Finance / Accounting
The results of the analysis of leading countries especially in Europe countries shows that there is a wide variation for the working capital performances, with the accounts receivables management being fairer than accounts payable management in some areas. The stronger working capital performance experienced in some areas can be attributed to the low amount of accounts payables with the billing system seeming to be quite effective. There seems to be stronger payables performances given that the net outstanding receivables are greater than the net outstanding payables. The analysis shows significant evidence that there is a wide variation of the means of working capital management aspects. It shows that the strategies used by the telecom firm with respect to the days for the outstanding payables vary with customers located in various countries. The analysis further shows that the efficiency of working capital management is improved by reducing the working capital days , which could lead to improved profitability of this firm in regard to profit margin. Where there is seen a non-existence of unbilled revenue can be said to lead to large proportion of the accounts receivables. Performance of the working capital in individual countries also vary widely and the collection strategies utilized by the firms may be wanting given that the large amount of receivables shows a poor aspect of the working capital management.
The dynamic telecommunications market normally experiences unprecedented degree of customer delinquency. There is always pressure for growth and retention of the subscriber base and higher bills which results from the convergence of services and this may make the telecommunications operators to face increasing amount of write-offs. There can, therefore, be an increased pressure on the management of debt to recover any amounts that are outstanding (Clements, Donnellan & Read, 2004). The telecom collections remain one of the largest drivers of the delinquent accounts that are normally placed with collection agencies. A strategy that can be used for this collection is a telecom collection segment. Such a good collection strategy should in place so as to create a sustainable and profitable model of revenue collection, so that it addresses various main items which consist of segmentation, dialing strategy, skip tracing and letters (Scholey,2008). The aspect of segmentation is important in the collecting telecom accounts given the larger placed volume that comes with them (Schaeffer, 2002).
The first step relating to this strategy involves the identification of contactable accounts, the amounts in which the phone numbers contained in the file have the highest possibility of reaching the customer. This is important considering that a telecom organization will be operating in an environment that is highly competitive. It is easy for customers to shift between suppliers and behind significant debts and managing customer relationship in the collection process is very important to ensure there is continued retention (Scholey, 2008). An effective working capital management in the telecommunication industry puts the customer segmentation at the centre of the activities and process aimed at driving dynamic and collection strategy for every delinquent customer. The segmentation is therefore aimed at creating a customer profile with every customer being given a risk score. This will help in learning the customers’ behavior and identifying customers who are likely to slip into arrears. Such can be put into the same segment. After segmentation, the next step will involve focusing on the delinquent customers so as to assist the customers to pay their arrears and make their accounts to be up to date. The other step in the strategy is to identify high value customers so that a firm can generate future revenue from usage and purchase of additional services and products. The segmentation strategy can combine the behavioral scoring with risk based prioritization and specialized collection system. The collection system will assist in profiling the aforementioned customer base including those in arrears. This will make it possible for the collection manager to have a wide range of payment information and behavioral information from the internal sources especially the billing system (Schaeffer, 2002). The behavioral scoring will segment the customer portfolio and assign collections priority and thus predict the future trends accurately. The recovery score based on customer behavior will forecast the percentage of outstanding debt in an account that is highly delinquent and which is likely to be repaid in a specified duration. A scorecard that uses previous behavior that is combined with the current arrears will assist in determination of the of the priority customers. It is also helpful in prioritizing accounts and assigning priority to specified collections. Hence, the segmentation strategy lays the ground for determining the accounts receivables that are to be prioritized and assigning periods or durations when such collections are to be made. It also assists in adopting the appropriate billing systems for the telecommunication organizations (Schaeffer, 2002).
The organization of billing organizations, and specifically the data or vice carrier should be centered on a good analysis of the financial ratios with key metrics in combination with operational processes and profitability. The organization should consider the most essential operational and financial goals, and the key issues that may affect the revenue and the productivity performance of the billing department. This means that there should be a defined set of desired outcomes based on a system that ensures the checking and acting on data is done effectively (Bragg, 2010). This ensures that the billing firm is able to recognize the sources of data and whether the industry benchmarks are followed at the practice level and the organizational level. The attainment of such goals would be possible if a billing organization is able to adopt an ongoing analysis and measurement of the appropriate key performance indicators (Bragg, 2010). This would be a sure way of understanding of the happenings in the industry and how the performance can be improved.
The tactics for keeping such performance indicators vary in a big way depending on the metrics specifics of a firm and metrics to be assessed. Such would include assessing the performance indicators by payer, specialty and ranges for best practices to find out the specific areas for improvement. The data could be reviewed regularly in reports or custom dashboards and could reflect daily, monthly, quarterly and annual performances (Behl, 2009). Such would require consistency in gathering performance data over a period of time. The best industrial practices for the billing organizations would relate to how strategic the billing process is. They would include making the billing process o be consistent in terms of information, feel and look, accuracy of customers’ master data and the correct itemization of all charges that are maintained up to date. They would also include matching the billing cycles with cycles of client cash flow and process so that to avert any pointless repetitive effort and follow up (Behl, 2009).
References
Scholey, D. (2008).The strategic approach to debt management in the telecommunications sector. Retrived from: http://www.experian.nl/assets/documentatie/white-papers/strategic-approach-to-debtmanagement-in-the-telecom-mei-2008.pdf
Clements, S. R., Donnellan, M., & Read, C. (2004). CFO insights: Achieving high performance through finance business process outsourcing. Chichester, West Sussex: Wiley. 56-59
Schaeffer, M. S. (2002). Essentials of credit, collections, and accounts receivable. Hoboken, N.J: John Wiley & Sons. Inc.110-113
Bragg, S. M. (2010). Accounting best practices. Hoboken, N.J: John Wiley.
Behl, R. (2009). Information technology for management. New Delhi, India: Tata McGraw-Hill. 313-316
