Note 42: Additional rating features - Part 2

Posted: 25 November 2007

Metering

Some networks, such as those of water and electricity utilities, generate consumption in terms of meter readings. Before rating can price the customer's consumption, it must determine the difference between the current and previous meter readings. When multiple meter readings are performed within a billing period, the rating process can look similar to the processing of interim consumption records since the full consumption is only 'known' when the billing cycle is performed.

Meter 'clockovers': Much like a car's odometer, meter readings can go from 9999 to 0000, and the rating process must handle this appropriately.
Meter replacement: Old and damaged meters are replaced resulting in transaction types such as final and initial meter readings. Meters need to be uniquely identified to allow such changes to be addressed. Receipt of further readings on finalised meters should be a cause for error requiring manual investigation.
Estimated readings: Meters may not have sufficient readings performed between billing cycles to allow an actual reading to be used in subsequent billing. To capture ongoing revenue, the biller may use the customer's prior measurements to estimate a reading for the customer's next bill. When actual readings are received, a reconciliation must occur for subsequent bills.

Taxation

Taxation provides its own complexities quite apart from those driven by the needs of rating. The tax types, rates, methods and jurisdictional exceptions must be determined for each of a biller's product offerings. This is made more complex when bundled rates and 'free' items are involved.

The point when taxation is performed within billing is determined by factors that are related more to the legislation of the relevant taxation system and customer expectations than the billing process. Within the limitations imposed by the taxation regimen, the biller may choose to calculate and apply taxation within rating, or wait and calculate it within the regular billing cycle. Influences affecting taxation within rating include:

The timing of taxation remittance: Tax legislation may require that taxes are calculated and remitted to the relevant government body as transactions and consumption are performed. In this circumstance, the taxes for a quarterly billed customer are calculated immediately even though the customer may not be billed until months later.
Customer presentation: Billers may allow customers to view their transactions prior to the billing cycle. The biller may present such transactions as 'untaxed' (which would also align with their undiscounted status), or may choose (or be required) to present them as tax inclusive.
Prepaid products: Billers offering a prepaid payment method must charge tax-inclusive amounts for their products. Prepaid transactions performed in real-time (e.g. mobile phone calls) must therefore be rated and taxed before reserving an amount of the customer's balance.

Aside from prepaid products, a transaction's price may be changed by later processing, such as rerating or discounting, and because of this it is desirable to delay the taxation process and do it only once against the transaction's (discounted) final price.

Pretaxed transactions present special challenges because the information used to calculate the tax amounts may no longer be present in the transaction (i.e. details are presented as a fait accompli). Some pretaxed transactions may represent non-standard work performed by the biller on a 'time and materials' basis (e.g. installations). Billers can also process pretaxed transactions on behalf of third parties. These parties may be entities within the same business, or result from relationships with business partners.

Since taxes may be fixed and/or variable in nature, recalculating them if the transaction's price changes (e.g. is rerated or discounted) can be problematic. In such circumstances the liability for correct tax calculation and collection is important to understand for both the biller and their partners. The question of financial liability also arises in Credit Management when customers don't pay their bills.

Pretaxed charges may be processed through rating, but without any rating processing, to allow transactions to be collected and held in a common format (e.g. prebill presentation), to support tracking of financial amounts (e.g. cross-product rates) and non-financial resources (e.g. free minutes).

Transaction Discarding

Some transactions will be passed from the network to rating, but the biller's business rules will not include them for billing. Transactions not intended for billing can be output to a 'discard' destination (file). Discards should be monitored to ensure that only appropriate network events are unbilled, and this may include reports that quantify the transaction numbers, classify them by type and indicate long-term trends. Discard examples for a phone network could include records for unanswered calls to busy phone numbers, calls to emergency phone numbers (police, ambulance), directory assistance, calls deemed too old, or calls shorter than a specified duration.

Currency

Transactions obtain their financial value (price) when they are rated. An attribute of that value is its currency. Older systems, or systems that are strictly domestic, may assume a default currency, but systems that bill across international boundaries must consider the attribute of currency in their processing. Multi-national business customers, roaming residential customers, and inter-network interconnect settlements can each drive a need for multi-currency processing.

Currency distinctions that can be made include:

Base currency: The default currency in which the billing system performs its processing. This is likely to be the currency in which the biller's financial systems operate (e.g. general ledger).
Rated currency: Transactions may be rated in a different currency to the base currency.
Comparison / Display currency: An alternative currency may be used to show the equivalent price in the local or an international currency.
Billing currency: This currency appears on the customer's bills, and is the amount and currency the customer is asked to pay.
Debt currency: Debt may held in the same currency as was billed, or it may be converted to another currency (e.g. base) before being recorded and tracked in the biller's account receivable system.
Payment currency: The currency used by the customer to pay their bill. Since payment happens after billing, exchange rate movements can complicate payment processing when the debt (in a different currency) is now worth more (or less) than the requested payment.

A customer can be billed using the same currency throughout the billing system, or perhaps the rating and billing currencies may be different. Where the biller is using one billing system to operate across multiple jurisdictions, each jurisdiction may operate under a different currency for its entire customer base.

Conversions between different currencies within the billing process must be performed carefully to ensure that rounding is performed correctly, and that the appropriate exchange rates are used. The processing between different currencies can become complex quickly due to the impact of exchange rate movements. When implementing foreign currency processing, important questions that need to be worked through include: sourcing the exchange rates, agreeing on when rates will change, and who is liable for discrepancies when exchange rate movements occur.

Transaction Categories

Where a biller operates a large product catalog (e.g. movies, music, books), and the catalog's content and price structures change frequently, billing may wish to avoid containing all the catalog's detail and instead operate using a categorisation approach.

For example, songs can be thought of in catalog terms such as 'Top 40', 'Just Released', 'Classical', 'From the 1960's', 'The Beatles', 'Movie Soundtracks', or 'Children's Songs'. Each of these categories can be billed at a specific rate without needing to know explicitly which songs are in each category, or when that categorisation changes. Song details can be passed from the song supplying 'network' using a unique identifier, category and/or a description, allowing the billing process to remain aloof as to the entire catalog. As songs move between categories (as of specific dates), the category passed to billing with each song will change and so will the price charged.

This approach allow new songs to be added to a central catalog as required, prices and categories can be changed regularly, customers can understand how they will be charged, and billing is isolated from, and less impacted by, the dynamic rate of change within the catalog. Detailed changes at the song level can be made without the need to reflect them in billing.

Downstream invoice presentation

In addition to transactions that generate a financial impact, information-only transactions with no value can also be processed through rating. This allows transactions to be presented on the customer's bill alongside the billed amount. This information is not used in financial calculations, and may be passed electronically to (corporate) customers with the billing data for further analysis.

For example, details of incoming phone calls that could not be connected can be captured and passed through rating and onto the bill. This information may useful for call centre businesses who may have an inadequate number of inbound toll free (1800) phone lines and be losing customers due to busy signals.

Tags: Billing, Rating, Metering, Taxation