The utility sector has a massive impact on the lives of millions of Americans by keeping the lights on and the heat running in households across the country.
In recent years though, like any other industry, it has faced significant hurdles in the effective provision of utility services due to the rising delinquency in utility bills. Staying on top of utility bills is a challenge for more households in the U.S. with the rising cost of living, and shrinking incomes, and priorities shift to accessing other necessities.
While the energy crisis is challenging for customers, it is doubly risky and difficult for utility companies to cope with the high demand against the delinquent utility piles that keep increasing. Utility companies need to adopt these 5 practices that can transform utility collections and tackle delinquent utility bills before they emerge.
Credit Risk Assessment and Customer Segmentation
The trajectory of debt in the utility sector has not flattened since the pandemic; in fact, it has gone up with every summer being hotter and every winter being colder since then. It has been recorded as late as May 2023, that nearly 20 million Americans are behind on their utility bills and that curve has only gone up, according to the National Energy Assistance Directors Association.
In such situations, utility providers must develop measures to assess the risk of defaulting for their customers, to anticipate who will fall behind on their payments and need to be engaged quickly. Utility companies should utilize accounts receivable aging reports to identify which customers are struggling with timely payments and communicate with them to fast-track the utility collection process. After all, the utility providers also rely on steady cash flow to provide the best services to their customers.
They can also utilize a system to segment customers based on previous payment history by using a “Willingness Matrix” to see which ones have a lower propensity to pay and focus collection efforts on them. The customers that fall under the category of unwilling and unable will be the customers that will have the most delinquent utility bills and will need additional efforts to persuade them to pay.
Timely Billing and Onboarding
Utility providers must ensure they are serving their community while maintaining a good relationship with their customers to manage their reputation. One way that they can weed out defaulters early is to do a thorough onboarding when taking on new tenants and customers.
Administrative errors are a leading cause of nonpayment and delinquent utility bills, according to a report by McKinsey. Most companies would fail to update their systems, and change temporary contracts when they are assigned, losing track of new tenants and hence, the piling of unpaid bills left by previous ones.
If every utility provider can ensure documentation of new tenant’s information and a detailed onboarding process where they acquire payment histories, bank details, credit scores, and contact details. Utilizing automated utility collection software for faster billing processes and payment tracking can help cut down the administrative delays that contribute to delinquent utility bills.
Home Energy Audits and Awareness Building
One of the major reasons that people get behind on their bills is that they do not factor in the rising and fluctuating cost of bills in changing weather conditions. Utility providers should conduct periodic home audits to cut down on wasteful energy expenditures.
Providing educational content to customers also helps them manage their bill payments more efficiently without falling back. Clearly articulating the consequences of non-payment can help them prioritize it and avoid delinquent utility bills, which is beneficial for the utility providers as well as the customers in accessing services without disruption. While there will always be a group of people who will need more than just educational material to manage their utility bills, keeping up a culture of awareness and identifying common challenges in utility collections help reduce the number of delinquencies in utility collections.
Utility Bill Insurance
There seems to be a surge in delinquency within the utility sector, with more households struggling to pay their bills on time and accumulating massive debt that is impossible to pay off without government support.
“The combination of rising prices and cutbacks in income supports is creating a perfect storm of misery for low-income families that is making it increasingly difficult to pay their home energy bills.’, said Mark Wolfe, NEADA Executive Director and despite the 1.6 billion provided by Congress to pay heating and cooling bills for households, only one in 5 households qualified for this aid, leaving many vulnerable to delinquent utility bills and no sources to pay them off.
Utility providers can partner with insurance agencies that can manage some of the collateral that remains from unpaid utility bills to ensure customers get access to the services, without disruptions. In the case that seasonable fluctuations cause higher delinquencies in utility bills, providers should be prepared to have supporting payment plans with insurance agencies and encourage customers to also have utility insurance.
Flexible, Tiered Payment Solutions
During the pandemic, there were many government bodies that put a restriction on utility collections, to provide some ease to the customers, but without any checks and balances, many customers accrued large amounts of delinquent utility bills that had no way of being paid off. Utility providers face bigger issues with customers who fall back on their bills when there is no alternative solution for timely payment.
When onboarding new customers, utility providers should ensure they go over the credit history of their tenants to discover payment history and patterns for each. If they see a pattern of defaulting or difficulty in timely payment from new tenants, they should set up tiered payment plans to avoid any complications later. Every customer will have unique financial issues, and adjusting payment plans accordingly saves defaulting problems later. Utility providers will know how to approach customers with financial stresses and customers become more confident in paying their dues when they know they have a workaround that lets them manage their bills without pressure.
The CollectCo Solution to Prevent Utility Bill Delinquencies
Utility providers do not often have adequate systems in place to predict and course-correct delinquent utility bills. Being a smaller sector, there are limited funds and manual processes that cause delays and inefficient accounts receivable management as well as utility collections. CollectCo is a proprietary digital utility collection platform with automated accounts receivable management systems, real-time collection tracking, and data analysis to ensure you stay on top of your utility collection processes.
Built out of the need to ease collections for businesses, especially within the small and medium front, CollectCo helps business owners make decisions around utility collections, access real-time tracking, and predict customer payment patterns to ensure they are ahead of any delinquencies. The automated accounts receivable management system with CollectCo business owners who cannot afford in-house collection resources, including staff and technology to manage collections. The other aspect that makes CollectCo ideal for small and medium-sized utility providers is the money saved on traditional collections. Utility bills are usually small-value debts that accumulate to become bigger monetary stresses. Overseeing smaller debts through an automated collection system ensures you don’t lose hard-earned revenue in traditional collection agency commissions.
Dive deeper into utility collection automation with CollectCo and see how a simple solution can transform utility collections for you while preserving your hard-earned community relationships. Book a demo now to find out more!