ACCOUNTING SYSTEM | Budgeting and Financial Planning

The foundation of each organization’s accounting system is a chart of accounts. This is a name and number system whereby each account has unique identification in the form of a name and number. If a particular department has accounts in more than one physical location, this becomes part of the structure as well. Accounting systems are built around five categories of accounts, assets, liabilities, equity, revenues, and expenses. Table 1 explains a little about each.

TABLE 1

Assets (1000)	Items of value owned. Examples include cash, inventory, and land. Assets are usually tangible, but not always.
Liabilities (2000)	Debts. Examples include loans and taxes owed. These debts are usually settled by cash payment, but sometimes they are settled by providing a good or service at a later date
Equity (3000)	Equity represents the owners’ interest in the company. Equity accounts include common stock and retained earnings or profits reinvested in the business, as opposed to profits distributed to stockholders as dividends
Revenues (4000)	Revenue Increases assets when the organizations output is sold or exchanged for money or otherwise valuable goods and/or services. Examples include sales of equipment, merchandise, or voice and data communications, and any interest earned from investments.
Expenses (6000)	Expenses decrease assets or increase liabilities when goods and services are acquired and used to fulfill orders and serve customers. There may be literally hundreds of expense categories such as salaries, rent, utilities, advertising, voice and data communications services, taxes, fees, subscriptions to publications, and memberships

Within each of these categories are subaccounts used to classify each entry or transaction. If the organization does business or maintains a presence with resources—people, address, buildings, telephone number, etc.—in more than one location, the system will also have location information in the form of a name and number. Understanding this structure is vital to successful management practice in any mid-size or large organization. Communications circuits, equipment facilities, and service are as vital to organizational function as space, heating, air conditioning, ventilation, power, water, and rapidly becoming more vital than postage. Communications is not just paying the telephone bill anymore. Where there was, and still is in most cases, a simple single line on in the expense category there should now be at least three, and perhaps four, for each department or cost center requiring use of communications in its operation.

Communications equipment and other assets are accounted for in the asset category. Communications operating expense is accounted for in the expenses category. Accounting for anything to do with communications in the other categories is highly unlikely. If you are, have been, or expect to be given responsibility to manage a department or cost center, you have or will receive monthly summaries of expenses your department incurs. You may or should also know or be aware of investment in or spending for equipment and other assets required for proper operation of the department(s) you’re responsible for and that produce the monthly expense summary or summaries. One of the items in the expense summary is depreciation. This is the result of writing off or expensing the value of the asset against revenue over a period of time. It has the effect of reducing taxes and increasing the amount of cash kept from the revenue stream after all other costs are absorbed during each accounting period.

Spending the organization’s money begins outside the accounting system when a commitment in the form of a purchase order or proposal acceptance is made. To this day, many organizations still place verbal orders for telephone service. But now even the telephone companies are catching on and it’s possible to use their website to place an order for service. Many have had customer order entry systems in place for several years for large accounts. Sooner or later these verbal or computer-based order entry systems cause service delivery and subsequent invoices that are paid and, in most cases, classified by someone in the organization so it fits into the single telephone expenses category.

The expenses category of the accounting system tends to mirror the organizational reporting and management structure. Look at any particular location from headquarters to remote sales offices or stand-alone call centers. What you will see is someone, somewhere in the organization, appointed to be responsible for all expenses incurred during the course of operations at each and every location. Another connection between the system and the organization is in the revenue category and the sales department. Stop and think about it: Is your organization using a website to attract prospective customers and then enabling them to place orders? Where’s the sales representative in this picture? The revenue category in the accounting system must be capturing the revenue numbers somehow, somewhere. What does it take to get the expense category to capture the cost of the Internet access facility?

Depending on the size and number of accounts, larger organizations will have additional subaccounts in a hierarchy of sorts that tends to mirror organizational reporting structure and management chain. For example, revenues would look a lot like the sales and marketing organization. Certain parts of the asset accounts would match production or manufacturing organizations where inventory or facilities churn and change on a daily basis as products shipped undergo the billing process. In communications service provider organizations, the equivalent to production is network operations where facilities are used to support the organization’s service delivery.

