Dominic Smith explains the difference between charging and billing, and debunks the theory that billing is on its way out.
A recent article on the excellent Billing Views website has caused a stir in the BSSOSS community by suggesting that billing is dead
. I’m not normally one to rise to the bait over such headlines, but what piqued my interest on this occasion was not so much the article itself as the retweeting, posting and sharing of the article for self-serving purposes without everyone necessarily understanding the difference between ‘charging’ and ‘billing’.
Just so we are clear up front, charging
is the process of calculating a price or fee and applying it to an account, whereas billing
is the process of summarising a set of charges and creating an invoice to demand payment. For ‘prepaid’ style services, the account usually has credit and the charges are deducted against this account balance until the balance is depleted or expired. For ‘postpaid’ style services, the account is allowed to accumulate debits until the customer is asked to make a payment to clear their debt (usually on a cyclical basis, but can also be threshold driven).
Now that’s clear, here are seven reasons why the death of billing won’t be happening any time soon:
1. Enterprise Customers
. The inexorable march towards doing everything in real-time / online is all well and good for the residential sector, but most businesses still require invoices and at least 30 days payment terms and to try and force them into a ‘prepaid’ style model will only result in them buying their service from someone else. However online charging will still benefit enterprise customers, enabling greater transparency and cost control.
2. Accounting and Taxation.
Billing is inextricably linked to accounting, which itself is managed according to financial periods such as months, quarters and years. Billing systems apply complex taxation rules and accumulate vital financial information for passing on to the accounting / general ledger systems, whereas most charging systems are limited to tax inclusive pricing creating significant challenges for the accountants to reverse engineer the information they need.
. Love them or hate them, but CSPs do use contracts to incentivise customers to stay for minimum periods through preferential tariffs and discounted equipment which is offset against the price and length of service. These contracts also come with early termination fees and upgrade policies to reward customers who renew their commitments, none of which is possible without billing. Also, whilst other industries are transitioning to the security of recurring revenue models (subscription billing), it makes little sense for CSPs to go in the opposite direction.
. Though online charging presents new opportunities for real-time offers and interactions, the performance and high availability requirements make the platforms hyper-sensitive to changes and marketing departments may not be given the free rein to create all the packages and offers they may wish. Billing provides the means to do all manner of flexible discounting and tailored pricing schemes without impacting service delivery.
5. Multi-play Bundles.
Whilst mobile is built on technology that can for the most part readily support online charging, for CSPs offering bundles with fixed, broadband, cable or TV services, additional investment would be required to upgrade these other platforms to enable online charging for all services. Furthermore, even when these are all charged on the same online platform, cross-product discounts will place a huge burden on the charging system and would be better dealt with offline at billing time.
6. Operator Billing for Content
. Billing relationships are built on trust, and by operators opening their BSS infrastructure to allow billing for 3rd party content and applications, there needs to be a mechanism to validate and repudiate charges, as well as settling with content partners. Customers can view transactions on ‘prepaid’ statements, however it is usually much harder to get a refund than to dispute an invoice item.
7. New Business Models.
The introduction of advertising or sponsored services means that though it may not be necessary to ‘bill’ the customer, the advertiser / sponsor will need to be charged and this will almost always involve a cyclical billing process (see Enterprise Customers above).
Though it was the death of billing headline that grabbed all the attention, the editorial was really about the rise of online charging and there’s no disputing that this is now an operator imperative. But this doesn’t mean billing is now defunct. Even when all charging is done online, there will still be customers who prefer to pay monthly. And whilst charges are calculated and applied online, billing systems will still be required to collect payment and manage bad debt.
Online charging and billing are not mutually exclusive, in fact they are complementary and close linkage between the two will provide CSPs with many more options in how they package and price their services for the full range of residential and corporate customers.