WhitePaper Billing

Published on December 2016 | Categories: Documents | Downloads: 52 | Comments: 0 | Views: 399
of 10
Download PDF   Embed   Report

Comments

Content

Plugging the Leakage in Utility Billing
AN INFOGIX WHITE PAPER

Plugging the Leakage in Utility Billing
The Critical Role of Automated Information Controls
David A. Richards, Angsuman Dutta, Sue Pawlak, Tim O’Hara Abstract
Utility organizations lose 2 to 5% of their revenue due to what could have been preventable operational losses, resulting from un-metered use, unbilled use, and inefficiencies in the billing processes. The cost of these billing errors causes businesses and customers to overpay or underpay for utilities services, leading to embarrassing headlines, regulatory fines and stakeholder distrust. This loss in revenue is not just in terms of operational losses. The subsequent reputational damage and customer mistrust over future billing, further cuts into profit margins over time.

The source of much of these losses can be attributed to lack of internal controls or at best, poor design of controls. Manual inspections to detect and resolve errors and inconsistencies amass a loss in productivity by disrupting hardware, software, and the time that FTEs take to uncover and resolve errors. Utility organizations must face these challenges by implementing a set of adaptive controls that are automated, independent, and continuous, to eliminate and mitigate the risk of revenue leakage due to operational losses derived from billing errors.

Objectives • Understand the underlying inherent risk factors within utilities billing • Learn the frameworks needed for ensuring integrity of the revenue assurance process by leveraging automated information controls
© Copyright 2010 Infogix, Inc. All rights reserved. Page 1 of 10

Plugging the Leakage in Utility Billing
AN INFOGIX WHITE PAPER

Table of Contents

Abstract ...................................................................................................................................................................1 Table of Contents ..................................................................................................................................................2 Introduction ...................................................................................................................................................................3 Utility Billing Errors In the News ...............................................................................................................3 Root Causes of Operational Losses ...............................................................................................................4 Areas of Focus ...................................................................................................................................................................4 Account Set-up and Termination Process .................................................................................................4 Meter to Billing Process ................................................................................................................................5 Operations and Financial Process ...............................................................................................................5 Current Market Approaches to Revenue Assurance .............................................................................................6 Automated Information Controls Plug Revenue Leakage in the Billing Process .......................6 An Automated Information Control at Work .............................................................................................7 Conclusion ...................................................................................................................................................................9

© Copyright 2010 Infogix, Inc. All rights reserved.

Page 2 of 10

Plugging the Leakage in Utility Billing
AN INFOGIX WHITE PAPER For the hundreds of thousands to millions of dollars lost stemming from a single or several information errors, utility organizations suffer thousands more in auditor fees and substantial losses in productivity from cleaning up the mess, leaving them with the task of rebuilding the public’s trust in their billing systems.

Introduction

The increase in energy costs, high volumes of customers, and the intense competition in the market place are forcing utility organizations to cut costs by reducing operational losses. Operational losses can be seen as preventable losses resulting from the unmetered use, unbilled use and inefficiencies in the billing processes. Several studies estimate (1,2,3) that utility organizations lose between 2-5% of their revenues because of information error issues associated with the billing and revenue recognition process. Operational losses not only negatively impact the bottom line of an organization but also have severe implications on an organization’s reputation since most billing errors wind up as newspaper headlines, leading to public scrutiny and customer attrition. Utility Billing Errors in the News Embarrassing billing errors make headlines, causing these organizations to flee into postcrisis mode for a public relations and operational recovery. • Failed Database Conversion Drains Utility Authority of $1M Great customer service for a newly formed public utility authority includes proper billing in a timely manner. What many customers of the Cape Fear Public Utility Authority received were thousands of dollars in erroneous charges, charges for closed accounts, and late bills – if they received a bill at all (4).

