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One time vs. Ongoing Audit – What is right for your organization?

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One time vs. Ongoing Audit – What is right for your organization?

By Sharon Watkins, CEO of RadiusPoint

There are many questions that come up when considering a one time audit on your telecom or utility invoices versus an ongoing monthly audit.

After years of research, hands on experience, and daily Client interactions, the ongoing audit would most often be more beneficial to an organization.

  • Would you rather have overcharges refunded to you each month or would you rather wait for 2 years or more to have an overcharge refunded to your company?
  • How much money are you leaving on the table for taxes and interest when you are waiting 2 years or more for an overcharge to be refunded to your company?
  • Are the telecom vendors really only giving back 6 months or less of an overcharge found in their favor?
  • Are there really that many overcharges identified during the one time or ongoing audit? Is it worth all of the time involved in gathering invoices?
  • When you use an Expense Management company, do you relinquish all of your control over the invoices?
  • Have your Telecom vendors reduced their refund policy for erroneous charges to 6 months or less?

One time vs. Ongoing Audit – What is right for your organization? 3These are just some of the questions that arise when contemplating a one time audit or the use of an Expense Management company to manage the telecom, wireless and utility invoices and services. Many organizations plan to have their telecom or utility invoices audited every 2 years.  Would it be more advantageous to have that audit monthly and recoup your overcharges each month instead of having your vendors play with your money over that two year period?

There are many things to consider when starting the process of the telecom or utility audit.  If the services are being sent out for a Request for Proposal (RFP), there are certain time consuming tasks you must consider.  These tasks would have to be completed every two years, even if you hire the same audit firm each year:

  • Time to create the RFP
  • Time to evaluate the RFP
  • Expertise to evaluate the different service offerings, i.e. level of service – surface audit or in-depth audit
  • Time involved with vendor meetings
  • Contract negotiations
  • Gathering 2 years of invoice copies
  • Gathering vendor contracts
  • Gathering other needed documentation for auditors
  • Answering questions from auditors regarding the environment, services and locations

The gathering of the documents and time involved in the RFP process may sap your team of time that they need to perform their daily tasks and for some organizations, the time constraints are the biggest obstacle in getting the audit on the schedule.  Maybe it would be easier for the auditor or an Expense Management company to get the invoices on a monthly basis.  But how would they be compensated for this extra work?

An Expense Management company for telecom, wireless or utility invoices would be receiving your invoices monthly as a part of their services to manage the full lifecycle of the invoices, from receipt to payment.  If this vendor is already processing your invoices and allocating the charges on a monthly basis, performing a monthly audit is the next logical step in managing the expenses.

The financial arrangements vary with the audit firms that are hired to perform the one time audit.   Knowing what type of arrangement that you are signing on for is imperative as a complete and thorough understanding will eliminate any confusion on cost.   While it may be appealing to hire a firm on a contingency basis, i.e. they only share in what is found, just know that with this type of arrangement, there can be many pitfalls that will ensure that you are not getting a full and complete audit.

Some of the issues of a contingency based audit are:

  • Typically only identifies low hanging fruit
  • A full inventory of all services and cost is NOT completed
  • There is a charge for savings identified, not realized
  • A Cost Avoided charge applies to any overcharges identified or optimization recommendations whether they are implemented or not.
  • Your team must identify every issue that has already been reported to the vendor before the work starts, or the audit firm will be able to take credit for any refunds or Costs Avoided.

What is involved when your audit firm only identifies the low hanging fruit?   This most often involves very simple contract issues and third party charges that are on your local service invoices.   This type of surface audit involves your audit firm providing a report of your overcharges or refunds without providing a complete inventory of your services, i.e. every phone number or circuit number identified with the physical address, all monthly charges detailed and the use of the service.

When do the Cost Avoided charges come in to play and how are these calculated?  Most of the Contingency Audit firms expect to be paid on Cost Avoided for a specific period of time.  This would involve the audit firm identifying a phone line that is no longer in use, making a recommendation to cancel the line and then calculating a Cost Avoided for a 12 or 24 month period.   This may or may not involve the audit firm actually canceling the line, so it is imperative that you know who will be responsible for ending the services so that your organization will actually realize the savings.

The example below outlines what a Contingency based audit would charge.