The Account Numbering System

The structure of the monthly reporting system is built around unique identifiers for the account and subaccounts in the accounting system’s chart of accounts. At the small end of the scale is the entity that keeps track of its accounting affairs in each of the unique categories: assets, liabilities, equity, revenues, and expenses. At the other end of the spectrum is the large entity with many departments and operational functions located in many locations. At the smaller end of the spectrum are organizations that can easily use two- or three-digit series numbers while the large organization will require three-, four-, or even five-digit account numbers. The same is true for department and location numbers. The key point is to architect the system so that it is expandable and scalable beyond foreseeable growth, while at the same time keeping memory, storage, and processing complexity reasonable.

In addition to the chart of accounts, most modern computer-based accounting systems include, and won’t operate properly without, unique departmental identification and location information. For example, the payroll part of the accounting system needs to know which department to allocate payroll expense to, in addition to knowing which employees reside in cities and states with payroll and income taxes.

The combination of account and subaccount identification, department name and number, and location name and number are the basis for communications expenses and capital investment in our mythical organization’s budgeting and financial planning examples and practices.

INTERNAL REPORTING

The typical enterprise runs on internal monthly reporting of actual results recorded in accounting journals and ledgers. This information is then compared to budget and as the year progresses, a current forecast for future periods. Some organizations use what’s referred to as a rolling forecast, whereby future quarters and year end coinciding with the annual report is forecast. The rolling forecast is sometimes used to bridge the annual business plan to a long-range strategic plan that picks up from the current year and may cover 3 or more years into the future.

Practices and management style determine how this information is presented and reviewed; however, it’s not unusual for an enterprise to detail out an accounting calendar with specific dates each month for a preliminary trial balance, usually within 3 to 5 days of the end of the month, followed by a period of 2 to 3 days for adjustments, and final closing within 10 days after the end of the month. Another common practice is full-fledged senior management reviews shortly after the end-of-month close. This allows release of quarterly results within 30 days of the close of each quarter.

So-called mid-month reviews are supplemented with reviews matching payroll periods. Biweekly or weekly operating results at lower levels in the organization become the time where line management focuses on results measured by orders received (bookings), shipments or installs (billings), orders placed (purchase commitments), and headcount changes (hires and terminations).

Accounting and treasury operations monitor payables, receivables, and cash position on a daily basis, and make decisions about exactly which bills to pay, taking several factors into account each day. Why should a communications manager worry about these issues? Wait until the daily or weekly executive conference call has an echo problem, or security breach, or there aren’t enough ports—no, you really don’t want to wait, you want to know the calls occur, and you want to know how long they typically last and you want to know if everything works OK, or you want to be in a position to have installed another four or eight ports just before they are needed. As the individual responsible for all communications circuits, equipment, facilities, and services, you need to know about key operating and strategic actions being contemplated and taken. Be aware though that these discussions are highly sensitive and, valuable as they may be, you may not always be invited, or privy to, all decisions until you’re instructed to take action or asked to advise on a situation.

ENTERPRISE REPORTING REQUIREMENTS

Reporting requirements vary by organization and are carried out in accordance with laws, rules, regulations, and the organization’s charter. Detailed treatment of the subject is outside the scope of this book; however, it is worth a few lines to put communications budgeting and planning in context.

Financial reporting has a public or external face and an internal or proprietary face. Communications financial information is typically 100% internal and proprietary. Hardly ever does any organization make details of its communications matters public. However, as you will see shortly, the information that is released through public channels depends on accurate record-keeping and forecasting to support the accuracy and validity of the higher-level information made public.

