Six Best Practices Utilities Can Employ to Improve Collections Performance
Utilities face increasing pressure from stakeholders and communities to improve their financial performance and profitability by minimizing write-offs for uncollectible accounts. West Monroe Partners recently benchmarked clients to identify best practices used to improve utility collections performance. While collections performance is highly measurable, visible, and actionable, it is also influenced dramatically by local ordinances and challenges that are unique to each utility. Our benchmarking effort identified six best practices that utilities can employ to improve their collections performance. Some utilities are hesitant to change collections practices, fearing a corresponding drop in customer satisfaction. West Monroe’s benchmarking found the opposite to be true — generally, utilities that implement and strictly enforce collections policies have higher customer satisfaction.
Best Practice #1 – Collect and Maintain Good Customer Data
To enhance collections performance, you first need to know your customers and debtors. At account setup, utilities should positively identify customers by requiring a social security number or driver’s license number. With this information, utilities can review past payment behavior (if available), or perform soft credit checks.
Best Practice #2 – Practice Premises-Based Billing
It is difficult to verify tenant demographics, and tenants’ transient nature increases utilities’ risk of not collecting payment. To address this risk, some utilities capture both tenant and property owner data, and will bill property owners or landlords in the event of tenant non-payment, especially in high tenant populations (e.g., college towns).
Best Practice #3 – Employ Customized, Risk-Based Processes
Aggressively treating all past-due accounts in a similar fashion is expensive, unrealistic, and could impact public-perception of utilities. To combat this, and to maximize effectiveness of treatment, utilities should use analytics to segment customers into low, medium, and high-risk pools.
Best Practice #4 – Make it Easy to Pay
By sending timely bills, with actual meter reads, and presenting bill information in an engaging and clear layout, utilities can improve on-time payment. When necessary, estimated bills should leverage customer history, seasonal usage patterns, and weather trends to mimic the actual amount due as closely as possible.
Best Practice #5 – Leverage State Laws and Local Ordinances
Multiple utilities surveyed cited issues of political pressure when attempting to perform collections activities. Survey results indicate that utilities which have a published delinquency policy, including fees, timelines, and cutoff practices, face the least political pressure.
Best Practice #6 – Make Utilities Accessible
While our firm typically works with utilities to improve business performance and enhance customer experience, we also strongly believe that utilities provide a commodity service that everyone deserves access to. Fortunately, this is something utilities can incorporate into their collections strategy.
What do you think about this topic? If you have any opinions, please share with us in the comment. You may also contact us for a discussion.
