Overview
This article introduces service providers to the margin reporting capabilities in Emersion and how to use that data to conduct margin analysis.
Prerequisites
Before reading this article, it is important you have an advanced understanding of:
- the Emersion billing objects.
- the BUY and SELL architecture underpinning billing objects.
As this is an introduction-level article, a basic level of understanding of the above should suffice.
What is Margin Analysis?
It is out of the scope of Emersion to teach the totality of margin analysis to service providers, as it is a specialty in of itself. Many companies require the services of Financial Analysts and Actuaries to conduct marginal analysis for them. But in basic terms, it is an examination of the benefits of an activity compared to the costs incurred by that same activity. Companies use marginal analysis as a decision-making tool to help them maximise potential profits. In another use case we commonly see at Emersion, it is used to double-check that the prices agreed to between a service provider and their service supplier or carrier, are the prices that are actually being charged.
Margins are provided as a positive figure (profit) or a negative figure (loss)
In this example:
- the green entry shows the service provider was charged $11.29 inc tax where as the same item was sold to the customer at $25.00 inc tax, representing a total profit of $13.71.
- the red entry shows that the service provider incurred a cost of $4.95, but charged the customer nothing, representing a total loss of $4.95.
When comparing telecommunications charges, it is common to see charges incurred by a service provider when the cost to the end user is zero. But this does not necessarily mean the service provider made a loss on the customer's package subscription, as a package subscription will comprise multiple items. If these two items were for a single subscription, the overall cost to the customer is still greater than what was paid to the supplier. This needs to be factored in with any analysis.
Preparing for Margin Analysis in Emersion
One of the most powerful features in Emersion is its ability to produce data for the purposes of margin analysis. It relies on your BUY prices being stored and maintained. When service providers initially begin using billing Emersion's system for billing, it is a common strategy to focus on the SELL prices only. This is to keep the implementation of the Emersion system to a reasonable scope and timeframe in the first few months of use. It is not essential for BUY prices to be populated for the purposes of billing. However they are mandatory when the service provider wants to use the system for margin reporting.
Margin Reporting Prerequisites
In order to use the margin reports, service providers must:
- populate buy pricing in all billing objects
- update the prices if and when they change
- have at least 3 months worth of data to compare and report on.
Fees for Margin Reporting
Any cost can be interrogated for margin reporting purposes. This includes:
- set up fees (package plans, service plans)
- access fees (package plans, service plans)
- service feature access charges
- bolt-ons
- bolt-on add-ons
- inbound usage
- product purchases.
usage that is not properly identified and rated (i.e. usage that is quarantined) has failed to determine the price to charge the customer and as a result, cannot be included in margin reports.
Data bolt-ons and data bolt-on add-ons are new billing objects and not yet available in any margin reports.
Executing Margin Reports
Margin reports can be found at the following location:
Reports > List > Margin
These reports crunch large amounts of data and as a result, may take a while to return results when run on screen. Furthermore, conducting margin analysis requires the data to be exported into data analysis tools such as Microsoft Excel. It is strongly recommended you use the Export function for all margin reports.