Telecom Expense Management Blog

There are several ways a wireless expense manager can allocate the cost of the pool plan to different cost centers.

Average per line.  With this method, you simply add the total monthly recurring and peak charges and average per each line in the pool plan. 

1. 100% Cost per Minute.  With this method you take the total monthly recurring and peak charges and divide by the peak (non-mobile-to-mobile) minutes to derive a cost per minute.  Then you allocate the pool costs by charging each user the cost per minute times their peak usage.  Users with zero peak usage in that month should be charged nothing for the voice component.  Of course, if they only made text or data charges, those costs would be directly allocated to the individual and not averaged in the pool.
2. Base Plus Cost per Minute.  This method is a hybrid of methods 1. and 2. Here you would allocate a base charge (say $39) to all users in the pool.  This is the cost to have the potential benefits of a cell phone, regardless of how much you use it.  Any excess costs (pool monthly and peak charges) above the base charge times the number of users is converted to a cost per minute.  Thus, each user is allocated a base plus the cost per minute times their peak minute usage.
3. Everyone Gets Unlimited.  While this may not be the most cost effective option, it does simplify order, administration, and monitoring. If your company is large enough, you might be able to negotiate the unlimited plans down to $89/line.

If you need help with your wireless expense management, contact us today or call us at 877-219-8012

You would think that it would be easy to get approval from senior management to migrate to a pool plan to reduce wireless expenses.  This is not always the case. Migration can become a complex and contentious issue when there are multiple cost centers.  Cost center managers that have low usage individual lines do not want to subsidize the high usage cost centers that share the pool.  For example, cost center 1 has 10 users on the lowest individual plan of 450 minutes (at $39/line) and cost center 2 and 10 users on the highest individual plans of 2,000 minutes (at $89/line).  So the total pool size needed is 24,500 minutes for an average of 1,225 per user.  The closest plan that the carrier has is 1,500 minutes so you put all 20 users on the 1500 minute plan (at $59 per line).  Cost center 1’s cost has gone up $190 in the pool even though the company reduces wireless expenses and saves $100 ($1,280-$1,180).

In my next post on wireless expense management, I will explore different ways you can allocate a pool plan.

As a manager with responsibility for Wireless Expense Management you may be challenged with converting individual plans to pool plans. If you do some analysis, you can see that it is possible to reduce mobile phone expenses by a significant amount by simply placing all of the lines into an optimal pool plan. 

There is another benefit of the pool plans.  The number of minutes an employee uses in a given month can vary by as much as 100%, especially if the individual occasionally travels.  However, with all the users on a pool plan, the total usage usually doesn’t vary by more than 10%.  Obviously, the larger the pool, the less the monthly variance will be.  Therefore it is much easier to monitor and manage a pool plan rather than individual plans. If you manage your pool using a manual process or a spreadsheet, we think the optimal pool size is one that gives you about a 20% buffer over your average monthly usage. If you use a Wireless Expense Management solution, you can save money by reducing the number of minutes in your pool to give yourself a 10% buffer

Once you decide on the cost allocation methodology, the next step is to determine the monthly process to monthly monitor the pool plans and implement the cost allocation methodology.  I’ll discuss some ideas regarding this in my next post on Wireless Expense Management.

The use of mobile devices increases the risk of loss of company data. This risk can be mitigated by using company liable mobile devices and following two practices. First, the company should maintain an accurate and updated inventory of all company-owned mobile devices along with each device’s user assignment. This is usually done as part of a telecom expense management process.  Second, the company should acquire the capability to remotely “wipe” or disable and delete all data from lost or stolen mobile devices.

Loss of Company-Owned Mobile Devices: Personnel Data Security

The use of mobile devices also increases the risk of loss of private data belonging to employees. An example of this type of loss could involve a human resources manager who loses a mobile device that contains company personnel data, such as employee tax identification numbers or medical information. If this type of loss occurs, we recommend employers notify employees immediately.  Here again, the employer can mitigate risk by implementing wireless expense management and maintaining  an accurate inventory of mobile devices and corresponding user assignments, along with the capability to remotely “wipe” mobile devices.

Mobile Devices and Enterprise Network Security and Performance

In addition to the risks discussed above, the use of mobile devices introduces vulnerabilities and potential performance issues into an enterprise’s network. Network security risks increase exponentially as an organization adopts mobile devices with e-mail and internet browsing capabilities, as a portfolio of such devices provides numerous attractive access points into a company’s network for viruses and hackers.  Telecom and IT managers must ensure that appropriate security measures are deployed to drive down risks as far as possible. Highly effective tools to manage risk include data encryption, firewalls, virus protection and the use of passwords.

It is very easy for employees to download applications onto company-owned smart phones, PDAs or mobile data devices. Some of these applications may create security risks or create network bandwidth bottlenecks. Employees should agree not to download software that is not approved by the company onto company-owned devices. Your service provider may provide utilities that prevent users from downloading unauthorized software or content.