Operational leakage issues stem from primarily three areas: customer account creation and provisioning (e.g. error in rate classification, duplicate or missing customer records, etc.), meter reading, billing and servicing (inaccurate transfer of meter data to billing system) and payment collection (reconciliation to GL and the billing system). Accurate and consistent billing not only prevents revenue leakage, but is critical for regulatory compliance such as SOX and Public Utility Commission Codes. Despite significant investment in billing and compliance solutions and efforts to ensure revenue assurance, the result of these efforts remains questionable. The challenges are exacerbated by deregulation, the increasing complexity of ratings, variable billing plans and extensive use of an outsourcing model. With the advent and adoption of real-time technologies such as smart metering, the amount of data that needs to be processed for billing has increased significantly. For example, a utility organization has recently implemented a solution to read its meter in real-time, replacing its monthly billing process. As a result, this organization will have real-time information regarding the usage of its electricity, which will not only allow it to adjust its generation schedule and trading structure, but also will allow it to provide more valueadded services to its customers to optimize their consumption. However, the increasing volume of its information subsequently increases the need to validate a heavy volume of information in real-time to ensure the reliability of the process. As these growing complexities have become the norm for businesses, considerations must be given to proactively detect, prevent and correct errors. Current approaches to detect revenue leakage issues become heroic efforts of the revenue assurance team who must use a myriad of tools and techniques to detect and

• Natural Gas Company Billing Error Results in Over-Charging 200,000 Customers Incorrect settings in wireless devices result in customer undercharges for half the natural gas consumed, while countless other customers received double-charges of their original amount (5). • Internal Audit Reveals $1.5 Million in Losses Owing to Billing Errors After a $700,000 billing error was discovered, an internal audit on this utilities company was conducted over the course of several years. Auditors discovered the initial error that was never accounted for, which accumulated up to $1.5 million (6).
© Copyright 2010 Infogix, Inc. All rights reserved.

Page 3 of 10

Plugging the Leakage in Utility Billing
AN INFOGIX WHITE PAPER resolve errors. However, much of the current effort focuses on detecting errors after the fact – resulting in time consuming and costly recovery efforts. Data Quality Issues Within Source Systems: Source systems data may be incomplete or inconsistent. For example, a customer record in the CRM or provisioning system may have missing service code information which may result in erroneous billing or delayed billing.

In addition, deregulation has opened up options for customers to choose separate vendors for suppliers of electric and gas than the current transmission vendors, which exposes a high risk area that will need management.

Areas of Focus

Recent reports of increasing utility billing errors (4,5,6) indicate the urgent need for adopting a systematic approach for proactively detecting revenue errors before they happen. This white paper outlines the inherent causes of these operational losses and a framework for ensuring the integrity of the revenue assurance process by leveraging automated information controls.

Much of the revenue leakage due to operational losses is derived from information errors in the following three key processes: A) Account Set-up and Termination Process B) Meter to Billing Process C) Operations and Financial Process

Root Causes of Operational Losses
While several factors can be attributed to the information errors in the aforementioned areas, the following are the major causes:

Changes in the Source Systems: Changes in the source systems often require software code changes. Even with the appropriate quality assurance processes, there is always potential for error. Process Failures: As the usage data traverses from the meter reading system to the billing applications, there are critical risk points where data can be lost, duplicated, or corrupted originating from system process or transformation errors. System errors may include abends due to unavailability of source system/extract or the incorrect format of the source information. Transformation errors may result from incorrect formats, or changes to critical information fields. Changes/Updates in the Reference Data: Having outdated, incomplete or incorrect reference data such as rates, taxes, etc. will lead to errors in the billing process. For example, errors in the zone-rate table may result in erroneous calculation of the billed amount.
© Copyright 2010 Infogix, Inc. All rights reserved.

