Utility Debt Management: Mitigating Indebtedness With Optimised Collection Strategies

As gas and energy prices surge alongside the rising cost of living, consumers in Europe, particularly in the UK, and the U.S., cannot or do not pay their utility bills. As a result, utilities are facing mounting debt management challenges. The financial and credit control departments within utility organizations are obliged to navigate between revenue requirements and social responsibility, spurred by government initiatives.

Furthermore, businesses relying on manual debt management processes experience the daunting task of managing diverse customer bases, each with unique debt collection needs. Customer service representatives and debt managers must adapt their approaches accordingly, catering to the specific requirements of individual debtors.

Fortunately, effective debt management strategies can help mitigate the impact of indebtedness while creating a win-win situation for both suppliers and consumers. These strategies traditionally encompass flexible debt collection methods, efficient communication, and technology to streamline debt recovery operations.

In this article, we delve into the real-life challenges faced by the sector and explore tangible approaches for optimizing debt collection management to minimise the impacts of debt on business performance.

The Factors Causing The Debt Management Crisis in Utilities

The current debt management crisis plaguing utilities is not an overnight occurrence. It has manifested as a result of multiple contributing factors that have created a perfect storm within the industry. These are

• Post-Covid Economic Recovery: The resurgence in economic activity following the Covid-19 pandemic has led to a surge in energy demand. 

• Cold Weather Risks: With the looming risk of a cold winter, the demand for gas has intensified as it remains the primary source for heating the majority of homes in the UK. 

• Limited Gas Storage Capacity: Inadequate gas storage capabilities have left utilities vulnerable to supply disruptions and price volatility. The lack of sufficient storage infrastructure has amplified the impact of market fluctuations, adding to the challenges faced by utilities.

• Global LNG Demand: The soaring demand for Liquified Natural Gas (LNG), particularly from Asia, has created intense competition for gas resources. This surge in global demand has contributed to price spikes, making it increasingly difficult for utilities to manage their financial obligations.

• The impact of the gas price crisis on electricity prices: The most expensive marginal cost of energy sets the entire market price. Despite gas-fired generation accounting for only 40% of energy production, it currently sets the marginal market price at an alarmingly high level.

• Geopolitical Factors: The war in Ukraine has led to a significant reduction in Russia’s gas supply to Europe. This geopolitical tension has disrupted the energy market, compounding the challenges faced by utilities.

To successfully overcome these complex challenges,  the utility sector needs a strategic and all-encompassing approach to debt management. Company executives if willing to build a customer-centric utility organisation must reevaluate conventional debt collection methods, which often rely on a generic, one-size-fits-all approach and consider a segmented one, backed up with automation, a certain level of configurability, and efficient ways to communicate with customers.

Indebtedness Tamed: Exploring the Benefits of Automation, Configurability, and Excellent Communication

To overcome a debt management crisis, utilities must design effective strategies that expand payment options, enhance customer segmentation, streamline collection efforts, and reduce operational costs. These strategies are only attainable with the aid of advanced debt management technology that embraces automation, configurability, and a powerful reminder system.

MaxBill offers utilities a flexible and modern debt management solution that enables the creation of customer-friendly approaches to collecting growing utility and energy bills. With this solution, utilities gain the ability to establish multiple workflows for debt management, catering to various schemes, customer groups, and predefined intervals based on specific business rules.

Such configurability creates an environment where both suppliers and consumers succeed – suppliers efficiently manage and recover debts, while consumers stay well-informed and navigate their debt recovery journey smoothly.

Automation is a key driver that significantly enhances debt management processes by facilitating communication activities, collection processes, and reporting. Utilities can adopt MaxBill’s debt management approach as a standalone solution, seamlessly integrated into their existing utility and energy billing system, or opt for a comprehensive billing system that encompasses debt management capabilities.

MaxBill’s solution delivers several compelling benefits, such as:

1. Optimised debt recovery activities: Suppliers simplify the process of transitioning consumers to pre-payment tariffs, facilitating the gradual recovery of outstanding debts. Businesses can also implement tariff plans with various discount schemes, including the ones provided by the government.

In addition, these activities involve establishing tailored workflows for customers enrolled in payment plans, incorporating predefined stages and business rules to address potential default scenarios.

Furthermore, these workflows consider situations where customers simultaneously receive or make payments for current bills while gradually settling their outstanding debts according to the agreed payment plan.

2. Tailored debt recovery approaches: The system offers the flexibility to design specific recovery cycles for different customer segments, ensuring customized approaches that suit individual circumstances. Workflows can vary based on factors such as residential or commercial customers.

3. Data-driven debt follow-up: The integration of customer data, including creditworthiness checks through third-party APIs, enhances debt management decision-making. Customer flows can be designed to incorporate verification processes, leveraging data insights to inform appropriate actions.

4. Powerful reminder and alert system: The solution includes a robust reminder and alert system for multiple purposes. Debt collection flows can include reminders with pertinent debt information and due payment dates. Automatic bill copies can be sent to customers in line with the debt management workflow. Additionally, ad hoc alerts notify the credit control team when human decision-making is required.

5. Insightful reporting for improved decision-making: MaxBill’s debt management solution provides real-time reports that empower utilities to assess the performance of activities, evaluate the effectiveness of strategies, and make informed changes or improvements. These reports also offer valuable insights into customers’ specific conditions, allowing utilities to identify trends and patterns and adopt a more empathetic approach to debt collections.

MaxBill’s comprehensive debt management solution equips utilities with the tools and capabilities needed to handle debt management challenges effectively. By harnessing automation, configurability, and a powerful system of communication, utilities can enhance their debt recovery efforts, optimize operations, and foster positive relationships with their customers.

Ready to transform your debt management processes? Get in touch with MaxBill today and let us help you deal with financial challenges, brought on by the current utility market conditions.