Public Reporting and Information Release

Public, or external, information is limited, highly controlled, and subject to rigorous legal and other reviews before being released. Financial reports are released four times a year at the end of each quarter. The basic release includes short factual summaries of revenue, net income, and growth calculations. Unaudited profit and loss, balance sheet, and funds position statements are included with quarterly releases and full audited statements are included in the annual report. Figure 1 illustrates how financial information makes its way from information recorded each month through to quarterly and annual reports.

 

Figure 1: Information Summary and Flow

In addition to the quarterly and annual written reports, it has become customary in recent years to communicate financial guidance with respect to expectations for meeting revenue and income growth. Underpinning the public reporting and information structure is an elaborate, detailed accounting and financial planning system.

A word to the wise: If you have been invited to speak, make a presentation, or appear on a panel at a conference, find and make friends with someone in the group that deals with investors and the media well before the event. Tell them what you’ve been asked to do and ask for their guidance and support. Chances are they will jump at the chance to support and help you with your speech-writing and presentation charts. The strong advice is to avoid the temptation to not ask for their support and help. When you appear in public and say anything, you are automatically deemed to be a representative of your company, especially so if someone introduces you as ‘‘so and so from Company X,’’ or mentions your company at all. If your company is a publicly traded company, you could be deemed to be an insider under securities law. Your media relations or public relations group can help you avoid career destruction, so involve them early and to the extent they are willing and helpful.

Budgeting and Financial Planning

Budgeting and financial planning are not stand-alone activities. Budgeting or making a budget is the act of quantifying cost or pricing for an item or list of items, and in the case of communications, the list is likely to be a combination of goods and services. The items on the list may be a one-time occurrence or recur on some periodic basis. Financial planning is the process of striking several budgets based on alternative scenarios to arrive at a point where the budget fits within an overall set of financial parameters for the organization. The result of the budgeting and planning processes provide a financial benchmark within the overall business plan. The budget part of the business plan includes revenue, expenses, and net income, or if expenses exceed revenue, a loss, which is a big no-no. During the course of the year, the budget will be used to compare actual results of operations in current and previous periods, and to forecast results in future periods.

Organizational budgeting and financial planning for an organization typically rests within the chief financial officer function. There are two activities to be concerned with. Accounting is responsible for entering transactions into the system and periodic reporting of actual results. Successful budgeting and planning requires contribution, collaboration, and cooperation from department managers and subject matter experts as well. The communications cost management process envisions working closely with both groups. Successful communications cost management depends on a high level of consensus among all three groups, and in turn all the department managers are responsible for creating the budget and managing to success and satisfaction of management and stakeholders.

The purpose is to provide understanding and insight into creating and planning communications operating expense and capital budgets to fit within an existing accounting and financial operations system. However, significant improvement in managing communications cost  is likely to require changes in the way communications expenses are first accounted for and then budgeted in the future.

Recognize up front that changing accounting practices and processes should not to be undertaken lightly because change causes variances when current period performance is compared to previous periods. It can be seen as an inconsistent practice, which is a big flag-raiser with management, auditors, and investors. Getting past the flag requires an explanation. Be prepared up front, and then as the changes take effect and are noticed, be prepared to explain them again. Initially, most of the changes required to realize significant savings involve reclassification of expenses in the telephone expense account. This can be a natural outcome of implementing machine-based invoice validation and establishment of a standard cost system for communications.

Establishing and implementing standard cost and machine-based invoice validation so that each invoice is classified, coded, and recorded prior to being paid provides a basis for analysis, which can in turn support more accurate budgeting and financial planning in the future.

The bottom line is accounting will have to be convinced that the advantages outweigh the disadvantages before changes can be made. There is a two-part message: (1) be convinced and sure of your ground, and (2) be prepared to educate, inform, and convince your colleagues and executives there’s ‘‘gold in those hills.’’