Refunds Identified Example of Error Monthly Fee in error Refund Achieved Payment to Audit Firm
35% of One time credit Long Distance plan erroneously placed on local service invoice $100.00 $600.00 $210.00 ($600.00 x 35%)

Possible loss of 18 months of overcharges $1,800.00 due to vendor refund restrictions

35% of One time credit Contract error on MPLS services $52,000.00 $312,000.00 $109,200.00 ($312,000.00 x 35%)Possible loss of 18 months of overcharges $936,000.00 due to vendor refund restrictions

Note the Refund Achieved – this involves a 6 month refund without any interest or taxes being provided as a refund by the vendor.   Telecom and Utility vendors differ in their refund policy and over the past 4 years have shortened their refund time to six (6) months or less.   Many of the vendors have a one (1) month refund policy that has to be fought against by the audit firm just to retrieve monies overpaid by the Client.

Optimization Cost Savings Example of Recommendation Monthly Fee (includes taxes and fees) Cost Avoided Payment to Audit Firm
35% of Cost Avoided calculated for a 12 month period Remove phone line that is no longer needed $85.00 $1,020.00 ($85.00 x 12 months) $357.00 ($1,020.00 x 35%)

 

35% of Cost Avoided calculated for a 12 month period Implement EFax technology to eliminate fax lines at 100 locations $8,500.00 $102,000.00 ($8,500.00 x 12 months) $35,700.00 ($102,000.00 x 35%)

So would it be better to have this identification or errors and possible Cost Avoidance as a part of an ongoing monthly audit for all of your telecom and utility invoices?

Let’s explore the pros and cons of each service.

Pros and Cons of One Time audit

Pro Con
Refund sharing – no fee until an error is identified Cherry Picking or surface errors are found; no deep dive into services
Cost Avoided sharing – No fee until a fee is identified as avoidable or a service is optimized Possible dispute over who found the Cost to avoid or who optimized the services

Could result in having to move to a different vendor = additional cost

Could be a requirement whether the change is made or not

Refunds identified as errors can be retroactively claimed for up to 6 months; could be +/- months depending on vendor The error could have occurred the entire 2 years but the vendor only allows for a credit equal to a fraction of the overcharge

The larger dollar amount of the error, the longer the vendor will take to provide the refund, could take months to recover your overcharges

Dealing with audit firm only once every 2 years Time spent in gathering invoices, contracts and other needed information every 2 years

Pros and Cons of Ongoing Audit through Expense Management

Pro Con
Eliminates the Accounts Payable tasks for receipt to payment of invoices Monthly fee for lifecycle management; receipt to payment of invoice
Eliminates paper invoice handling by organization; Imaging performed by Expense Management company Perceived loss of control of invoices
Elimination of error proactively on a monthly basis through monthly audit of invoice Addition of Expense Management company working with the organizations vendors
No refund sharing/Errors are identified monthly through audit

 

No Cost Avoidance fees/Detailed monthly processing allows for optimization monthly

Hiring an Expense Management company to manage the lifecycle of your telecom, wireless and utility invoices may make more sense, if your company has more than 50 locations, multiple wireless users, has had or plans to have acquisitions or divestitures or if there are staffing constraints.   An Expense Management firm can offer the following services that can augment your current staff, bringing soft dollar savings to your bottom line, as well as, identifying errors or optimization that will result in hard dollar savings.

Invoice Processing                                                          Expense Allocation

Invoice Payment                                                              Invoice Imaging

Contract Management                                                  Reporting at the Cost Center or Location Level

Reporting at the End user level                                 Interface with Accounting Software

How would your organization be affected if you hired an Expense Management company to manage the full lifecycle of your invoices on a monthly basis that included a monthly audit instead of hiring a firm to provide a one time audit?

In the example below, the assumption will be made that the organization has $3MM annual expenses to be managed and the refunds and Cost Avoided in the above Contingency Audit example were identified during the one time audit.

