QPR CostControl model
For the core calculation we have chosen QPR CostControl. This tool is very flexible and adequately easy to use. The application has a very useful task list generator that allows all the model information (Base Information, Allocation data and Period information) to be uploaded in one run and do the full calculation and validation subsequently without user intervention. A typical process for allocation of costs to products is shown below:
QPR
CostControl is able to store each of the objects in its own layer, perform the fully allocated costing and report the results to text, html or database formats.
Management information
Fundamentally, the system provides profitability by product and by customer. For this, the ledger costs will be allocated to products in a series of allocation steps.
Default reporting will show for all products the structure, for example the used route factors (network elements) and the allocated retail activities (e.g. the billing). This information is of course also available at customer group level.
With QPR CostControl’s excellent drill-down reporting the model can show capital employed, revenues and costs for each product and for each customer segment. This way the user can analyze any product or even customer on historic costs base or on current costs base (CCA).
A very useful report is the product profitability report that shows for each product the revenues, allocated costs, capital employed, all in total and per traffic minute.
The reporting is flexible. It should be since management questions change day by day. In most cases with QPR CostControl and LRIC such questions can be answered within minutes.
Changing transfer prices or allocation information can have substantial effects on the results. Since the process is quick, what if scenarios are easy to process. This typically helps our customers to be one step ahead.
Accounting separation for regulator
Accounting separation involves the logical, rather than physical, separation of a telco into separate licenses or businesses. The local regulator defines the boundaries of each business as well as the rules for transfer charging (e.g. the WACC and cross charging rates to be used).
The fundamental differences from fully allocated costing are:
• Transfer charges between businesses need to be reflected
• Product reporting may require allocations of revenues, inter business payment balances and costs between products
Interfaces
A certain amount of manipulation is required to general ledger (GL) costs, prior to import into the costing system (for example, grouping of accounts into account groups; manipulation of asset categories in the GL into more detailed categories for CCA purposes).
The QPR CostControl system therefore has excellent import/export facilities from/to Excel, Access and Text file formats.
Calculation of increment costs
An important result of the calculation is the costs per increment (network element). But each cost category has its own behavior. We therefore have to split up the costs for each network component (increment). Consider for example the network component GSM Base Station. Some costs allocated to this component are:
• HR cost centre pay (salary) costs
• HR cost centre non pay (material) costs
• GSM Base Station depreciation
• GSM Base Station net replacement costs
• Network cost centre pay costs
• Network cost centre non pay costs
• Finance cost centre pay costs
• Finance cost centre non pay costs
The FAC system (QPR CostControl) will allocate all of the network component costs to products in exactly the same way and so allocates the entire cost together. However, in order to calculate the LRIC of the component, it is necessary to identify each cost separately, since each cost behaves differently and will therefore have different cost volume relationships. Therefore the FAC system enables costs at the activity level to be analyzed by source cost (i.e. source cost centre and source account).
The next step is exporting these data from the FAC system to the LRIC system. The number of relations between products and ledger elements is huge. An average product in a medium telco relates to thousands of ledger elements. The results are stored in an ODBC database for further processing by the LRIC application.