Again, the employer can mitigate these risks by implementing wireless expense management maintaining an accurate inventory of mobile devices and corresponding user assignments, along with the capability to remotely “wipe” mobile devices. It is not good practice for the company to rely on wireless service providers to maintain this device and user assignment inventory, as it must be accurate and available at a moment’s notice.

My next post on the topic of wireless expense management will discuss the implications of employee use of company-liable wireless services.

One of the most of important advantages of migrating from employee-owned mobile devices to company-liable mobile devices is reduced cost. For an equal amount of services and features, the average personal plan is 33% more expensive than the average individual business plan. Companies can achieve additional cost savings and reduced administrative expenses by migrating from individually billed business plans to pooled plans that allow multiple company liable devices to share the same large allotment of minutes or other services. Often, a wireless expense management solution is required to optimize the pool plan according to usage patterns over time and allocate pool charges accurately across multiple cost centers. Many telecom and IT professionals find that reporting employee usage of wireless services on a regular basis to cost center managers eliminates the perception that telecom services are free and allows managers to hold their reports accountable for excessive or inappropriate use. This, in turn, drives cost conscious behavior among users of wireless services. Reporting of this kind is made possible by the adoption of a wireless expense management solution.

Company Liable Mobile Devices: Managing Invoices and Allocating Expenses.

Along with the many benefits of assigning company liable mobile devices to employees comes a considerable administrative challenge. Part of this burden involves managing a number of invoices from different wireless services providers. Because the amount of call detail on these invoices is so large, receiving a paper bill is usually impractical as a single paper bill is often hundreds of pages long. To add insult to injury, many wireless carriers charge their customers an extra fee for the privilege of receiving their invoice on paper. It is much better to receive wireless services invoices in electronic format every month. Carriers can send a CD, allow you to view your invoice online or send an EDI file you can load into a wireless expense management solution.

Regardless of the invoice medium you choose, to keep expenses under control over the long term, you must set up a rigorous process to audit mobile phone invoices for accuracy every month. Your monthly audit process should reconcile the inventory of devices, confirm user assignments and validate the invoiced rates. Confirm that last month’s disconnect orders have been processed and that you are only being charged for active devices. Check to ensure all contracted discounts are being applied. Make sure that all taxes and surcharges are legitimately assessed and correctly calculated. Set up automatic thresholds to identify instances of excessive use. All of this is more effective and less time consuming to manage with a wireless expense management solution.

You may also have or be given responsibility for allocating wireless invoices across your organization’s cost centers every month. If your users are all on individual plans, it’s easy. 100% of a line’s charges are allocated to an individual cost center. For users on pool plans, use a two step process: first sum the charges for pool plans, charges for add on lines and charges for peak overages, then allocate the sum evenly across all lines in the pool. Next identify non pool charges and assign them to the appropriate line. It is important you do not allocate non pool charges across all lines. This will not meet your organization’s accounting standards. Also, no cost center manager wants to be charged for costs that do not belong to his or her cost center, so allocating non pool charges across all lines is likely to provoke a negative reaction from cost center managers. Once pool and non pool changes have been properly allocated, assign each line’s charges to its cost center.

Again, one of the most effective tactics we have found to control costs is reporting employee usage of wireless services on a regular basis to cost center managers. This eliminates the perception that telecom services are free and allows managers to hold their reports accountable for excessive or inappropriate use. This, in turn, drives cost-conscious behavior among users of wireless services.

For any sizeable portfolio of mobile devices, the processes described above are impossible to manage effectively with an Excel spreadsheet or similar tool. You have to use a wireless expense management solution to get the appropriate level of accuracy and rigor for the investment of a reasonable amount of time.

In my next post on the topic of wireless expense management, I will write about designing and implementing an optimal wireless device procurement and approval process.

By Hai Yen T. Nguyen, Analyst, ProfitLink Telecom Expense Management

It is realistic to expect that if a company provides a mobile device to an employee, the employee will use that device to do some tasks related to their personal life. Some employers regard limited personal use of company liable devices as acceptable. The employees of these companies must have the common sense to limit personal use to breaks and to avoid any use that disrupts their work or the work of others.

Tax Implications of Employee Personal Use of Company-Liable Services

The IRS rules regarding mobile devices were adopted in 1989, when mobile telephony was an uncommon and expensive luxury. IRS regulations say that cell phones are “listed property,” which they define as items obtained for business purposes that lend themselves easily to personal use. IRS regulations regarding employer-owned cell phones state “unless the employer has a policy requiring employees to keep records, or the employee does not keep records, the value of the use of the phone will be income to the employee."

The IRS also states "At a minimum, the employee should keep a record of each call and its business purpose. If calls are itemized on a monthly statement, they should be identifiable as personal or business, and the employee should retain any supporting evidence of the business calls. This information should be submitted to the employer, who must maintain these records to support the exclusion of the phone use from the employee's wages."

If the mobile device is owned by the employee, the IRS says "the listed property requirements do not apply. Any amounts the employer reimburses the employee for business use of the employee's own phone may be excludable from wages if the employee accounts for the expense under the accountable plan rules." All of these requirements would be an onerous burden on even the most highly developed wireless expense management process.

