This is part 3 of a series of blogs by FIQAS about optimizing billing processes. In this blog, we delve into the factors that make the rating process complex.
A simple definition of rating is ‘setting a rate.’ That sounds quite straightforward. However, correctly calculating invoices with all the underlying amounts can become quite complex.
For many parties, this part of the order-to-cash process poses the biggest challenge. An appealing new proposition needs to be quickly introduced to the market. New propositions are determined by Sales and Marketing. The technology must then be capable of transparently and seamlessly calculating these to be passed on to your customers. Correct amounts on invoices imply satisfied customers, prompt payments, and a healthy cash flow, without operational stress afterward. Do you recognize this challenge?
In the rating process, invoice rules are generated for the next process step, the actual creation of the invoice. The starting point for rating is a set of clean data in a usable format: the result of the data collection and mediation process. If this data does not yet contain price information, it must be added in the rating process.
There are various factors that can make the rating process complex. Especially when they occur in combination, which often happens in practice, depending on the commercial propositions companies offer. Above-average complexity can, for instance, be found with parties that combine products, services, subscriptions, and usage in their strategy.
This leads to some typical elements that the process and billing platform must be able to provide for:
- Timing is crucial in rating. Price plans and number plans are valid for a specific period, and consumption is realized on a certain date. If this time-bound information is stored neatly and in an accessible manner, the correct price can always be applied in the rating process.
- In propositions consisting of various elements, consumption data can occur in different variants. The rating system must recognize and process all variants.
- In the telecom market, rating must cater to specific elements such as calculating call bundles and distinguishing between prepaid and postpaid. Interconnect traffic is also typical for this market.
- Elements such as indexing, discounts, offers, special contract agreements, long-term obligations, or changes during the contract term add extra complexity.
- System performance and good interfaces between systems are crucial when the rating process needs to handle large amounts of data, often in (near) real-time.
- Rating offers more possibilities than just calculating invoice rules for customer invoices. The same process technology can be used to calculate commissions for partners or to verify the amounts charged by suppliers and enablers for accuracy. Also, propositions and margins can be calculated through the rating mechanism in response to the question ‘what if…’.
- Technical issues such as rounding numbers or dealing with full minutes can have a significant impact on margins.
- In rating, there are often variable scenarios and complex business rules. The challenge is to set up the process in a maintainable and manageable way, even in the long term. This is best achieved with a generic rating platform where processes can be set up without customization.
- Rating deals with details. Even in seemingly straightforward ‘all you can eat’ propositions, rating is necessary, for example, for fair use, fraud prevention, margin reporting, and auditing.
- Lastly, a crucial complicating factor: the calculation of VAT, which in every country must comply with its regulations. A correct calculation starts in the rating process.
Rating in Practice
In the rating process, invoice rules are generated for the next process step. To illustrate, here are a few examples from FIQAS’s practical experience.
Example 1: Stacked Bundles
A business telephony provider has a client that wants to purchase bundles of 500 minutes per month for 50 employees. The provider chooses to offer these bundles as a ‘stacked bundle’ proposition, where the realized consumption is evaluated across all purchased bundles. If a user consumes more than their bundle, the excess usage is settled with the bundles of colleagues who have not fully used theirs. This can continue until the total company bundle is exhausted.
This means that the customer doesn’t pay for excess usage on one hand while having unused balances on the other. Additionally, adding or removing individual users becomes easier. With every user added or removed, the total company bundle grows or diminishes. For rating, this means that the current total usage of all users must be calculated at any given time. For each new call, it must be verified whether the usage falls within the total bundle of all users.
Example 2: Near Real-time Rating
Some FIQAS clients process more than 3 million calls (CDRs/UDRs/consumption records) per day. Near real-time rating is necessary to make data available via the web portal at any time for clients but also to quickly detect extreme ‘high usage’ for fraud prevention. The rating process involves continuous rating, checking results, and comparing them with benchmarks.
Example 3: Individual Price Agreements per Customer and Categorization of CDRs
Telecom providers prefer custom price agreements for their business clients. These can be recorded in separate price tables for each customer, incorporating discounts into the included rates. With a customer base of some size, this results in an unwieldy number of price plans. To make this less complex and more direct, in one of FIQAS’s telecom clients, the discount percentages per level (such as prefix, call type, etc.) are applied to one standard price table. In the rating process, the consumption records (CDRs) are classified for the price addition. Then, the price can be calculated efficiently, which can be split on the invoice as per the end customer’s preference. This way, propositions of the type ‘bundle X is free calling to zone Y’ can be made transparent.
Example 4: Cost Components per CDR
When it is necessary to separately invoice different cost components, it might be required to rate consumption records separately. Several FIQAS clients, for instance, differentiate between components for purchase, processing (platform costs), and terminating costs.
In the rating process, each consumption record must be split based on codes in the record and provided a price per component. Depending on the agreements with the client, these components are either combined on the invoice or shown as separate items. Of course, it is crucial, also for accountability, that the separate components of each consumption record can be traced back to the original record.
Rating: Translating Propositions into Invoice Amounts
In commercial enterprises, Marketing generates dynamics that impact the billing process. Various propositions need to be translated into comprehensive back-office processes. That’s where complex calculations happen, forming the basis for the invoice.
Rating is a critical process directly related to cash flow. A process that’s so important – rating as a sub-process, but essentially the entire order-to-cash process – demands powerful and flexible software.
Other Topics and the Purpose of This Series:
- Part 1: Invoicing, It Can Be Better
- Part 2: Data Collection
- Part 4: Invoice Production and Distribution
- Part 5: The Collection Process
The experts at FIQAS have a wealth of experience in setting up, executing, and optimizing billing processes. The business cases we encounter often narrow down to one or two of the aspects mentioned above. With this series of articles, we aim to encompass the bigger picture.
In the next part of this series, we will extensively cover the processes and best practices around the production and distribution of invoices.
Dennie van Beelen
FIQAS has been an authority in the field of invoicing processes since 1989, serving renowned clients both domestically and internationally, operating from Aalsmeer.