SEVEN STEPS TO PRACTICAL COMMUNICATIONS COST MANAGEMENT

• Invoice validation against standard cost
• Day-to-day order administration—moves, adds, and changes
• Initiating and managing capital projects
• Analysis of spending and resource utilization
• Monthly, quarterly, and annual reporting
• Development of annual budget and business plan
• Development and ownership of technology plan and long-range strategic plan

Invoice Validation Against Standard Cost

The first step in good CCM is validation and verification of all invoices. This requires an accurate, stable cost reference database. This must be established through a process commonly referred to as an audit. Notice that these two steps are independent, yet closely intertwined, and require interaction between accounting, communications technical, procurement, and vendors.

In addition to charges for the service, there are a myriad of service fees, taxes, and other charges imposed on the service by federal, state, and local municipal governments. Further complicating the matter is the fact that contractual agreements covering telephone service are a mix of private one-time agreements, multi-year service contracts, and public tariffs on file with the FCC and state PUCs. Presenting a bill that will be paid on presentation is a balancing act between providing enough information to justify the total amount due and simplifying or summarizing the details so the information will fit onto a reasonable amount of paper or in a reasonable size file, and not seem overly complex.

Telephone service invoices, especially for long distance service, are complex, lengthy, and involve very complex rating, pricing, and tax and other assessments such as access charges and universal service charges. Manual verification of the amounts on the typical number of invoices, and the level of detail is next to impossible. It would be easy to just blame the telephone company for the situation, but that wouldn’t be quite accurate because they are required to collect and remit taxes and assessments levied by federal, state, and municipal governments. The telephone company designs and builds billing systems to generate these complex and massive invoices. Given all the complexity, and the fact that the systems evolved over time, mistakes are highly probable, especially with respect to taxes imposed by so many jurisdictions. Successfully coping with this situation is potentially lucrative in terms of credits and reduction of future charges. The most effective way is to fight fire with fire in the sense that it requires well-written application software, significant computing power, accurate rating tables, and constant maintenance of records.

Day-to-Day Order Administration—Moves, Adds, and Changes

Day-to-day moves, adds, and changes may appear simple, but that doesn’t mean it is. Across the spectrum, it is in reality like leading an orchestra because it can vary from installing a new telephone for a new employee or contractor to moving entire work groups over a weekend, while at the same time managing multiple contractors in one or more capital construction projects. If the work is not planned and coordinated properly, telephones, LANs, and the entire network service capability can seriously impair business operations. One of the keys to saving money and making sure the invoices are validated and paid promptly is solid technical work planning, using standard processes and dependable sources of supply. The level of effort and resources required to support this step is also dependent upon how many service locations are included, organizational or business growth rate, and the amount of time allowed to properly plan the work.

Initiating and Managing Capital Projects

If communications facilities and services can be considered the lifeblood of a business, project implementation has to be the heart and soul of organizational growth. Establishing an operation in a new location after renovation or during new construction starts before the first wall is knocked down or shovel full of dirt is dug. Making sure the wire is in the wall, ceiling, or underground at the right time can cost or save thousands of dollars, and delay the overall project. Making sure the right thing is in the right place at the right time requires good relationships with dependable suppliers, standardized requests for proposals (RFPs), timely evaluation, and due diligence followed by supervision and acceptance of timely deliverables.

Analysis of Spending and Resource Utilization

Knowing where you stand with all facilities and resources in a so-called fast-paced environment requires stopping to analyze where the business is at on a periodic basis. Good management of financial resources requires good budgeting in the first place, but good budgeting doesn’t lead to good performance without constant attention and awareness of needs against available resources, spare capacity, and what’s in the pipeline for both.

Supplier Evaluation and Selection

Serving a customer is about the only thing more valuable than having strong working relationships with a range of competent, dependable suppliers. Achieving the lowest possible cost is best served with competition. Open, fair, and honest competition happens when suppliers are engaged in a balance between informal give- and-take as well as formal RFPs and organized presentations and proposal responses. Suppliers are where the new technology comes from. Understanding their value chain, timing, and content can provide marketplace intelligence that money can’t buy.