One time Audit Components Annual cost/expense
Cost of Accounts Payable daily tasks in processing the invoices $97,128.00
Hard Dollar Savings for Refund identified and recovered in the one time audit – Paid to Audit Firm $210.00 + $109,200.00 = $109,410.00
Hard Dollar Savings for Cost Avoided in the one time audit – Paid to Audit Firm $357.00  + $35,700.00= $36,057.00
Total for 12 month period (excludes time involved to create and run RFP process) $242,595.00

Annual Cost for Expense Management firm in above example: $42,000.00

Savings to utilize an Expense Management firm: $200,595.00

The savings would have to be viewed in a couple of ways due to the refund and Cost Avoided differences in the one time audit and the ongoing audit.  The ongoing audit will allow for an immediate refund or Cost Avoided, eliminating the ongoing overpayment of an error for a 24 month period.  The one time audit will most likely leave 18 months’ worth of overpayment that cannot be recovered due to the vendor’s dispute and refund policies.  In this example, the loss was equal to over $900,000.00 because the audit firm could not get the vendor to refund the entire 24 months of erroneous billing.

So what makes more sense for your organization?  Managing your invoices monthly and using an outside firm to audit every 2 years or having monthly assistance with the full lifecycle management of your telecom, wireless and utility invoices coupled with a monthly audit?

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Pandemic risks eclipse treasury priorities as businesses diversify investments to mitigate impact

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Pandemic risks eclipse treasury priorities as businesses diversify investments to mitigate impact 4

The Covid-19 pandemic has shunted aside existing challenges to sit atop treasurers’ priority lists, according to “The resilient treasury: Optimising strategy in the face of covid-19”, a survey run by the Economist Intelligence Unit (EIU) and sponsored by Deutsche Bank.

The results show that treasurers are looking to diversify their investments in a bid to mitigate the pandemic impacts, including heightened liquidity, foreign-exchange and interest-rate risk. As many as 55% plan to increase investments in long-term instruments, with 48% increasing investments in bank deposits, another 48% in local investment products, and 47% in money-market funds.

“The Covid-19 pandemic has drastically altered business plans in 2020. It has placed a certain level of strain on treasury processes, but the challenge it presents has been managed by traditional treasury skills. It is clear that pandemic risk will be on the treasury checklist for years to come, but it is one of many risks the department faces and will continue to manage,” says Melanie Noronha, the EIU editor of the report.

Despite Covid-19 looming large, other challenges wait in the wings. Notably, the replacement of the London Interbank Offered Rate was identified by 38% of respondents as the main challenge of their function.

Technology, meanwhile, continues to be a pressing issue, with treasury teams becoming increasingly reliant on IT solutions. Here, data quality is rising up the list of concerns. Already highlighted as very or somewhat concerning in 2019 by 69% of respondents, the figure rose to 78% in 2020. Acquiring the necessary skill sets to realise the full benefits of this data and technology is also a continuing priority – with some progress registered from last year. In 2020, 30% of respondents say they have all the skills they need to manage technological change, up from 22% in 2018.

“Treasury’s focus on technology is not only helping teams operate more efficiently in a remote-working environment, it has long played – and continues to play – a key role in realising their long-term priorities,” notes Ole Matthiessen, Head of Cash Management, Corporate Bank, Deutsche Bank. The survey shows that

Release 1 | 2  managing relationships with banks and suppliers (highlighted by 32% of respondents) and collaborating with other functions of the business (also 32%) remain top of the agenda – and seamless digital systems will help give treasurers the bandwidth and insight to be more effective partners for both internal and external stakeholders.

Based on a global survey of 300 treasury executives, conducted between April and May, the survey explores stakeholders’ attitudes among corporate treasurers towards the drivers of strategic change in the treasury function – from the pandemic through to regulation and technology – and their priorities for the next five years.

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Digital collaboration: Shaping the Future of Finance

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Digital collaboration: Shaping the Future of Finance 5

By Ryan Lester, Senior Director of Customer Experience Technologies at LogMeIn

With heightened economic uncertainty and increased customer expectation becoming the norm in the banking industry, it is understandable that the sector is struggling to keep afloat. Due to its precarious nature, banking institutions are trying their best to ensure they remain relevant in the competitive landscape and guarantee that their customers continue to be a priority.

When it comes to the first half of this year, the pandemic has shown how easy it is for industries to fail. Customers and companies alike had to get used to the new normal, as physical locations started to close. The banking industry felt this first hand, as banks were made to restructure how their business ran, with restricted opening hours and a wider push to motivate people to use online banking.

