Telecom Expense Management (TEM) – Auditing Telecom Invoices to Detect Cost-Saving Opportunities

The telecom expense management (TEM) industry has grown in size over the last few years, concurrent with the evolution of telecom technology, the demand for bandwidth, and the rising use of wireless devices and video conference services during the pandemic.

As a result of these trends, medium-sized and large corporations have resorted to using the services of 3rd-party providers specializing in the analysis of telecom vendor services and billing in order to curb the increasing weight of telecommunication services on their P&L.

As part of their mission, telecom expense management specialists like RadiusPoint audit the invoices issued by telecom and internet service providers, to detect cost-saving opportunities and erroneous charges driving up the cost of the lines.

A few definitions

To do their invoice analysis, telecom expense management specialists will have to gather specific data points from the client and the telecom operators billing the client. Here are 11 data points that always must be collected by the TEM specialist. The TEM specialist provides the 12th one in the following table to the client.

Some definitions are necessary:

Service Address / Identifier The physical location or unique identification of the client’s telecom service
Service Provider The company that provides telecom services to the client
Master Account Number The main account number associated with the client’s services from the service provider
Sub-Account Number Secondary account numbers tied to the master account often used to track usage and costs for specific departments or locations
Circuit ID/Number A unique identifier for each circuit or line that connects the client’s service location to the service provider’s network
Circuit Type The technology used for the circuit, such as T1, E1, DSL, MPLS, or Ethernet
Port Size The bandwidth capacity of the port (measured in Mbps or Gbps) used to connect the client’s equipment to the service provider’s network
PVC (Permanent Virtual Circuit) A virtual connection between two points on a network that simulates a dedicated physical connection
DLCI (Data Link Connection Identifier) A unique number assigned to a PVC in a Frame Relay network, used to identify the virtual connection
CIR (Committed Information Rate) The guaranteed minimum data transfer rate provided by the service provider for a particular circuit
Un-Audited MRC (Monthly Recurring Charge) The monthly cost for the telecom service as billed by the service provider, before the audit
Audited MRC The corrected or optimized monthly cost for the telecom service, identified during the audit process


Data points: how they are used for the audit

Each of the data points above has a role in the auditing process which will eventually lead to identifying potential savings or billing discrepancies. The table below summarizes the use of these data points.

Data Point Auditing Purpose & Identifying Savings/Discrepancies Reference/Source Document Flagging Cost-Saving Opportunities or Billing Discrepancies
Service Address / Identifier Verify service locations and validate service usage Service provider invoices, contracts, and client’s internal records Compare the service address with the client’s records to identify unused services or locations
Service Provider Ensure appropriate providers and services are being used Service provider invoices and contract Look for better rates or service options from alternative providers or negotiate with the current provider
Master Account Number Verify account accuracy and organization Service provider invoices and contract Ensure charges are billed to the correct account and identify unauthorized charges
Sub-Account Number Analyze costs and usage by department or location Service provider invoices and client’s internal records Identify high-usage areas, reallocate resources, or uncover billing errors
Circuit ID/Number Validate the circuits and their usage Service provider invoices, contract, and circuit inventory Compare circuit IDs with inventory to identify unused circuits or billing discrepancies
Circuit Type Assess if the correct technology is being used Service provider invoices, contract, and client’s internal records Evaluate if a more cost-effective or efficient circuit type is available
Port Size Check if the bandwidth capacity meets the client’s needs Service provider invoices, contract, and client’s internal records Identify underused ports or opportunities to upgrade/downgrade for cost savings
PVC Validate virtual connections between network points Service provider invoices, contract, and client’s internal records Ensure PVCs are correctly billed and identify unused or unnecessary virtual connections
DLCI Confirm Frame Relay network connections Service provider invoices, contract, and client’s internal records Verify DLCIs match the client’s records and identify billing discrepancies
CIR Ensure the guaranteed data transfer rate is being met Service provider invoices, contract, and client’s internal records Monitor actual usage vs. CIR to identify opportunities for negotiation or cost savings
Un-Audited MRC Establish a baseline for monthly telecom expenses Service provider invoices Compare with audited MRC to determine cost-saving opportunities
Audited MRC Identify optimized monthly telecom expenses after the audit Service provider invoices and audit findings Validate the effectiveness of the audit and track potential savings


Cost-saving opportunities

Once the information has been collected, and the telecom operators‘ billing has been analyzed, the TEM specialist looks for specific types of cost-savings their client can make on their telecom bills.

