Measuring
Success - Financial Metrics
BottomLine
Data Solutions (BDS) has developed a proprietary '9
Step Equipment & Circuit Reconciliation Methodology'
that operates in conjunction with its cutting-edge software solutions.
Under this '9 Step Methodology',
equipment and circuit segments are reconciled a site at a time.
In addition, circuit and equipment errors, including the related
financial implications, are measured a site at a time. Cumulative
totals are also recognized by city, state, region, etc.
Prior to initiating the OSS Reconciliation process, BDS Analysts
sit down with our clients and produce a 'Value
Schedule'. The Value Schedule
is a brief document containing agreed (between the Client and
the BDS Project Manager) financial values for recovered equipment,
capacity, MRC (monthly recurring charge), and MRR (monthly recurring
revenue). It is critical that all parties agree upfront how recoverables
are to be valued, measured and reported. For example, it may be
agreed that each fully-carded Fujitsu FLM-150 OC-3 network element
(both ends) recovered will be tracked at market
value at an agreed dollar amount of $40,000; or the
parties may agree that every stranded DS-3 recovered will be valued
at $1,500 per month, for 3 months total. The following table displays
some actual site recoverables in the various categories.
Table 1: Sample Financial Metrics
As represented in the upper "X Axis" of Table 1, metrics (in thousands
of dollars) are classified into five categories:
-
Equipment:
value for all recovered equipment - includes spare cards,
excess material, and over carding
-
Stranded
Capacity/MRR: value of recovered capacity as measured
in MRR (monthly recurring revenue)
-
Offnet/COGS
MRC: value of recovered LEC leased line overpayments measured
in MRC (monthly recurring charge)
-
Billing:
value of 'new' MRR placed on the books - typically Carrier
customers that were not previously in the billing system at
the proper amount, or not in the billing system at all. This
category can also include recovered back billings.
-
Asset
Management - Delta: captures the difference (aka: Delta)
between the Fixed Asset Record value prior to reconciliation
and after reconciliation. For instance, the Fixed Asset Record
for a particular CO (Central Office) may show a book value
of $3.0 million prior to the audit; whereas after the audit,
the true book value may be $4.0 million. Here, the delta would
be a write-up of +$1.0 million. This category does not include
the downstream financial record implications related to adjusting
depreciation schedules, insurance coverages and tax payments.
On the "Y Axis" of the above table, each audited and reconciled
site is listed, typically by site name and CLLI code - for example,
Houston Data Pop - HSTNTX02. Here, we have disguised the names
of the sites to protect the confidentiality of our clients. As
the table reflects, Site 1 produced
a total recovery of just over $117,000, Site
2 just over $353,000, Site 3
slightly more than $12,000, and Site 4
$237,000. One may ask, "Why such a large range of financial return?".
The reasons can be many - site size, age of location, type of
location and so forth.
Most importantly, is that beginning with the very first location,
throughout the life of the project, financial metrics are captured
and reported. These measurements can be regularly reviewed, providing
data that can be used to modify the project scope for financial
reasons (ex: the Dallas POP's are showing a greater proportion
of unbilled clients - additional resources should be directed
there), or reported to Senior Management to encourage ongoing
support for the project.