As with the 100-year-old Federal Excise Tax on long-distance calls which the IRS phased out in 2007, the rules regarding cell phones seem to have become outdated. They ignore the ubiquity of mobile communications, the low unit cost of mobile services and the onerous administrative burden of compliance.

In June 2009, the IRS caused a lot of commotion by proposing changes to these rules, suggesting that employers assign up to 25 percent of an employee’s annual company-liable cell phone expenses as a taxable fringe benefit. On January 8, 2010 IRS Commissioner Doug Schulman announced that the IRS would wait for Congress to pass legislation on the matter.
As of the 2010 tax year, a new law repeals the outdated regulations regarding cell phones. Section 2043 of the recently-enacted Small Business Jobs and Credit Act of 2010 removes cell phones from the “listed property” category of the IRS code.
My next post will cover designing and implementing an optimal wireless expense management process.

By Hai Yen T. Nguyen, Analyst, ProfitLink Telecom Expense Management

I have been blogging on the topic of fact checking Granite Telecom’s and Bullseye Telecom’s savings claims. Our experience suggests their claims of saving customers 20% vs. the ILEC don’t always pan out. In this post, I will suggest an alternative strategy a manager with responsibility for telecom expense management can evaluate.

Let’s review what we know. CLEC like Granite and Bullseye offer a 20% discount off AT&T and Verizon's standard, undiscounted rates. Granite cannot discount taxes that make up 20% of your bill and they often charge more for discretionary surcharges and obscure features.  These factors can result in sticker shock. Granite proposes 20% savings, but when you get your invoice it’s much less - anywhere between 0% and 10%.

What Granite does not tell folks who want to reduce telecom expenses is that the ILECs are able to offer term and promotional discounts that are usually between 10% and 25% off of the retail rates.  In some areas of legacy Bellsouth, promotional discounts can run as high as 40%!

As part of a telecom audit we recently conducted as part of a telecom expense management implementation, we performed an analysis to compare the expected total cost of ownership of signing up for the ILEC's best rates versus Granite’s discounted rates. In every case we reviewed, sticking with the ILEC resulted in larger telecom savings than Granite.

By taking a few simple steps each and every time an employee joins the company or is assigned a company-owned mobile device can help avoid future problems related to company-owned mobile devices and wireless expense management. Most organizations ask prospective employees to sign an employment agreement before they are hired. To support a comprehensive wireless expense management and asset management program, all employees should, as part of that agreement:

• Affirm that they understand that company-owned mobile devices and all information on such devices are property of the company.
• Agree to acceptable use policies of wireless devices and services.
• Agree not to download software that is not approved by the company onto company-owned wireless devices.
• Be notified that company liable mobile devices and wireless services and wireless expenses are subject to monitoring.
• Agree that they waive all rights to ownership or privacy of personal information stored on company-owned mobile devices.
• Agree that they will notify the employer immediately if a company-owned wireless device and/or company owned information is lost or stolen.

Again, the employer can ask the employee to agree to these conditions at the time of hire, when the employee is assigned a new mobile device or at any time.

Safety

Whether the company or the employee owns the mobile device, employees should agree in writing to the following safety rules:

• No hand held use of wireless devices while operating vehicles or heavy machinery.
• Comply with local laws (e.g. No handheld cell phone use in school zones).
• Keep hands-free, work-related wireless phone use while operating vehicles or heavy machinery to an absolute minimum.

In my next post on the topic of wireless expense management, I will be touching on the issues related to data security and network security and how to minimize risk.

By Hai Yen T. Nguyen, Analyst, ProfitLink Telecom Expense Management

Are wireless services core to your business or just peripheral? Some organizations allow employees to use mobile devices they own for business use. In most of these organizations, wireless services are not a business requirement for a large portion of the workforce. Other companies just haven’t overcome inertia:  “…employee-liable cell phones are just the way we’ve always done things. “

If a company allows employees to submit personal-liable wireless invoices on expense reports for reimbursement, employees should submit the entire wireless invoice, including call detail, and clearly itemize both business and personal expenses. To avoid this administrative burden, many organizations just pay employees a stipend to reimburse employees for a portion of their monthly wireless expenses. This stipend must be large enough to cover the majority of an employee’s wireless expenses. If not, employers risk employee satisfaction issues. 

If an employee is using a personal liable mobile device for business purposes, they may store company proprietary information on their personal device. An example of this could be a salesperson who keeps customer information on his or her cell phone. As a condition of employment, employees should agree in writing to transfer such data to the employer at any time upon request and to delete company information from the personal devices upon separation from the company.  Such an agreement does not eliminate risk to the employer. Employees are often less than cooperative when it is time to return company proprietary information, particularly when the employee has been terminated. Employers also tend to be inconsistent about applying a comprehensive exit process to employees who leave the company.

In many situations, allowing employees to use employee-owned mobile devices is not a best-practice approach. Establishing a company liable mobile phone policy and wireless expense management process has many advantages, including lower unit cost, better data security, and reduced company exposure to legal liability.

My next post on the topic of wireless expense management will cover key steps a telecom manager must take every time an employee is assigned a company liable mobile device.