Commentary - In today’s global economy, large organizations face many challenges when managing dozens of domestic and international telecom carrier agreements and a complex payment process that results from those global services. Consider that the average mid-market enterprise receives more than 300 invoices per month. This makes centralizing the payment of these invoices an arduous task with a number of hurdles. Some Fortune 500 companies’ invoices can amount to over 100 pages in length, which adds even more complexity to processing and paying for important services. In response to the plethora of complex, international carrier agreements and payment processes brought by today’s global economy, many enterprises are turning to Third Party Bill Payment solutions to support the payment of IT and telecom services. But the fact is there are a lot of Third Party Bill Payment solutions out there, so it’s important for enterprises to weigh their options carefully.
Let’s start with the basics. First and foremost, Third Party Bill Payment solutions must have the ability to support multiple currencies through a single dedicated process. Direct wire transfers are the preferred means of payment in the marketplace. However, carriers necessitate alternate guarantees for payment that will limit the risk to their business when it comes to collecting payment for services rendered. Once such fundamentals are under control, it’s important to examine a number of key considerations to determine whether a Third Party Bill Payment solution is a good fit for your organization. If not fully informed what is designed to decrease the burden and complexity of telecom billing, can actually result in an even more complicated situation.
In some areas of the globe, carriers present applied taxes on an invoice, yet it is the responsibility of the client to pay the tax municipality directly. Therefore, Third Party Bill Payment solutions must support split payments and the ability to maintain the splitting of transactions to different tax municipalities. When a Third Party Bill Payment solution is employed, the vendor will segregate the tax and issue payment directly to the tax municipality in a timely manner, separate from the vendor payment. It is important to note that tax payments are defined by the tax municipality and differ from carrier payment terms. This service is especially effective during end of the year tax filings when companies will be able to govern what was paid for settlement purposes. This also provides visibility into taxes and how they are applied from a global standpoint based on different types of services inclusive of tax exemption statuses.
Many countries’ governments, such as China, regulate and control how their currency is actually used. Third party bill payment vendors employ techniques to mitigate this issue, such as FXFTI (Foreign Exchange Funds Transfer Initiation). In this case, the foreign currency is purchased in order to place payment to the vendor. Unfortunately, as a result of not having a legal entity in that country, this method tends to incur penalties and additional taxes. Careful consideration is required in terms of the physical route of the payment in order to avoid incremental fees over and above what the carrier is billing in addition to the third party vendor’s payment service fees. It is important to note that these extra fees and penalties can be incurred on per-transaction basis and are calculated based on the total amount of the transaction being processed.
When you’re doing business globally, you have to consider that other countries have local privacy requirements to which you must adhere. This can be a major challenge for organizations with inadequate internal controls and tools to meet these local requirements. Best-in-class, Third Party Bill Payment vendors stay abreast of local requirements and comply with these regulations. For example, if the third party under consideration is a U.S.-based firm, it is important to confirm that they have received Safe Harbor certifications which are administered by the Department of Commerce.
It is becoming increasingly common in the global marketplace for carriers to require pre-payment. For example, Telefonica in Spain directly debits the clients’ account for services rendered prior to mailing the physical invoice. Telefonica will provide the client with a preliminary view of the invoice reflecting an estimated amount. Once the client has approved, they will then debit the account and issue the final invoice. In these arrangements, the third party vendor must have a vehicle to adjust the charges accordingly and settle any dispute after the final bill is provided. This will enable the adjustment of future payments in the subsequent bill cycle, ensuring the client is credited the correct amount.
Third Party Bill Payment solutions are designed to decrease the burden and complexity of telecom billing and proper due diligence is required to prevent ending up in an even more complicated situation than when you started. And once you have combed through a seemingly endless list of options and considerations, it’s also important to remember the benefits. Third Party Bill Payment solutions support multiple currencies through a single dedicated process while governing the varied invoice cycles and due dates within different countries. For global businesses, Third Party Bill Payment solutions—when done right—streamline a process that could otherwise very quickly go awry.
Louis Ifantis is Director of International processing for Tangoe. In his current role Lou is responsible for managing international fixed and mobile spend for Tangoe client base. Lou brings nearly a decade of experience in telecommunications expense management with a significant portion of his experience in international invoice processing.