Development of Annual Budget and Business Plan

No single department should undertake to strike an annual budget and develop next year’s business plan without consideration of current and possible communications products, services, and emerging technology. Communications technical and accounting professionals can provide invaluable insight and knowledge that will allow the line manager and the entire management chain to understand their competitive position and make rational, informed decisions about changing or not changing the way they do business.

In addition, the CCM function should draw up an annual communications plan that covers the organizations initiatives and plans to communicate internally and externally, and show how it will leverage expense and capital across all the functions of the business—sales, marketing, engineering, IT, as well as public and media interests.

Development and Ownership of Technology Plan and Long-Range Strategic Plan

 For now, just realize that the forces acting on your organization include competition, regulation, and technology. Establishing a credible long-term strategic plan requires a sound knowledge of emerging standards and technology. Technology is at the root of the continuing change and generally drives regulatory and business change, especially changes brought on by competition.

A well thought-out technology plan should be developed in between annual business plans and bridge the current business operations cycle by 6 months. For example, if your organization begins its annual business planning cycle in mid-year and obtains management approval in the last month of its fiscal year, then ideal completion of the technology plan should be coincident with the start of the annual business plan. Bridging technology and real-world business planning and execution is key to long-term survival.

CONTINUING THROUGH TO OVERALL COMMUNICATIONS COST MANAGEMENT

Machine-based invoice validation is a required first step in successful, long-term continuing cost management. Don’t forget the first objective is to reduce expenses and at the same time build a system to maintain good expense control. Overall, the work involves good accounting practices to analyze, classify, and quantify direct and indirect expense and capital investment in areas such as each of the following:

• Cable TV service
• Cable modem service (Internet access)
• Cellular telephone service
• Conferencing services
• Content distribution and delivery
• Fax machines
• Hosting facility use
• Internet access facilities
• Pagers
• Private line data services
• Telephone service
• Website developers

Although it’s tempting to make judgments about the value of each while making and completing a list, resist this inclination in favor of focusing on defining the details of how many, how much, how used, and by whom on the first pass. Try to make the list as complete and definitive as possible in terms of equipment, stand-alone application software, facilities, and services. Another important point is to capture the function or functions of each, and do your best to map that function to a business process because sooner or later it will be time to evaluate its impact on the business compared to other expenses or investments.

Get answers to the following questions:

• How are communications circuits, equipment, facilities, and services being used?
• What are the components of each circuit, piece of equipment, facility, or service?
• What are the units of usage and attendant cost?
• What is the volume and total cost of use/ownership?
• Is the cost fixed or variable, and if it’s variable what is/are the variable parameters?

Once the answers are placed into a spreadsheet and understood, consider them in light of other questions such as:

• What business are we in, or what’s the mission of our enterprise?
• What is each department’s role in that mission?
• What is the responsibility of each head on the payroll?
• How does their use, or lack thereof, impact communications cost?
• How can current communications unit cost be reduced?
• How will any considered change impact the ability to deal with suppliers and customers?
• What are the potential risks and rewards from any proposed change?

Satisfactorily addressing the above landscape puts you in a position to consider and undertake several next steps. These include:

