The Yelland-Sherick 5 Dimensional Model for Revenue Assurance
The concept of describing revenue assurance in a five dimensional model was first put forward in “Revenue Assurance for Service Providers” by Yelland and Sherick ISBN-13: 978-0755211999.
Although most readers are likely to associate the text with a communications service provider, in practice we have found that the approach works with any type of service provider.
The five dimensional model is designed to assist Service Providers with a starting point for both usage and non-usage revenue assurance and to assist those with an existing approach to develop a coherent and structured enhancement of their revenue assurance capabilities, ultimately providing better integration within the business.
Briefly, the five dimensions are:
- Completeness and accuracy of records
- Completeness and accuracy of charges, both incoming and outgoing
- Identifying potential issues within margins
- Improvements in cash-flow
- Creating a business differentiator through customer specific revenue assurance
Each of these is described in more detail below.
Dimension 1: Completeness and accuracy of records
The single dimension is simply one where progression is along the revenue generation chain for a product or service. It takes the input to one process and ensures that there is a corresponding output, or number of outputs. It takes these outputs and ensures that each output is accurately reflected as an input to the next stage. The process is linear in that the only information required is provided by the processes, there is no requirement to combine information from two different sources to arrive at an output. The result of a one dimensional analysis is confidence in the accuracy and completeness of the information transfer process.
In summary, the first dimension of revenue assurance involves reconciling the flow of data from a customer instigating a chargeable service or order, to the customer being charged for it.
Dimension 2: Completeness and accuracy of charges, both incoming and outgoing
The two dimensional approach takes information from two discrete and unrelated sources, for example the service and the tariff. It combines the information to calculate what the monetary charge should be. This is then compared with the actual charges shown on the appropriate invoice. A single service or product may incur multiple charges and outpayments.
In order to check the accuracy of the charge it is not adequate simply to know the details of the call. A second piece of information, the tariff schedule appropriate to that specific customer, is required. This data is not always carried in the originating record of chargeable event.
In summary, the second dimension of revenue assurance involves confirming not only that the customer is charged for each and every service or order they place, but that the charge is the right monetary value for that service. This means bringing together the data in the first dimension with additional data about the tariff that should be applied.
Dimension 3: Identifying potential issues within margins
The third dimension introduces the concept of planned and unplanned leakages. Unplanned leakages are those inaccuracies that inadvertently occur in the day-to-day operation of a business. Planned leakage is money that the Service Provider chooses to give away through activities such as promotions, incentives and discounts. This planned leakage is often not recognised by the business and hence not managed. From a business perspective, the marketing decisions are made based upon predicted customer behaviour. In response, the revenue assurance activity should be to provide independent assurance that the actual customer behaviour of those taking advantage of the promotion has not invalidated the marketing assumptions.
In summary, the third dimension of revenue assurance builds on the second dimension by not just ensuring customers receive the right charge, but by also comparing these charges to the actual costs incurred in supplying a service based on the change in customer behaviour .
Dimension 4: Improvements in cash-flow
The fourth dimension recognises that, in business, cash is king. With its cross-functional remit and access to data sources, the Revenue Assurance function is well placed to take ownership of activities to improve the cashflow.
If the cash is not collected when planned, the Service Provider can incur additional costs. One significant reason why cash is delayed is because the invoice being presented does not match the customer’s expectations. A query or complaint is raised and collection is delayed until the issue has been resolved. Identifying common causes for these queries results in an improvement in the cash collection cycle.
In summary, the fourth dimension extends the three dimensional analysis by also evaluating the timing of actual cashflows.
Dimension 5: Creating a business differentiator through customer specific revenue assurance
The fifth dimension considers the relationship between the Service Provider and its major customers. With many Service Providers the profitability will be driven by the top 10 or 20 customers. The result of such a customer deserting and moving to the competition can result in a significant impact on the bottom line. The traditional way this has been handled is to offer inducements such as lower rates which distort margins. By developing a bespoke RA plan for these customers, it is possible for both parties to win, without necessarily compromising the margins involved. The solution is to agree a specific set of Revenue Assurance activities which the Service Provider undertakes to provide confidence to the customer in the accuracy of the invoice. This reduces the customer’s effort in checking the invoice, providing him with a lower staff operating cost, a cost he would incur should he churn to a Service Provider who does not offer that facility.
In summary, the fifth dimension turns revenue assurance into a marketable service in its own right, offered to customers as a way of adding value to their business and reducing their costs.