A) Account Set-up and Termination Process Account set-up and termination processes are manual and hence there is a high probability of errors in the absence of appropriate automated information validation checks. Examples of the most common types of information errors are listed below:

• Incomplete Service Information: If the servicing information is incomplete, billing will be conducted based on the incomplete servicing information, resulting in revenue leakage. For example, a customer may not be flagged for necessary services and set-up fees such as service connection, trip charges, reconnection charges, returned item charges, non-payment disconnection charge, and broken/damaged items, etc. • Incomplete/Duplicate Customer Record: Incomplete customer records such as missing/ erroneous address or payment information may result in collection delays. In addition, if the customer record is duplicated, there is always the possibility of duplicate billing. • Delays in Entering the Customer Information: Lag time between the service activation and entering customer information in the CRM system may result in no billing at all in the first billing cycle and/or subsequent cycles. • Errors in Customer Rate Classification: Ensuring proper set-up and entitlement to

Page 4 of 10

Plugging the Leakage in Utility Billing
AN INFOGIX WHITE PAPER rates based on usage or other measures is essential for proper revenue assurance. Errors in customer classification code (especially for commercial customers) will result in miscalculation of billing rate. • Software Changes: Changes, and even maintenance, in the metering system, type of meter and/or in the billing system may introduce errors and risks that may go undetected resulting in billing errors.

• Delays in Entering the Termination Information: Lag time between the service termination and updating the customer information in the customer information Management system may result in continued billing even after a service is terminated.

• Provisioning: Provisioned products and services may be altered or cancelled during the initial setup period. If left unmanaged, these will remain within the system resulting in resources being committed and therefore unusable. • Fraud and Abuse: Monitoring account information for suspicious activity such as frequent turnover of customer name and address or accessing of customer information by individuals not authorized to access such information.

• Improper Application of Taxes and Fees: All taxes are not levied to all customers. If the customer set up information is incorrect or there are changes in the tariff management system, the result is erroneous tax and fees calculations. C) Operations and Financial Process

• Timing Issues: Errors in updating the payment information may result in production of bills with erroneous balance information. • Erroneous Payment Information: Manual errors or systematic errors in entering the payment information may result in revenue leakage.

B) Meter to Billing Process Meter to billing process is information driven and processes data both in real and batch mode. The most common types of information errors include:

• Incomplete Data Transfer in the Meter to Billing Process: The Meter Management system gathers data from multiple meters and sends the data to multiple applications such as billing, forecasting, trading, CRM system, etc. During the process of accumulation, meter data may be overwritten or lost if the data capture size of the meter management system is full. The telecommunication industry is challenged with similar issues where call records become overwritten when the Call Detail Records (CDR) file is full. Overwritten or loss of data will result in under-billing. Similarly, errors in the data transfer process may result in incomplete data transfer or transfer of the previous day’s data. In some instances, it may result in no transmission of data at all.

• Financial Reconciliation: Inadequate reconciliation procedures between the billing system and the payment system may result in revenue loss.

• Revenue Estimates: Revenue estimates must be made during each month for each billing cycle and around the financial close. Trending of consumption and revenue for each cycle would assist customer service and accounting personnel in making these estimations more effective and efficient.

• GL Reconciliation: Incomplete or incorrect posting of accounts payable and accounts receivable information not only results in erroneous revenue, but also impacts the ability to meet compliance mandates such as SOX. Challenges include Accounts Receivable/ Payable subsidiary ledger reconciliation to enable accounts to be balanced at a transaction level by account number and aggregated to match the total in the General Ledger. Additionally, Cash Side Reconciliation is also imperative since payments received which cannot be applied to a specific account are problematic.

© Copyright 2010 Infogix, Inc. All rights reserved.

Page 5 of 10

Plugging the Leakage in Utility Billing
AN INFOGIX WHITE PAPER • Internal Analysis: Marketing reviews household information to determine profitability by customer class to determine promotional programs. Maintaining accurate data is essential to a proper analysis. or combined into a single transaction. Such scenarios require advanced logic for balancing the information between the meter systems and billing applications. In addition, these processes are often used after the fact, resulting in high operational costs related to research and reruns.

Current Market Approaches to Revenue Assurance

The current focus in most revenue assurance initiatives is to rely on a number of manual and semi-automated processes to balance and reconcile the meter to the billing information transfer process. Some of the options currently being used by various organizations consist of:

Automated Information Controls Plug Revenue Leakage in the Billing Process
Current approaches are not scalable and sustainable. The use of automated information controls is no longer an option, but rather a business imperative in today’s context of evolving technology, the growing business landscape, and the increasing number of incidents involving billing errors that ensue.

