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Avoiding the perfect storm
Published: 25 February 2019
Whilst your revenue might seem predictable with managed services, undocumented or disconnected costs can easily be eating into your profit margins if not watched periodically.
An unexpected increase in costs may be down to:
- Higher customer usage of service support resources (e.g. High fault call rates on low revenue services)
- Incorrect invoices from vendors
- Vendors increasing prices without notifying you
- Forgetting to cancel services if a customer leaves
- Exchange rate fluctuations if dealing globally
- Changes in Retail Price Index …and more
Third party costs can bite an otherwise very healthy and profitable business. Combine these with poor cost control and the loss of a few customers, and you can create the ‘perfect storm.’
How can you avoid the perfect storm?
- Ensure that you have the best data on your live services. This means being able to view it in its complete and un-edited format. If a service exists, you need accurate data about what it is, how it works and how much of it is being utilised. Don’t just take your vendors word for it.
- Automate. The more you automate processes and update services, the more accurate data is likely to be. Even a small improvement in automation gives you an ongoing reduction in effort and cost.
- Collect usage consumption data which can be converted into clear, comprehensive billing information.
- Make sure that this data is easily understood by those professionals who are responsible for cost management and not technically minded – finance and occasionally, service management teams may be implicated.
- Bill your customers in a timely fashion using a recurring billing system. This might be obvious, but your customers can’t pay you on time if you’re not invoicing on time and this can affect cash flow. Automated billing increases accuracy in comparison to manual billing which is prone to human errors. Access to past invoices is also important, should any payment disputes arise.
- Have a defined and standardised structure to identify network components and their dependencies. This not only aids in inventory and cost management but also reduces the mean time to repair an issue or identify wider problems.
- Analyse and compare live services with utilisation and check this against both vendor and customer invoices on a regular basis. Ensure the services that you’re providing to your customers match up to the services your vendors are charging you for.
- Remove redundant services, if necessary, after identifying differences between vendor invoices and your own data. Creating a ‘soft cease’ at first is advisable – disabling a service without fully canceling it.
- Streamline vendor relationships. Communicating with several vendors is time consuming, costly and distracting. Services lack integration, administrative tasks increase, and accountability is decentralised.
- Have quarterly reviews with your key vendors and flag automatically renewing contracts well in advance of renewal dates
Don’t let costs and cash flow become the forgotten area of your business. If you don’t have them under control, it’s unsettling how quickly a few unexpected turns in the weather can sink you.
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