Here are 10 types of cost-savings a TEM specialist would look for:

  1. Unused services: Discontinue services or circuits that are no longer in use, which helps reduce monthly costs.
  2. Negotiated rates: Renegotiate contracts with the service provider to obtain better rates or discounts on services.
  3. Service bundling: Combine multiple services or features into a bundled package to get discounted rates.
  4. Optimized service plans: Choose service plans that better match usage patterns, such as unlimited plans for high usage, or pay-as-you-go plans for variable usage.
  5. Technology upgrades: Replace outdated or inefficient circuits with newer, more cost-effective technologies.
  6. Volume discounts: Leverage the client’s purchasing power to negotiate volume discounts based on the number of lines or the total spending.
  7. Optimization of port sizes: Adjust port sizes to match the client’s bandwidth requirements more accurately, avoiding over- or under-provisioning.
  8. Resource reallocation: Identify high-usage areas and redistribute resources or services to better align with the organization’s needs.
  9. Tax and regulatory fee adjustments: Verify and correct taxes and regulatory fees, which can result in cost savings if errors are found.
  10. Alternative providers: Research and consider alternative service providers that can offer better rates or service options.

Typical telecom overcharging situations and billing errors

TEM specialists use proprietary SaaS platforms to automate the analysis and processing of telecom bills. These are complex systems that compare the client’s current telecom invoices with the vendor’s conditions, the line number, and the device ID when applicable.

The function of these SaaS platforms is to accelerate and systematize the processing of telecom invoices, which is a big organization with hundreds of retail locations and can quickly become a monthly nightmare for their Accounts Payable department. In fact, it is not uncommon for a large-size organization to have to process over a thousand telecom invoices in the course of a month. This represents a very large workload, and when reduced by automation, sizable soft-dollar savings for the organization.

The TEM specialist sets up the SaaS platform to flag out any inconsistency in telecom billing, and mismatch with known rates. Here is an example of 10 common overcharges and billing errors found in a telecom operator’s invoice:

  1. Double billing: Charges for the same service or feature appear multiple times on the same invoice.
  2. Incorrect rates: Charges that do not match the contracted rates or discounts agreed upon with the service provider.
  3. Unauthorized charges: Charges for services or features not requested or approved by the client.
  4. Misapplied taxes: Incorrect application of taxes or regulatory fees, resulting in overcharges.
  5. Billing for disconnected services: Charges for services that were previously disconnected or terminated.
  6. Incorrect usage charges: Overstated usage charges due to metering errors or incorrect data.
  7. Billing for non-existent locations: Charges for services at locations where the client does not have any telecom services.
  8. Incorrect service plan charges: Charges for a more expensive service plan than the one agreed upon or requested.
  9. Incorrect circuit charges: Charges for circuits that are not in the client’s inventory or have been assigned incorrect circuit IDs.
  10. Late payment fees and penalties: Unwarranted late payment fees or penalties that are not justified based on the client’s payment history or the terms of the contract.

The job of the TEM specialist can just be to flag these errors and let the Accounts Payable department deal with the vendors to recover credits and refunds.

But TEM specialists like RadiusPoint offer their clients to take over this part of the service, and recover credits and refunds themselves, as well as follow up with billing corrections so that the same errors don’t reappear in the next billing cycle.

By identifying cost-saving opportunities and billing discrepancies, and requesting refunds and credits from telecom operators, Telecom Expense Management specialists ensure their clients can curb the rising costs of telecommunications services, spend no more than what is necessary for their organization to operate, and offer their clients valuable business intelligence in regard to the utilization of their telecom assets and their allocation by cost centers. This enables an organization to make better-informed decisions in procurement, cost allocation, and technology.