• Validate monthly billing (i.e., make sure specific items of equipment, facilities, and services being billed match what is actually in use or in accordance with an appropriate service agreement, contract, order, tariff filing, or whatever caused the billing).
• Make a list of all circuits and facilities terminated in the telephone room. This is a room in each building where telephone company wiring enters the building from the outside. Sometimes there is more than one such room in a single building. More often, one room in a single building serves multiple nearby buildings on the same or directly related owner’s property. Prepare the list so it shows unused capacity. For example, in the case of copper cable, the telephone company typically installs what it calls an entrance facility, which is a terminal block on the wall with every single pair of wires in the cable connected to the terminal block. The other end of the cable is terminated on a block in a cabinet, or spliced into a larger cable connecting it to the nearest wire center or controlled environmental vault. In the case of fiber entrance facilities, there will be light wave terminal equipment mounted in a rack or on a wall. This equipment can be used to provision T1, DS3, OC3, or OC12 transmission capacity. Record circuit identification details and get an explanation of the amount of capacity in use and available for future use.
• Compare the circuit list with the items being billed. Many times service is disconnected, but the billing continues. If circuits, facilities, or service is being billed but not delivered (i.e., billing for a fax line, but the line is physically disconnected), you are due a refund. Getting the refund can be challenge without a disconnect order. It is not unusual to find billing errors. Be cautious about use of the term disconnected. A telephone line, which may serve or have served a fax machine, may not be disconnected from the service provider’s perspective. However, it is an entirely different matter for billing for the line to appear on the bill, and the line not available for use because service was interrupted or discontinued at some point in the past. If a valid disconnect order exists and service was not discontinued, the refund is due.
• Recognize and understand the importance, relationship to, and difference between unit cost and departmental and enterprise wide expense. How expenses are classified and tracked by a department and then rolled up into the overall picture is important because it’s easy to lose sight of duplication and individual item unit cost. For example, it is a common practice to include volume discount from basic pricing in contracts for most all equipment, facilities, and services in use. Don’t be surprised if this escapes the attention of the person who writes each service order change or the person who pays the bill each month.

INITIATING COMMUNICATIONS COST MANAGEMENT

Communications cost management (CCM) should be initiated or approved by a senior executive or officer equivalent responsible for ensuring organizational expenditures and accounting are in compliance with accounting and financial rules applicable to the organization. This individual should request or be provided with a briefing on known and suspected level of expenditures directly attributable to telephone service (i.e., data communications, website development, deployment, web publishing, content distribution, delivery, e-commerce, two-way radio, satellite, cable television, and any other service that could be deemed to be or directly support the organization’s internal and outside communications).

Communications Cost Management Executive Briefing Content Preparation

An executive briefing should be prepared for by researching basic facts and parameters of the organization’s communications cost accounting and operating practices. The following list of high level actions, analysis, and summary outlines what and how to prepare and present the information:

• Gather all known contracts and billing agreements for voice, data, video, and Internet equipment, facilities, and services. If there are bills being paid according to tariffs on file with the FCC or PUC, obtain a copy of all the tariffs referenced in each billing. If it’s convenient and easy to get, include postage meter usage and overnight shipping, especially departments whose work output is not something physical other than paper documents. Every paper document is a candidate for electronic transmission at a fraction of the cost. And don’t forget that compact discs and other magnetic or optical media contain files that go quicker through the network at a similar fraction of the cost of paper.
  
  
• Gather up at least 3, preferably 6 months worth of paid bills. Each bill should show circuit identification or other deliverable being billed. If the individual items on the invoices are not clear, get an explanation of the item, function, or purpose from the service provider. This should be a written service description that provides greater detail than what is included on the invoice. Usually the invoice references some kind of service description. If the unit price of the deliverable is not included on the invoice or in the service description, request this information from the service provider specific to each invoice.
  
  
• Make a list of all billed deliverables paid for and include department, location, and name of the employee using the item. If it is a common item, such as a data line, list all the computer applications using the facility. Accounting might be able to provide a file or printout with this level of detail.
  
  
• Find out how the organization acquires or otherwise commits to pay for communications services. The two best places to start are purchasing and accounts payable. Is there a central source for coordinating and consolidating service ordering and terminations? Does each department just order a telephone line or other service or facility when they need it and then pay the bill when it comes in?
  
  
• Make a list of all equipment owned or leased and include year acquired, current book value, or unpaid lease obligation, monthly depreciation or lease payment, monthly maintenance cost, and planned replacement date if any. Some or all of this information may be available from accounting asset records or inventory files.
  
  
• Summarize all known vendors by service, equipment, and estimated annual unit and dollar volume.
  
  
• If cost management is an internal function, summarize headcount, professional specialty, and job responsibility of each individual directly attributable to CCM.
  
