assurance and Cost Assurance issues andpractices in the Telecommunications, Media and Entertainment sectors

In the Telecommunications, Media and

Entertainment sectors, as with other complex high

transaction businesses, incorrectly billing,

collecting or recording of transactions can result in

millions of dollars of increased costs and lost

revenue, as well as seriously denting a company’s

reputation.

The sheer amount of data processed by a

multitude of different systems and the rapid paceof change in products and technology means that

even small errors in reference data or processing

rules can have a huge financial and customer 

impact.

No wonder that Revenue Assurance and Cost

Assurance have gained in importance and visibility

to be recognised by many Service Providers as

being of strategic importance from both financial

and customer experience perspectives.

Various benchmarking exercises have estimated

losses to be between 2%-18% of revenue, to an

outsider this could seem exaggerated, however,

Revenue Assurance audits have frequently

uncovered huge revenue leakage issues even at

major established and mature operators - in some

cases leakage has been known to represent 60%

of a specific revenue stream.

The issues

In the Revenue Assurance and Cost Assurance

arena, revenue losses or avoidable cost exposures

are usually referred to as ‘leakage’. Many revenue

assurance issues start off as minor losses but can

remain undiscovered for long periods as they do

not stand out in standard financial reporting or 

other business check-points. The sum of these

issues can quickly add up to major proportions.

Furthermore, in the case of under-billing or non-

billing, it is likely that the issue will be exploited andcan turn into a major opportunistic fraud problem.

So how does leakage happen?

The most common problems leading to leakage

are related to incorrect, missing or corrupted

reference data, processing rules and network or 

billing/mediation system configuration. A typical

Service Provider will have hundreds or thousands

of processing rules throughout their technology

infrastructure and many databases and tables

containing customer and processing referencedata. This data is usually updated on a regular 

basis by network technicians, customer services,

the billing team, automatic processes etc. The

systems within which the data is stored and

processed are regularly subject to patches and

upgrades.

Over time the network, mediation and billing

infrastructure becomes so complex that only a few

people (often, no one at all) have a full

understanding of the data and financial flows that

make up the company’s revenues and costs.

Given the limited capability for a complete

perspective, and the rapid changes we often see, it

is no wonder that some things get out of sync and

errors are made.

Business Assurance | Revenue Assurance | Fraud Management | Receivables Management

8/14/2019 Revenue Assurance and Cost Assurance

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Business Issues

2

Revenue Assurance and Cost Assurance

Business Assurance | Revenue Assurance | Fraud Management | Receivables Management

Understanding Revenue Assurance and Cost Assurance issues andpractices in the Telecommunications, Media and Entertainment sectors

How do you know if you have a

problem?

Often you don’t, but sometimes there may be

indicators that point to revenue leakage, e.g. the

profitability of a newly launched product stagnate

and/or decrease despite increasing levels of sales

and usage. Then again, this can be difficult to

detect if usage, revenues and costs are collated

using data from down-stream systems.

Another indicator of leakage is irregular revenue

and usage patterns, most products have fairly

regular usage patterns over time, glitches in the

data can be a sign of leakage, e.g. previously low-

use services get a sudden and unplanned surge in

use as loopholes are discovered and exploited,

maybe due to the retail billing rate being incorrectly

set below the interconnect/purchase costs being

paid. Margin analysis may also uncover such

issues, especially if the costs are higher than the

end revenue.

Finding leakage can be like looking for a needle in

a haystack, even if the indicators are there to

suggest a leakage problem, pinpointing the

underlying issue can become a laborious task

unless a systematic and detailed approach is

undertaken. The longer leakage goes unchecked

the less likely the possibility of recovering the

revenue or cost exposure. Unless a leakage issueis discovered within 30 days it is often impossible

to back-bill a customer or offset against

interconnect or purchase charges.

There is a flip side to revenue leakage which is

often overlooked: most products used by

customers have an associated cost, which means

that not only have you forgone revenue but you still

have to pay 3rd parties for the usage (roaming

partners, interconnect partners, content providers

and so on). Furthermore, incorrect network

configurations or poor operational practices can

result in increased or unbudgeted costs or result in

a hugely inefficient management burden to correct

problems. Revenue and Cost Assurance is not

only about finding, stopping and preventing

revenue leakage, it’s also about assuring margins

and overall profitability.

Managing the problem

You will find many different propositions around

Revenue and Cost Assurance  – vendors sellingsophisticated software, consultants selling process

improvements and so on. The fact is that there is

no single answer to the problems, and a structured

and holistic approach is usually best, working

towards an

integrated cycle

of prevention,

d e t e c t i o n ,

analysis and

r e s p o n s e

powered by

measurement

a n d

p e r f o r m a n c e

improvemen t

mechanisms.

That being said, it is important to justify the spend

against the benefits and staged deployment of a

strategy is often a good way to proceed, justifying

next-stage investment as your strategy takesshape in deployment. In effect, each stage

sponsors the next through success measures and

returns. Execution of a carefully considered plan

should net excellent results and genuinely bring

about enhanced profitability.

Please refer to the Services,  Solutions  and

Packages  pages of our web-site for a more

detailed perspective of the components that might

be deployed within a strategic plan. Alternatively,

Contact Us to discuss your precise needs.