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Accounts Receivables- Process improvementsA Telecom UK LLC A case study1ContentBackground. . . . . . . . . . . . . . . . . . . . . . . 1.0Brief systems overview. . . . . . . . . . . . . . 2.0Requirement analysis . . . . . . . . . . . . . . 3.0Situation analysis . . . . . . . . . . . . . . . . . . 4.0Process improvements . . . . . . . . . . . . . . 5.02Background 1.0A Telecom UK LLC, a self-owned infrastructure mobile network operator in the United Kingdom (UK) with a subscriber base of around 5 million customers (3 million household and 2 million business customers) seeks to achieve the following goals as part of their 3 year growth strategy: Expansion of capacity by 15%, Expansion to newer markets within UK andBring up its EBIT from current level of -5% to +10%. 3Background 1.1The company uses customised billing software to handle billing for an average traffic of 60 million customer calls per day.

Bill payment options are as follows: 2 monthly billing cycles (10th - 9th of succeeding month) & (20th 19th of succeeding month) Payments may be made by customers either online, through companys service centres or via third party agents (such as banks).

4Background 1.2A customised CRM softwareis employed by the company to help manage customer relationships and promote loyalty in an intensely regulated, competitive and mature telecom market .

Besides maintaining customer records and tracking customer-related data such as queries, complaints, etc., the CRM is also responsible for providing customer activations, de-activations and suspensions input triggers to the provisioning, network inventory and customised billing systems of the company.5A brief systems overview 2.0Provisioning systemNetwork inventory systemMediation systemData warehouseBilling systemSAP FIPayment gatewayCore Network system

CRM6A brief systems overview 2.1

CRM sends commands to Network inventory system to assign phone numbers, IP addresses to customers.

Customer order initiates CRM to send provisioning command to Provisioning system for allocation of network resources to customer as per order.CRM also intimates customer master dataand services opted for by customerto Billing system.Customer master data from Billing system is updated daily through batch input sessions in SAP FI module used for financial accounting.

7A brief systems overview 2.2On completion of 9th/ 19th of the month, call detail records (CDR) generated by Core network system are rated by the billing system for generation of invoices and despatch to customers. Invoice list from billing system forms basis of accounting sales invoices in SAP FI.Payment information received from Payment gateway are fed intoBilling system and updated by batch input sessions in SAP FI on daily basis .

Transactions in billing system are periodically updated in Data warehouse to serve as raw material for business intelligence applications.8Requirement analysis3.0Management is evaluating several alternatives to help company achieve its 3 year growth strategy.

Considering its5 million largesubscriber base set to grow in the coming years, theyhave decided to engage external consultants to review their accounts receivables process and recommend suitable process improvements. 9Situationanalysis4.0Accounts receivables team consists of 75 full-time employees contributing to an annual average salary spend of 3 million GBPresponsible forthe following tasks:

Accurate andcomplete maintenance of customer master data in SAP FI including customer tax and credit information.Posting of invoices based on invoice list from Billing systemin the respective customer, tax andcommission expenseaccounts.Up-to-date posting of payments received through payment gateway.

10Situationanalysis4.1Flagging of overdue invoices and intimation to CRM team for follow-up.Computation of bad debts provisionafter applyingapplicable collection ratios on receivablescategories i.e. retail customers, inter-connect and prepaid cards distributor segments based on past trends.Write-off of bad debts against provisions based on confirmation list obtained from CRM team.As part of monthly book close, unbilled revenue information for customers from billing system provides basis for recording revenue accrual entries.11Processimprovements5.0A. Reduce billing turnaround time(TAT)and increase customer engagementAccurate and up-to-date customer e-mail ID, billing address and credit/debit card details help ensure minimum billingTAT for the company. Currently, the onus for update of these details lies with the customer which may be done through company's online self-service portal linked to its CRM.It is however recommended that routine monthly customer service calls may be initiated by company's CRM teamto verify customer billing details,obtain feedbackabout service quality and register queries andcomplaints,as required thereby increasing customerengagement with the brand.

12Process improvements5.1B. Strengthen revenue assurance controls to identify and/or prevent revenue leakageInvoice list from billing systemprovides basis for recording receivables entries in SAP FI and parked entries are reviewed by AR manager prior to posting.However, following additional checks may be performed and results documented as part of revenue assurance:i.Check to ensure invoices have been raised and accounted for all active customers in CRM.ii. Review CDRs with invoice list to verify whether services provided have been rated comprehensively and with appropriate rate.

13Process improvements5.2iii. Perform analytical review of receivables posted for the period to identify and resolve exceptional variances, if any.C. Reducecollection costs and collection TAT by introducing phone banking option for bill paymentsCollections are made through payment gateway which interfaces with customer service centres, online credit/debit cards and third party collection agents(incurring commission costs).However, phone banking option for customer payments may be introduced increasing customer convenience, reducing collection costs andcollection TAT.14