  
• If a significant level of expenditure is attributable to outsourced or vendor-provided CCM exists, summarize the specific vendors, term of contract, monthly or annual cost, list of work activities and deliverables, and names of key individual contributors responsible for the deliverable, their professional specialty and job title, pay grade, and responsibilities.

The briefing should provide a complete picture of how much money is at stake, what it’s being spent for, and the value of the assets attributable to communications functions by department and organizational function. For example, if a set of server hardware and software exists that is used by a single department in engineering, marketing, sales or other area, make sure that department and the function for which it is used is very succinct and clear.

In addition to being clear and succinct about the cost and use of communications assets and expenditures, it is critical that the process and practices being followed be equally clear. This knowledge and information can be used to rationalize next steps and characterize current status. The outcome should be a realistic assessment of the process and practices with respect to compliance with applicable accounting and reporting rules under which the organization operates. Recognition of potential savings is important because real money is at stake. If changes need to be made in operating practices or procedures to improve the competitive or strategic position of the organization, this is the time to get that on the table for consideration as well.

Next Steps

By the time the work in the executive briefing is completed, it is highly likely that additional steps will have been taken, but not included in the briefing. What needs to be done is to take the high level work items, and expand the details of each to gain deeper insight and understanding of how much money is at stake, potential savings, improvement in service levels, better use of human resources and assets, and the limits of flexibility as represented by spare or unused capacity for growth.

Once you have an overall picture of how much money is at stake, and what it’s being spent for, you can consider and decide the level and timing of effort appropriate for further work because you are now ready to take constructive, proactive ownership and management of communications cost in the enterprise you’re part of. Here’s a high-level list of topics and an explanation of what needs to be done, how to go about it, and a view of value or impact on the organization’s ability to accomplish its mission.

Automated Invoice Validation System

Automated invoice validation requires a file from the telephone company. Most, if not all, telephone company–provided billing information is assembled in standard formats and made available on various transport media or transported across a network connection. If no validation system exists, or for whatever reason it’s desirable to design and build a new one, the process involves getting a file and proceeding to extract the required information from it. The key fields used to match to department allocation are the location and telephone numbers. Information in these fields must be unique. It is highly likely your organization already has unique location names or numbers. In and of itself, the unique name is not sufficient for full allocation. The telephone number making and receiving calls is unique to the telephone company, and they have their own counterpart to the location name, which is a physical port on a switch or access facility into the nearest wire center.

In addition to the key field data, detailed unit count and pricing for all fixed monthly charges and all variable or usage based charges should be extracted and carried over into a file in the organizational accounting system. In addition to the charges for service, taxes and other fees such as access charges and universal service fees should be extracted and maintained in the file. Essentially what has to be done is to take this file with the current charges and perform all the calculations done by the telephone company and re-create the same information, but instead of using the reference pricing they used, use a separate reference database.

Figure 1 is a conceptual diagram of the invoice validation system.

 

Figure 1: Telephone Billing File Interface to Enterprise Accounting System

It must be implemented in the organization’s information technology (IT) infrastructure or built separately and integrated with the other systems.

Note the dotted line from vendor pricing. It will become solid after completion of the standard cost development in steps 4 through 8. Resist temptation to jump too far too fast until you’re confident the following functions are being performed:

• Import the billing file
• Extract the desired data
• Compare the data from the reference file with the billing file and highlights exceptions
• Output a list of invoices with amounts due by department, location, and user name satisfactory for feeding the cost allocation process
• Output a file with taxes and desired details required for allocation and further possible tax treatment
• Output a file with any or all fees in a format acceptable for use by the accounting and reporting systems

This will provide a preliminary look at the difference between manual invoice validation and automated validation. So far the only expenditure is the billing tape (should be under $50 for each telephone company, $100 for one local and one long distance) and the value of the time of the programmer(s). When the bill data of the first service provider(s) is successfully imported into the accounting system, incremental service providers, locations, and service should require less time and occur smoothly. If there are issues with the second, be sure to go back and resolve any common issues with the first one. Over time and with additional service providers, adding more billing into the system will become routine.