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Lawyers at our firm, Levine, Blaszak, Block & Boothby, LLP (LB3), are often asked whether contract clauses concerning limitations of liability, force majeure or indemnification are ever actually invoked. No one ever asks this about billing and payment provisions. It is a truism of modern telecom that all customers have problems with their bills, and the contract terms on billing and payment are the first place the customer looks to solve these problems. When these terms do not fairly balance customer risks and remedies, the result is frustration and lost dollars.

Companies with significant communications budgets frequently have to hire a Telecom Expense Management (TEM) company or dedicate an employee (or two) to sort through carrier invoices and spot and fix charges that are inconsistent with the rates negotiated, that are for services disconnected months ago, that are old, or that don’t correspond to anything the customer bought. Occasionally, carriers threaten to suspend the service of customers with good payment records because of a failure to timely pay a bill, when the bill was not paid because it was wildly overstated or sent to the wrong address.

Next to performance problems, and sometimes ahead of them, billing problems are generally the biggest headache for buyers of communications services. Sometimes billing disputes are resolved only after difficult negotiations, or even litigation/arbitration. Sometimes carriers acknowledge the problems up front and are cooperative in processing credits. Even then, flawed billing systems force customers to spend an inordinate amount of time sniffing out errors, thereby wasting internal resources and costing money.

The bottom line is that telecom savings aren't just about rates. Billing and payment terms matter. Improving them may not always result in a customer being able to avoid all of the problems listed above, but it will eliminate the "gotchas" built into the carriers' standard forms, and give the customer the tools it needs to protect its rights and resolve problems more quickly and advantageously.

Here are some of the key billing and payment terms that customers should be thinking about.

Payment Due Date
Carrier contract forms typically require payment within 30 days of the date of an invoice. Yet customers often don't receive telecom invoices until 7-10 days after the date of invoice, giving them 20-23 days to pay, which for many is not enough time to process payment.

Should you care? Absolutely. Most carrier forms state that the vendor can charge interest on past due amounts (usually at 18% per year) and suspend service on 5-10 days notice for failure to pay by the due date. Carriers like to claim that they would never actually enforce some of these remedies against good customers like you, but when/if a relationship sours, be assured that they will have no compunction about doing so.

In determining what to ask for, think about what you really need. What is your payment cycle? Can you live with 30 days from date of invoice so long as bills are actually received by a certain day of the month? Can you live with 30 days from your receipt of a bill? Maybe you charge back costs to your affiliates or internal clients based on their usage of the services--in which case worrying about and allocating late payment fees can be administratively harrowing. One idea that has been floating around is to push carriers for an early payment discount or a lump sum credit at the end of the year for timely payment, which seems to put the incentives in a better place. The carriers will not offer this up front, but in tough economic times, getting money quickly may be enough of an enticement for even the most intransigent carriers to change their ways.

Right to Withhold Disputed Amounts
Some carrier forms acknowledge that the customer has a right to withhold disputed amounts (but usually only if the carrier is informed of the dispute before the next invoice arrives), and that only undisputed amounts are subject to a late payment penalty. Others don't. Where the language doesn’t provide for this right, ask for it. There is no better leverage in resolving a billing dispute than having the right to withhold the disputed amount, and it is a right carriers are usually willing to give.

The harder issue arises where your company policy is to withhold not only the actual disputed amount but the entire invoiced amount when there is an error on an invoice. This is difficult to negotiate even though a lot of old time procurement types will tell you it's the only way to get the carrier's attention. Our view is that carriers respond most productively when they realize that you are challenging them with real-life problems, not a theoretical wish-list.

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