Smart Solutions to Proactively Optimize Utilities Debt Collections
Utilities who revisit their collections and credit process can position themselves better and ahead of any unprecedented changes, like the current pandemic/COVID-19 crisis, and also enable advantages for themselves, like customer experience enhancement and loyalty. Under a rigid regulatory and economic context, utilities are required to work smartly while manage and minimizing bad debt if they want to stand out from competition while improving resilience. Weathering economic/business decline becomes smooth if utilities have a cleaned-up credit & collections process with minimum overdue. It can make them move fast to cut down on costs, protecting profitability, and reserving growth capacity.
Loss of income during crisis like COVID-19 becomes a burden on businesses that inhibits growth. Energy regulators like Ofgem in the UK have recently ruled in favor of utility customers in financial distress and have put obligations of uninterrupted customer service for the Utilities as a component of their broader Hardships Energy Assistance Program. For instance, customers with pre-paid meters facing financial difficulty while adding credit, can talk to their respective providers regarding alternatives to remain supplied. This can involve nominating a 3rd party for credit top-ups, keeping a discretionary fund attached with their credit, or having been sent a card pre-recharged with supply credit to ensure uninterrupted service. It shall also include bill payments and debt repayments getting reevaluated, reduced or even paused wherever necessary, while completely suspending credit meters disconnections.
Moreover, intense competition in some utility markets may lead to greater levels of switching amongst consumers, at times followed with bad debt as final bills get unpaid. Nevertheless, external factors aren’t the sole reason why utilities might grapple with bad debt. For some of them, the issue becomes more complex from inefficient operating models, lack of well-defined credit-risk strategy, paucity of tools, and inadequate management focus. However, utilities can always take some affairs into their own hands, by revisiting their collections and credit process they can enhance their capability to predict risk, cut down on charges linked to bad debt, while providing a better consumer experience.
So, to minimize bad debt, bring down service costs, and then enhance and sustain customer satisfaction for longer duration, utilities need to pay attention to both collection and debt prevention. Preventing bad debt is not only a financial performance indicator but also helps utility companies to minimize reputation risk from the debt recovery endeavor. The best solution is to build a well-defined and structured collections and credit process that spans across each and every stage in the customer life cycle. An integral part of this structured process could be Collections Effectiveness Index, that essentially evaluates the effectiveness of debt recovery efforts and is imperative in the Energy & Utility industry owing to the fact that this sector cannot afford the inefficiencies and costs of working on each account equally. Aligning dialer settings with business strategy is a starting point to facilitate a quantum leap to the amount collected. Collections Effectiveness Index is a robust measure that concentrates on the collection effort quality with time by ascertaining the percentage of accounts receivable an organization can recover or resolve within a given time period. Typical benefits a Utility can realize from this would be:
- Compare actual debt collected versus what was supposed to be collected in that period
- Help understand the quality of collections efforts of the BPS provider
- Focusing on collections of the largest receivables with maximum overdue
- Provides scientific and valuable insights to streamline credit policy implementation
Meticulously considering all the above and critical aspects, Tech Mahindra has collaborated with Qualco to maximize the performance of Utilities Account Receivables (AR) . Our joint solution approach will enable an intelligent customer journey to proactively PREVENT and LIMIT debt exposure. Our end-to-end technology backed collections management can monitor utility debt portfolios throughout the debt collection lifecycle while enhancing the overall CX efficiently with –
- Automated Dialer based services
- Customizable & Scalable Modules
- Personalized Communications
Figure 1: TechM's end-to-end technology backed collections management process
As part of our Debt Collections offering, we along with our partner Qualco, look forward to proactively optimise collections process across the utility’s customer journey. Our joint soft collections approach is simple, data-driven & intelligent that positively influences the overall experience & engagement, considering the financial well-being of utility customers:
- Prevent : Stop debt before it starts
- Deflect : React proactively to debt risk
- Collect : Help customers clear their balance and manage hardships
- Recover : Protect revenue
Challenges Addressed:
- Identification of current & potential debtors with early credit risk detection & treatment strategy
- Enhance relationship between utility providers & consumers
- Facilitate vulnerability identification & refine hardship programs to mitigate loss
Benefits Provided:
- Improved Liquidation Ratios – up to 97%
- Delinquency Rate Reduction – up to 50%
- Enhanced Collections – accelerate cash flow by 10-20% in early buckets
- Increased Profits – OPEX reduction by 20-30% per process
- Improved Collections Effectiveness Index; + 65% to 70%
- Reduced Collection Costs & Improved Visibility
- Improved – Promises kept rate & propensity to pay
Operational Efficiency:
QUALCO’s solutions can help utilities explore a wide range of possibilities while enjoying operational efficiency and process automation. Data-Driven Decisions Engine (D3E) and QUALCO Collections & Recoveries (QCR aka - Qualco IntraCollect). These powerful tools substantially contribute towards workflow-driven collections and operational effectiveness.
- Take advantage of advanced modelling capabilities.
- Launch new campaigns with no effort.
- Fast assignment/recall process.
- Monitor and measure performance at all times.
- Seamlessly integrate with DCAs and legal offices.
Why Tech Mahindra BPS
Our approach is built around six key drivers of- People, Process, Digital, Automation, Analytics, & Compliance, and our executives undergo rigorous pre-process, process and on the job training to understand customer sensitive circumstances during debt collections related interactions.
Moreover, our ‘soft debt collections’ approach that duly considers the customer hardships management aspect is fully compliant to major region-specific utility regulators all over the world while keeping a close eye on the Collections Effectiveness Index (CEI).
