Help Prevent Bad Debt with a Strong Collections Process for Utilities
May 2, 2023
In our previous blog, 5 Ways Utilities Can Improve Days Sales Outstanding (DSO), we gave tips for preventing late payments. All the recommendations in the world will never eliminate overdue accounts, especially considering how many of your customers are struggling in this high inflation/high-interest rate environment.
Weathering economic downturns is easier when you have an effective credit and collections process to recover late payments. A utility collections process refers to the period the utility spends trying to collect payment before the payment is sent to a debt collection agency for recovery. How can you make your collections process successful and ensure your customers aren’t disconnected? By improving your debt collection processes, you can predict and mitigate risk while providing a better, more supportive customer experience.
“The National Energy Assistance Directors’ Association reports that U.S. households owe energy providers around $20 billion – that’s 67% higher than pre-pandemic times.”
Start at the Beginning
According to a McKinsey report, an effective collections process must start when acquiring and onboarding a new customer. Collecting customer data, contact information, and communication preferences right off the hop allows you to send communications to customers regarding missed payments. Having accurate contact information will enable you to track customers down, even if they’ve moved. You can further minimize credit risk by analyzing customer data to understand which customers are more likely to struggle and then suggesting they use a pre-pay product or set up autopay when they enroll. Additionally, making high-risk customers aware of support programs for low-income households helps you and reduces the financial burden for those customers. All these steps help reduce late payments, especially when implemented at the beginning of your customer relationship.
Connect With Customers in Their Channels of Choice
Communicating with customers in their preferred channels increases the likelihood that they’ll respond and pay you. For example, utilities that approach digitally savvy customers via email or text rather than a phone can improve payments by as much as 12%. Products like KUBRA NotifiⓇ let billers inform customers of overdue bill payments and encourage prompt payment via text, automated phone calls, mobile push notifications, and even Amazon Alexa or Google Home.
Cutting down on bad debt also requires a customer journey designed to make it easy for customers to update their contact data, move seamlessly between digital and other channels, and use self-service tools to settle their accounts. Settlement options should cater to your customer’s individual needs as much as possible and be free of administrative obstacles.
Use Analytics to Personalize Debt Collection Strategies
A one-size fits all approach doesn’t work in many circumstances, and it’s particularly true in debt collection strategies. Leveraging customer analytics lets you segment your late payers based on their behavior, various personas so that you can personalize your communications to them. Obviously, a customer who is rarely late and likely to settle their late payments on their own should not receive the same approach as a high-risk customer with a history of overdue payments. Customers expect and appreciate personalization now that companies like Amazon have taken getting to know their customers to a new level. Regardless of the industry, tailored, personalized messaging is a key component of a successful debt collection strategy.
Use Self-Service Tools to Facilitate Payments
The self-service economy has truly arrived. 67% of customers prefer self-service over speaking to a support agent, and 73% want the ability to solve issues independently. The sheer number of customers choosing to self-serve is changing the customer experience. If you aren’t offering self-service solutions, you’re adding a barrier for some of your customers to settle their accounts, even if unintentional. With tools like Natural Language IVR platforms, digital portals, or mobile apps, customers can quickly find their overdue balance and choose the payment method that works for them.
Go Back to Basics With Print and Mail
Despite singing the praises of digital channels and self-service solutions, many utility providers find that going back to basics when reaching out to late-paying customers who have ignored other methods of communication is effective. Consider adding a print-and-mail component to your collections process by sending overdue payment notices in the mail to encourage payments.
Keeping the Lights On and Your Accounts Paid
Managing delinquent accounts requires a collections process that begins when you first sign a customer up and, if necessary, continues past when they are no longer your customers. A comprehensive collections process helps improve your bottom line and provides a superior customer experience by catering to each customer’s needs, making it easier for them to settle their accounts.