• Reconciliation of Record Count between Meters and Billing Systems: Developing an independent script/program that compares the record count and usage information from the meter system with the record count and amount information from the billing system. These scripts are often executed either on an ad hoc basis or scheduled to run after the billing cycle is complete. • Manual Audit of Bills: A sample number of bills are selected to test for accuracy, reasonability and completeness of the billing process. This technique is primarily used for one of two reasons: (a) Errors are detected too late in the process resulting in complete reruns or partial reruns which tend to be costly and stressful for the organization.

Automated information controls are application independent routines/procedures that can validate information to detect errors and anomalies. • Independent: Controls operate independent of system being controlled.

Seven essential, defining characteristics of automated information controls set it apart from other options: • Continuous: Event driven, cycle driven, controls are continuously available and operate at the same time as controlled systems.

While these methods are somewhat effective in detecting the errors, they rely heavily on sampling techniques or manual methods. More importantly, these approaches become inadequate when the transactions from meter systems are either split into several transactions

(b) Unlike natural processes, information errors tend to be results of systematic errors as opposed to idiosyncratic errors of processes. As a result, information errors often do not follow normal distribution making it difficult to detect them through sampling techniques.

• Verifiable: Fully verifiable audit trail of control reports and execution (to prove they operate as intended). • Standardized: Consistent, standardized controls, which can be spread and maintained throughout the enterprise, driving down cost of controls ownership and audits. • Rule-based: Implement, maintain controls, and administer your own business rules without the aid of software developers.

© Copyright 2010 Infogix, Inc. All rights reserved.

Page 6 of 10

Plugging the Leakage in Utility Billing
AN INFOGIX WHITE PAPER • Non-intrusive: Controls that work with existing data in current formats. • Tracking: Ability to track information to ensure transactions quickly reach vital processing steps. real-time cycles.

• End-to-End: Controls that reconciles across the enterprise by tracking transaction flow as it moves throughout applications and systems. Ideally, automated information Controls should have the following capabilities to validate realtime and batch transactions in both mainframe and distributed environments:

• Verification: Ability to verify the information content and format by cross-checking your information against external and internal lists to ensure all required information is accounted for. • Balancing: Ability to balance and compare information as it traverses through various systems. • Reconciliation: Ability to validate and reconcile information at a transactional level for one or multiple sources through batch and
X4 X5

In addition, automated information controls will provide visibility into control results and the ability to manage control exceptions. Based on our years of experience in helping Fortune 500 utility organizations with their key revenue assurance initiatives and the study of the publically reported billing errors[4,5,6], we propose a minimum of six information controls to detect and prevent revenue leakage due to operational losses. The following diagram identifies the location of six automated information controls in a simplified process diagram.

The following control points illustrate the critical risk areas and automated information controls that should be deployed at these points to mitigate the propagation of errors.

Automated Information Controls at Work:
The control points illustrate the critical risk areas and the automated information controls that should be deployed at these points to mitigate the propagation of errors.

Customer Information System
X2 Meter Data X1

Tariff Management System
X3

Utility Commissioner

Compute Consumption

Calculate Charge

Prepare Bill

Deliver Statement

Customer

Meter Reading System

AR/AP System

Collection System

Meter Management System

X6

Finance and Accounting

Information Controls

© Copyright 2010 Infogix, Inc. All rights reserved.

Page 7 of 10

Plugging the Leakage in Utility Billing
AN INFOGIX WHITE PAPER Control X1: Ensure completeness of Data Transfer from the Meter to Billing Control X3: Validate the Reasonability of the Billing Information

• Detect duplicate, late or missing usage information transfer from the meter management system to the billing and other application: Comparing the current file with the previous day’s file, the expected arrival time, and comparing the hash value or balancing the detail record count with the trailer records are several ways to detect duplicate, late or missing usage. • Ensure completeness of data transfer between meter and the billing system: Comparing the number of files/records received with the number of expected files/ records will ensure completeness of data transfer. For example, at steady state the number of usage records should equal the number of customers currently serviced.

