Planning Your Telecommunications Budget

How Come the Cost of a Call is Dropping and Our Expenses are Rising?*

Why Most Organizations Can’t Budget Accurately

Most organizations do not know how much they spend on telecommunications. It is therefore difficult to prepare a telecommunications budget to enable planning for this increasing and elusive expense.

Typically, the first approach to finding out how much is spent is to ask the accounting department to provide totals from the general ledger. This is the part of the accounting system that tracks the detail of all the expenses and income of the organization. Some dollar amounts are usually produced from this request. The problem with using these numbers to plan a budget is that the people in the accounting department do not know how to look at telecommunications bills or how to determine what type of expense they represent. It is rare that the numbers coming from accounting accurately reflect the total spending. It is as common for them to understate the costs as to overstate them, but in either case, it does not support the preparation of a realistic budget.

Even more unlikely is a report from accounting that provides accurate breakdowns as to the type of telecommunications expense (fixed local service costs, variable long distance costs, voice mail maintenance, Internet access, etc.) or information on what purpose in the organization is supported by this expense (Customer Service center, Sales Force, etc.).

Even when bills are reviewed and approved at the department level, the situation is much the same since the approval takes the form of a signature on the bill saying it is okay to pay it, but not indicating what is being paid for or its purpose.

Organizations with sophisticated systems for charging back the cost of telecommunications expenses to departments are not immune to these issues, since the charged-back amounts often do not bear up to scrutiny in terms of what services and purpose they represent.

Organizations with in-house telecommunications departments may do a little better at estimating true expenses, but it is unusual to find that the expenses for all telecommunications are managed by a single department. Thus, no one individual has the whole picture.

Note: We make the above observations based upon 25 years of experience working with hundreds of organizations on their telecommunications expenses.

Start By Making A List

We suggest starting with no assumptions and building the information from the ground up. First make a list of all possible telecommunications expenses that your organization may incur, either monthly, occasionally or just once. Here is a list of some major categories to get you started. Individual organizations may have other items to add or may not wish to include all of these categories. You may want to put the list on an Excel spreadsheet, so that it can become the basis for building the expense record as bills are identified.

Fixed Costs Monthly costs for outside lines connecting you to your local telephone service provider (part of your local telephone company bill) Monthly costs for outside lines connecting you to your long distance telephone service provider (part of your long distance bill – may be shown as “access charges” Monthly costs for outside lines connecting you to another office of your organization (may be called “tie lines” although this term is becoming somewhat dated.) Monthly costs for outside lines for data transmission to other offices within your organization (computer-to-computer communications between two points or among multiple locations) Monthly costs for Internet access Costs for the maintenance contract on your telecommunications equipment including PBX (telephone system), voice mail and related systems and hardware (this may be monthly, quarterly or annually) Monthly cost for cell phone usage (if you have an agreement for a fixed cost covering a given number of minutes) Monthly rental of pagers and beepers and associated services Cost for yellow pages advertising and other listings Salary and benefits for employees responsible for telecommunications management Monthly fees for outside services providing telecommunications management Cost of space for housing telecommunications equipment

Variable Local telephone calls Directory Assistance Long distance telephone calls (outgoing and incoming toll free) Calling Cards Audio teleconferences Video conferences Purchase of telecommunications equipment (telephone instruments, circuit boards, modems, faxes, cell phones, video conferencing equipment etc.) Installation charges for outside lines (on the local or long distance bill) Installation charges for telecommunications equipment Professional Services/Telecommunications Consulting, Management and Administration

*(Excerpt from Telecom Tutorials, 2nd Edition, Tutorial #26)

For More Tutorials Click on the Book Cover Below

Back to top