Recurring service versus once-off installation fees
How the Telecom pack keeps a provider's monthly service income apart from once-off installation and activation fees, line by line, in its ledger.
By Achekam · · 4 min read · For Telecoms businesses in South Africa, Nigeria, Kenya
Launching soon. The Industry CRM add-on described in this article is launching soon. This article describes it as it will work at launch.
An internet provider earns two very different kinds of money. There is the monthly service fee, which arrives every month for as long as a subscriber stays, and there are once-off charges: installation, activation, a call-out when something goes wrong at the customer's premises. Lump them together and a busy installation month looks like growth, even if the number of paying subscribers did not move at all.
Owners, lenders and buyers of telecoms businesses tend to ask the same question first: how much of the income comes back every month? The ledger can only answer if the two kinds of income were kept apart from the first invoice.
There is a second reason. Installation fees sit beside real installation costs: installer time, vans, cable and the equipment fitted. Seeing the fees on their own line makes it possible to ask whether installations pay for themselves, or whether they are really a cost of winning subscribers that the monthly fee has to recover.
The Telecom pack in Achekam's Industry CRM keeps the two kinds of income apart at the point of invoicing. This article explains how.
The starter catalogue
The Telecom pack's starter catalogue lists monthly service, static IP, installation, activation and call-out items. Every one is unpriced, and between them they post to two revenue accounts: Service subscriptions (4460) and Installation fees (4470).
When the pack is switched on, those two revenue accounts are placed in your chart and the starter items, still without prices, in your catalogue. One thing can stop that: a code the pack wants that your chart already uses for an account of another type. Then the switch-on halts and tells you which account is in the way, so you can deal with it before a single invoice is raised.
Which account each item uses
The split is the point of the whole exercise, so check it item by item before you price anything. Open the catalogue after activation and read which of the two accounts each item names.
The monthly service item belongs with Service subscriptions and installation with Installation fees; that much follows from their names. For static IP, activation and call-outs, the item itself says which account it uses, and it is worth confirming that matches how you want to report them. A static IP billed every month is recurring income in most providers' eyes; a call-out is a once-off.
If two accounts are not enough for the reporting you want, raise it with your accountant before the first invoice rather than after the first month, so that the reports they prepare and the lines on your invoices agree. ACCA's article Revenue revisited explains the IFRS 15 five-step model for recognising revenue from contracts with customers, useful background for that conversation.
Pricing the items yourself
No starter item carries a price. Your packages, speeds and installation charges are your own, and so are any differences between fibre, wireless and mobile customers. Before the first invoice, set the price for each item you will sell, with your current price list beside you. Prices that live only in a salesperson's head, or in last year's brochure, are the ones that end up quoted three different ways.
From accepted quote to draft invoice
Customers say yes online. They open the quote's link, type their name and tick a box, and their acceptance becomes a draft invoice in receivables. Once sent, the quote cannot be edited, only revised; the acceptance is kept with the customer's IP address and browser, and the link's token is held only in hashed form.
For a new connection, the quote might carry the installation, the activation and the first month's service. Nothing posts at the moment of acceptance. The draft waits for a person, unless an administrator has recorded the authority for invoices to be issued at once. That review is a good moment to confirm that the installation has actually been booked.
Lines that name their account
With the pack on, every line on an invoice carries two things: the product being sold and the revenue account it belongs to. When the invoice posts, each line's income goes to its own account, and any cost of sales is booked in that same journal.
Take a new subscriber's first invoice. It has three lines: installation, activation and the first month's service. When it is issued, the service line posts to Service subscriptions. The installation line posts to Installation fees, and the activation line to whichever of the two accounts its item names. Next month, the subscriber's invoice carries only the service line, and only Service subscriptions moves.
Reading the split
Achekam's management accounts set any period's income statement next to the one before it, built from your own journals, with export to PDF or CSV. Once service and installation income sit on separate lines, one month's statement answers the questions that matter:
- Did recurring service income rise or fall against last month?
- Was a strong month driven by installations rather than by subscribers?
- Are call-outs and other once-off charges growing, and is that a sign of service problems?
Credits for downtime are a separate step, taken from the affected invoice, as described in crediting subscribers for an outage last month. Read the month's service income alongside any credits issued, so a bad outage month is not mistaken for subscribers leaving.
Before the first invoice
Check your chart for account codes that could clash, switch the pack on, read which account each starter item uses, and price the items. Then issue the next new connection through the pack and look at the journal it produces. For how that invoice reaches the subscriber, see knowing a subscriber actually got the invoice.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
