The European utilities' industry is struggling to maintain profitability in the face of shifting public policy and the rise of affordable alternative energy sources. As a result, utility companies are now under intense pressure to improve their bottom lines. A natural complement to demand generation and new business activities is a fresh look at collections and recovery.
Revenue assurance optimizes processes and data quality to improve cash flow and profits. When applied to collections and recovery, it is an underestimated strategy to identify and manage risk—and reclaim revenue—through the collection of outstanding payments.
As many European retail banks are learning, the major problem with debt collection lies not in deciding to collect, but in doing so in an efficient, effective and coordinated way.
Utilities can improve their position by reducing flaws in existing processes, taking measures to improve data quality, and creating well-documented policies and procedures on how they identify, assess and handle delinquencies.
Below are three steps utility producers can take today to reclaim revenue and increase profitability.
Collections and accounting teams must work together to prevent the need for collections in the first place, and optimize recovery efforts when the situation does require action. Collection scoring techniques, such as behavioural modelling, assist in the early identification of accounts likely to become seriously delinquent, reducing losses and write-offs.
Pre-emptive accounting processes can flag delinquent accounts, so collections can step in sooner and increase the likelihood of success. Timely, stringent and well-established collection schedules can identify arrears before they reach the point when collections becomes less likely. Segmentation of collection activity improves efficiency and productivity by allocating resources toward accounts that require collections intervention while allowing others to self cure.
Process management and efficiency are key to making collections and recovery a profitable exercise. First, data must be centralized. Risk management and reporting demands immediate availability of data to support a prompt and consistent approach to the management and collection of debt arrears.
Second, processes must be systematized. While the history and behaviour of delinquent accounts may differ, collections must follow a consistent, documented pattern to develop a replicable and effective path to success.
Customers are always far more likely to respond positively to a steady, calm approach than aggressive action when an account reaches delinquency. A measured and professional approach to arrears and collections will include a history of the event and an audit trail of the processes followed to address the default.
Work with the customer, and encourage open discussion about how the debt can be repaid. Following a consistent but flexible process helps avoid misunderstandings and increases the likelihood of repayment, while preserving the customer relationship.
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