While some had already embraced digital options prior to the pandemic, this proved to be a stark contrast to the elderly population, who frequently visited branches to access their finances. Moving forward, banks have to adopt new methods to ensure customers get the most out of our their accounts, without their experience suffering.

Heightened Customer Expectations

When the pandemic reached its peak, people were encouraged to use online banking, as telephone contact was under strain with long waiting times and pressure mounting on contact centre agents. According to Fidelity National Information Services (FIS), which works with 50 of the world’s largest banks, there was a 200% jump in new mobile banking registrations in early April, while mobile banking traffic rose 85%.

With branches remaining closed, customers were continuously being urged to limit the amount of calls they made to the most urgent cases and consider whether they could solve their answers through mobile online banking or checking the company website. Although already being adopted in pockets of the industry, this was a real catalyst that spurred banks to up their game on digital channels and with self-service tools.

Banks are challenged with precariously balancing customer needs with the cost of personalised support. With the demographic of customers changing over the last few years, customers are becoming increasingly younger and more comfortable with technology. Influenced by the “Amazon Effect”, their expectations have raised to an all-time high, placing record strain on the sector

Customer experience isn’t just about support anymore, it’s about serving your customer at every point in the journey. Companies have an opportunity to elevate the experience they provide by moving beyond one-and-done interactions to create continuous engagements with their customers. It is starting to become a primary competitive differentiator in the market and one that doesn’t have a lot of variation. Deploying AI chatbot technology will be able to strategically help banks improve customer experience and raise the level of support that agents provide.

Digital collaboration: Working around the Clock

The benefits of adopting digital channels and self-service tools are second to none. By implementing chatbots, fuelled by conversational AI, banks will be able to help serve a wide range of customer queries and ensure they are protected from fraud and scams.

Ryan Lester

Ryan Lester

Conversational AI is exactly what it sounds like: a computer programme that engages in a conversation with a human. When it comes to service delivery, conversational AI can be deployed across multiple channels to engage with customers in ways that effectively address evolving customer needs. At a time defined by COVID-19, self-service tools such a conversational chatbots can work around the clock to solve customer queries in a concise and timely way. Of course, self-service tools won’t completely replace human agents in the banking industry, but they will help companies re-distribute customer traffic and workflows in ways that enhance customer experience. Self-service tools fuelled by conversational AI can also improve employee experience because service employees can handle fewer, but higher-level service tasks that chatbots might escalate to them.

Adopting new tools to help facilitate consistent and concise answers and help maintain customer experience is on the forefront of many industry minds. Banks such as the Natwest Group have seen this first-hand and are testament to the benefits that a good digital experience can provide. Simon Johnson, Capability Consultant, Digital at NatWest Group highlights NatWest’s use of digital tools during lockdown, “Over the last few months, we’ve learnt how to use digital tools to help our employees remotely. From a banking perspective, there have been a lot of changes including base rates, waive fees and the best ways of contacting our vulnerable customers, ensuring we keep them protected from frauds and scams.

“By introducing our Bold360 chatbot interface, Ella, we’ve been able to get relevant information out quickly, apply the best practice and ensure that our customer journeys are being developed correctly. Due to the volume of questions, some of our customers were finding themselves waiting longer than usual. So digital channels become essential to helping reduce the wait time. Using Bold360, we were able to mitigate issues and answer questions in a more timely way through our chatbot.

“Moving forward, as we open more digital services, we are analysing our data to see if customer will return back to their usual way of banking, now that they’ve seen what a good digital experience can provide. Either way, with Ella, we are ready.”

Chatbots and Humans: The Best Option for Customer Service

Over the last year, banking institutions have recognised the power that digital collaboration can have to their success. Delivering exceptional customer service and support is key for any business wanting to stay competitive in today’s market and banks are especially challenged with precariously balancing customer needs with the cost of personalised support. Leveraging the right technology, such as AI-powered chatbots, will enable the banking industry to provide better support and a more robust customer experience in the long term. Other institutions must follow suit, or risk becoming obsolete.