• Identify statistically unreasonable bills: Identifying accounts where billing information falls outside the historical range will help eliminate unreasonable and inaccurate bills. • Identify statistically improbable bills: Identifying accounts where billing information is statistically improbable will eliminate inaccurate bills. For example, controls can identify where the billed amount is zero, a negative or a very large, improbable amount.

• Validate the data structure prior to processing: Verifying the position and format of the key business fields as account information or usage information, prior to processing the data will validate the data structure prior to processing. For example, changes in the meter reading software may shift the position of the certain key business fields which can result in errors throughout the billing cycle. Control X2: Detect Unreasonable Consumptions • Identify unreasonable consumptions: By comparing the current consumption/usage data with the historical usage data, we can identify reasonable consumption by validating whether the current usage is within the historical range or aligns with the historical trend. • Detect irregular consumptions: Identifying accounts with a fixed level of consumptions, zero consumption, or negative consumption data; will help prevent the propagation of irregularities.

• Test aggregate reasonability: Validating the reasonability of the billed amount, and taxes etc., for each of the defined customer groups (residential, commercial, etc.) within geographical classifications such as zone/ route/district etc., will aid in verifying accurate amounts for each transaction item. Control X4: Detect Troublesome Accounts • Reconcile meter data with the account data to detect accounts where service is activated but not set up for billing. • Identify accounts with incomplete product/ service information. • Identify accounts with high numbers of changes/write-offs.

• Identify accounts that are terminated but have usage information. • Identify accounts where customer classification is changed (e.g. commercial classification to residential or vice versa).

• Identify accounts with incomplete product/ service information. • Detect duplicate customer information.

• Identify accounts with missing key business fields (classification code, zone code, zip code etc.).

© Copyright 2010 Infogix, Inc. All rights reserved.

Page 8 of 10

Plugging the Leakage in Utility Billing
AN INFOGIX WHITE PAPER Control X5: Detect Statistically Impossible Changes to the Rating table, Classification and Taxes and Other Charges • Detect statistically impossible changes to the rates, taxes and fees by comparing with the historical information.

Conclusion

• Identify accounts that will be impacted by the changes in the ratings, tax rates and zoning classifications. Control X6: Ensure Accuracy and Completeness of the Financial Reporting • Reconcile billing system with the accounts receivable system.

• Reconcile the account receivable system with the general ledger system.

With the accelerating changes in the utility billing process to support current business needs, an increasing reliance on real-time or near real-time usage information for critical business operations and decisions is vital in expediting operations and maintaining customers. The expanding (and ever-changing) array of regulations and compliance requirements has added to the complexity and urgency to reduce the risk of lost revenue by streamlining operations and detecting and resolving errors before they propagate throughout systems, before they make it to customers and before organizational losses from fines and customer attrition ensue. To maintain pace with these accelerating demands, manual efforts have become obsolete. The use of automated information controls has become an imperative. It is the only way to ensure billing accuracy and prevent revenue leakage. Successful organizations who have used automated information controls featuring the seven defining characteristics, have been able to expand the scope of information controls beyond the scope of the revenue assurance projects by developing an enterprise-wide program for ensuring enterprise information quality. With an appropriate selection of tools and frameworks for information controls, organizations can achieve the elusive goal of having accurate, consistent and reliable information assets in a cost effective manner and mitigate the risk of operational loss from billing errors and inconsistencies.

• Monitor and track manual adjustments related to billing.

