Allen Liebnick
Allen Liebnick
Telecommunication Audits

Why your company should have them done.

February 4, 2010
by Allen Liebnick, CPA, CFF

Denise Munro and I have worked together over the years. Denise is Principal Consultant in the Dallas, Texas-based firm of Cost Reduction Group, a telecommunication (telecom) audit firm. The Cost Reduction Group specializes in the review, analysis and recovery of overbillings, along with optimization and cost savings recommendations for any recurring telecommunications charge in the corporate environment. Our discussion was to learn more about what a telecom audit is and the overall benefits of doing a telecom audit.

What Is a Telecommunications Audit?

According to Munro, a telecom audit consists of a complete review of all telecom services that a telecom provider bills on a monthly basis and includes the validation that the telecom services billed are actually installed, being used and invoiced at the correct rates. “The result is cost savings and potential refunds for overcharges that may have occurred due to telecom provider errors along with optimization recommendations,” Munro said.

Who Are the Best Candidates for a Telecom Audit?

While a telecom audit is a great exercise to go through for any organization, Munro said that the best candidates are:

  • multi-location companies with a local, national or international presence,
  • those companies that have been acquired or experienced a merger(s) or
  • those firms that have been located physically in the same place for an extended period of time.

I can see how a company that has been merged or been acquired may be using outdated services and may end up just carrying its old services into its new relationship. Munro pointed out that the same held true for those companies that hadn’t moved from its location in many years and probably hasn’t looked to see what new options there are either.

How Much Staff and Time Is Required From the Client?

We all know that every company today seems to be short handed due to cuts, layoffs, etc. So a question that is foremost in most company’s mind is: Does it take much staff time during a telecom audit?

“No! Most clients’ staff is too busy dealing with the day to day operations of its business,” said Munro emphatically. “Audit work takes an investment of time and effort. In this world of getting more accomplished with smaller amount of resources and fewer personnel, telecom billing gets less attention.”

And when prodded about why a company should ask an outside audit firm to conduct the audit, she said, it was because telecom bills are not easy to read. “Our motto is that you can’t manage what you can’t see. An audit is a complex process. The information comes from many sources and organizing it can be a serious challenge that is very labor intensive,” she said. “By allowing an outside audit firm to do this work, it frees up essential telecom and IT staff to focus on mission critical activities. An experienced outside auditor will have access to information that is not necessarily common knowledge to the client’s technology staff. Experience is necessary and key in researching tariffs, contract negotiation and the regulatory environment,” she added.

How Do You Know the Recommendations You Make Today Won’t Be Obsolete in a Year?

“An excellent question, since technology is moving so quickly. We do our best to get acquainted with the nature of our client’s business. We make recommendations based on the strategic direction of their company,” she said. “The result is a path that will satisfy the needs of the company with a long range view but that will not lock a client into an obsolete service,” she added.

As Part of Your Telecom Audit, Do You Recommend Changing Carriers or Renegotiating With the Ones in Place?

“We have found that no two audits are the same. We will make recommendations that make sense for the client, whether that means changing services with a current carrier, engaging new carriers, or modifying existing agreements,” Munro noted.

Regarding competition from other than U.S. providers, I wanted to now whether she saw foreign providers entering the U.S. market and being more competitive and whether U.S.-based auditors are the best source for telecom audits. “There have been a few foreign companies attempting to enter the U.S. market. However, the technology and regulatory environment in the U.S. is very mature and complex,” she pointed out. “Utilizing the skills of an established U.S.-based auditor will still prove to generate the most positive results,” she said.

International Calling

I know that Munro was recently involved in a company with a great deal of international calling and traveling by its employees. I asked if she was able to help them cut down the costs of international calling. “We had a client with many employees traveling abroad. The international calling on their cell phones was very expensive,” said Munro. Her company recommended a simple way that they could alter how the employees placed international cellular calls that cut their cost in half. “It meant some minor changes in the way they did their calling, but the overall savings were substantial enough for the client that it is now standard operating procedure for all their employees traveling abroad,” she said.

Surprising and Interesting Finds

Interesting Munro has found clients who have been billed for and have paid for phone rentals that they have not used in over 20 years as well as clients who have been billed for phone lines that were never installed! She also reiterated having seen “Clients [that were] billed for services at facilities that had been closed and abandoned. Clients’ discounts negotiated in their contracts, but never applied to long distance services. Lines for fax service with no fax machines installed. Extra unauthorized lines being billed to the client were set up by employees for their personal use.” She emphasized that “clients can save money in many ways.”

What Are the Benefits?

The benefit of a telecom audit is that all the client’s services are identified, the service usage is validated and rates being charged the client are confirmed as accurate. Munro pointed out that s client will gain from this experience the certainty of knowing:

  • what a firm has in place,
  • what it is used for,
  • that it is a service needed for its particular operation and
  • the client is utilizing its telecom system to its maximum.

And most important in today’s economic environment — the client is paying a fair price.

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Allen M. Liebnick, CPA CFF, is president of Overpaid Payables Recovery, Inc. A former associate professor, Liebnick has been providing accounts payable, sales tax and telecommunications post audit recovery services for over 15 years. He serves clients in the U.S., Canada and Mexico. He is a member of the New York State Society of Certified Public Accountants as well as Texas Society of Certified Public Accountants. Liebnick thanks Denise Munro for participating in this article. Corporate Finance Insider readers who have questions for Munro can contact her directly to ask any questions they might have. Tell her Allen sent you. Corporate Finance Insider readers should note that all views in this article are solely the authorís and that neither the AICPA nor Corporate Finance Insider should be held liable for the opinions expressed herein.