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A sleeping digital giant wakes? 4 key trends accelerating payments transformation in the US

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A sleeping digital giant wakes? 4 key trends accelerating payments transformation in the US 6

By Lauren Jones, International Payments Ambassador, Icon Solutions

The US payments industry is undoubtedly ripe for change. Before the unprecedented shock of COVID-19, digitization and payments transformation initiatives had been organic, piecemeal and predominately the preserve of the largest banks.

Now, increasing pressure means that financial institutions of all sizes are working to define a digital strategy to unlock new opportunities, drive business value, and stay competitive. But beyond the immediate impact of COVID, what underlying trends are accelerating digitization in the US?

  1. Real-time payments – the stimulus for change  

Real-time payments have been met with a degree of caution by US financial institutions. Risking traditional profit generators in return for potential revenues down the line is a gamble many have not been willing to take. But immediate payments are coming to the US whether banks like it or not.

Major payments infrastructure providers, including NACHA and The Clearing House (TCH), have moved to encourage immediate payment adoption in recent years. But the Fed, frustrated with a slow rate of progress, has announced that it is pressing ahead with the implementation of its FedNow system (despite significant industry objection). Although the Fed’s true intentions are open to interpretation and this may just be a play to accelerate private initiatives, it is a clear signal that they mean business.

This means holdouts risk their own ‘Kodak’ moment if they miss the huge opportunities in front of them by fixating on traditional revenue streams. Banks are in a position to support innovation across entire industries such as healthcare, which could be released from the constraints of paper-based bureaucracy and slow, expensive transactions.

Another opportunity that can be unlocked via instant payments is ISO 20022 (used in the TCH RTP system). It is the future of payments messaging standards and can greatly enhance various payments processes through increased data-carrying capabilities. More importantly given the current climate, citizens reliant on federal or state support can benefit from RTPs combined with additional data to immediately access emergency funds.

  1. The kids are growing up

The US is getting older. Consumers who were 10 when the iPhone first launched are now 23. This means we are seeing a ramp-up of digitally native Gen Z consumers (roughly those born between 1995 and 2010) accessing banking services.

Demographics are an inexact science and not perfect predictors (there are technophobe college students and 100-year-old Instagram influencers), but we can detect noticeable trends.

Younger customers don’t usually choose a bank because there is an ATM in their neighbourhood, a slightly better interest rate or an advert in the newspaper. Rather, a strong digital presence, personalised tools, rewards and experiences, and the trusted recommendations of friends and family, will have a more significant impact on customer acquisition.

Banks must look at the effect this will have on their longer-term digitalization strategy and be able to segment what this emerging customer base might want and how they will interact in years to come.

  1. Checkmate? Evolving corporate requirements

    Lauren Jones

    Lauren Jones

Corporate treasurers are people and their experience of seamless, immediate payments in their personal lives shapes expectations in the workplace. Although check usage for business-to-business (B2B) transactions is still the norm in the US and barriers remain, corporates are increasingly demanding the ability to transact in a real-time, omnichannel environment, 24×7.

The benefits are clear. Corporate treasurers stand to enjoy enhanced liquidity management and transparency, greater control over payments and enhanced data for reconciliation purposes. And for consumers, alternative digital payment options such as buy now pay later promote choice and flexibility.

  1. Increasing competition

A significant consequence of emerging consumer and business demand for digital offerings is the increase in competition from fintechs, technology giants and other third-parties. Traditionally, incumbent banks have enjoyed the advantage of consumer trust to offset more limited innovation. But as consumers become more comfortable entrusting their financial transactions to non-banks, banks must differentiate and digitize to remain competitive.

Data is where the technology giants excel, and their ability to personalise experiences and emotionally connect with their users is unprecedented. Banks need to learn from the positive aspects of this model to better understand their users and deliver meaningful, useful products and services.

For data to become the cornerstone of a banks’ customer relationship and take services to the next level, breaking the channel silos and extracting value from a comprehensive dataset will be decisive. But with only 18% of banks reporting that they are in the process of shifting from a transactional revenue model to a data-driven revenue model, this work has some way to go.

Taking customer propositions to the next level

Customers now expect services that work for them, not their banks. All banks, no matter the footprint, need to move quickly to offer a broad digital service platform that adds value to both the customer and the bank.

By defining a robust payments transformation strategy, banks of all sizes can remain fiercely competitive by rapidly lowering costs, unlocking revenues and promoting innovation

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