References 1. Reducing Revenue “Leakage” (2006), Retrieved from <http://www.oliverwyman.com/ow/pdf_files/Energy06RevenueLeakage.pdf> 2. Neilson, Randi. Plugging the Revenue Leakage. Retrieved from <http://www.itron.com/pages/news_articles_ individual.asp?nID=itr_000558.xml> 3. Roy, Pradeep. Plugging Revenue Leakage in the Utility Industry (2006) Retrieved from <http://www. energypulse.net/centers/article/article_display.cfm?a_id=1260> 4. Mazzolini, Chris. Billing Errors Cost Utility Authority up to $1 million (2009) Retrieved from <http://www. starnewsonline.com/article/20090726/ARTICLES/907269979> 5. Xcel Energy. (2007).. Xcel Energy fixes natural gas billing error Retrieved from < http://www.xcelenergy.com/ Minnesota/Company/Newsroom/News%20Releases/Pages/Xcel_Energy_fixes_natural_gas_billing_error.aspx 6. Harwell, Drew. Dunedin audit prompted by utility billing error uncovers $1.5 million undercharge. (2009) St. Petersburg Times. Retrieved from <http://www.tampabay.com/news/localgovernment/article1041130.ece>
© Copyright 2010 Infogix, Inc. All rights reserved.

Page 9 of 10

Plugging the Leakage in Utility Billing About the Authors
David A. Richards, CIA, CPA David A. Richards Certified Internal Auditor (CIA) is the former President of The Institute of Internal Auditors (IIA) and member of The IIA International Board of Directors for over 17 years. AN INFOGIX WHITE PAPER Angsuman Dutta, Unit Leader, Customer Acquisition Support, Infogix

Prior to being President of The IIA, Richards had a 33-year career at FirstEnergy Corp., where he was chief audit director for 24 years.

Richards has also served 5 years as a member of the COSO Board of Directors during the period when the COSO documents on Enterprise Risk Management Integrated Framework (2004), Internal Control over Financial Reporting Guidance for Small Businesses (2006), and Guidance on Monitoring of Internal Control Systems (2009) documents were issued. Richards earned his undergraduate degree in accounting from John Carroll University, and holds an MBA from Baldwin-Wallace College. Tim O’Hara, Sales Specialist, Customer Acquisition Support , Infogix

Angsuman Dutta is Unit Leader of the Customer Acquisition Support Team at Infogix. Since 2001, at Infogix, he has assisted numerous industry leading enterprises in their implementation of automated information controls by providing Assessment, Advisory, Implementation, and Support Services for Infogix clients. Dutta has a Bachelor of Science degree in engineering from the Indian Institute of Technology and a M.S. in computer science from the Illinois Institute of Technology, and a MBA in Analytical Finance from the University of Chicago. Susan Pawlak, Sales Specialist, Customer Acquisition Support, Infogix

Tim O’Hara joined Infogix in 1997. Tim has assisted numerous customers to mitigate financial risk with automated information controls.Tim is CPA Inactive and has earned a B.S. in Accounting from the University of Scranton.

Sue Pawlak is the Sales Training Administrator of the Customer Acquisition Support Team at Infogix. Since Pawlak’s start at Infogix in 2007, she has covered various roles and responsibilities within the sales arm of Infogix, including overseeing recruitment, training and ongoing support of the sales staff. Pawlak has a Bachelor of Arts degree from Northern Illinois University.

About Infogix, Inc.

Leading enterprises around the globe use Infogix Controls Solutions to eliminate information errors. Infogix offers a complete portfolio of software products and services to monitor, detect, and prevent information errors. Infogix Controls are independent, continuous, and automated. They can be deployed enterprisewide across applications, platforms, and business processes. Since 1982, Infogix has been providing Infogix Controls Solutions to Global 2000 enterprises. Millions of Infogix Controls continuously monitor and assure the integrity of information in hundreds of enterprises everyday. For more information, call +1.630.649.6800 (US, Canada, and International), +44 (0) 175.370.1060 (Europe), or visit www.infogix.com today.
© Copyright 2010 Infogix, Inc. All rights reserved.

Page 10 of 10

Information Integrity and Infogix are registered trademarks of Infogix, Inc. Other company, product, brand, service, and mark names and logos herein are the property of their respective owners. 2010-05-04

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close