Did you know utility companies write off millions in bad debt annually?
Getting utilities debt collected can prove to be quite a challenge at times. Unpaid utility bills pose a serious challenge and are something that should not be taken lightly.
Past-due bills in the utility sector open the gates to financial strain, operational disruptions, and reputational risks.
In our previous blog, The Hidden Cost of Utility Bill Debt, we explored how unresolved utility debt can impact businesses.
In this 7-minute guide, we will walk you through the key processes and best utility bill recovery strategies a business should follow to ensure timely payments and minimize financial losses.
Struggling with unpaid utility bills? Learn how to
Utilities Debt Collection Matters for Your Business – Here’s Why
In 2024, utility companies were hit hard with billions in unpaid customer balances, leading to financial strain, operational headaches, and even debt write-offs.
According to Utilities Now, 32% of Americans reported that they found their utility bills unaffordable, and 1 in 6 experienced electricity shutoffs due to unpaid bills.
Now, that is a concern – and to put it in simpler terms, it means that not only are consumers falling behind on their utility bills day by day, but it’s also affecting businesses in the form of financial loss and cash flow disruption.
To dive deeper and further dwell on this, take a look at our previous blog outlining the 4 major ways utility bill debt can hurt your business.
Getting an Understanding of the Utilities Debt Collection Process
To fix the root cause of commercial utility debt, it is important to understand the entire process of utilities debt collection.
So, let’s break down multiple stages of utility debt collection.
Key Stages of Utility Debt Recovery
1) Pre-collection efforts:
The first step in recovering unpaid bills is proactive communication. Timely reminders and providing your customers with a tailored payment plan can help prevent minor delays from turning into bad debts.
Offering a payment plan can also be perceived as a friendly gesture by your consumer. This compassionate approach is crucial to fostering a positive community.
AI-powered platforms like CollectCo can offer just that via tailored solutions, omnichannel communication, and timely reminders to keep your consumers in the loop and enhance their billing experience.
2) Formal demand notices:
If the subtle and friendly approach doesn’t result in recovery – now is the time to take it a notch further and start considering formal demand notices that clearly outline the consequences of non-payment.
Remember that the demand notice should be carefully worded to remain compliant with legal standards while emphasizing the urgency of resolving any outstanding balance.
3) Partnering with debt collection agencies:
If you have exhausted all internal efforts with little to no progress made, partnering up with a specialized debt collection agency becomes a need of the hour. It is crucial to have any utilities debt collected ASAP because the more days past due an account gets, the harder it becomes to recover.
Debt collection agencies have the expertise and manpower to recover any past-due accounts while adhering to legal and ethical standards.
Some seasoned debt collection agencies like Cedar Financial can also provide customized solutions tailored to the utility sector.
4) Legal action:
After all sorts of amicable efforts, the last resort you are left with is legal action.
However, pursuing litigation should be a calculated risk, taking into consideration the cost involved and the likelihood of recovering the debt.
The legal cost varies state by state and depends on multiple factors, but it usually boils down to around $500 to $1500 per case.
So, it is advised to give it a good thought and even discuss the matter with a legal expert to better assess the chances of success before you take on any court proceedings.
Challenges in Utility Debt Collection
5) Customer relationships:
Customers are the backbone of any good business, so retaining them should always be a top priority in any utility sector.
Utilities should look to strike a balance between firm collection efforts and preserving customer goodwill.
Time and time again, we have seen businesses lose long-standing customers and burn bridges just because of harsh recovery tactics. So, it is advised to refrain from using such methodologies.
6) A high volume of low-balance debts:
A commonly faced challenge that we often hear from utility providers is that they have to deal with a large number of relatively small unpaid bills.
Debts of this nature make collections a very costly process for utilities. The price of traditional or contingency collection can be as high as 40% of your total collected debt.
So, it’s important to implement efficient recovery strategies – and automated collections happen to be one of them.
CollectCo has established itself as an innovative and expert platform when it comes to the collection of high volume – low balance accounts, also known as quick-to-pay accounts.
Discover more about our smart collection software and tailored solutions.
💡 Pro Tip: Automated reminders reduce late payments by 40%! (Source: FasterCaptial)
7) Regulatory compliance:
In utility debt collection, overdue payments require strict adherence to regulations like the Fair Debt Collection Practices Act (FDCPA) and the Telephone Consumer Protection Act (TCPA), along with state-specific consumer protection laws.
Utility providers must balance compliance with fair billing practices, disconnection policies, and customer rights, ensuring ethical debt recovery while avoiding legal risks and service disputes.
CTA Card: Need help navigating utility debt laws? Schedule a free compliance consultation.
Need help navigating utility debt laws?
The 3 Best Practices for Successful Utility Debt Recovery
1. Proactive Strategies
Clear payment terms and transparent billing:
Ensure that customers understand their payment obligations by providing clear billing statements and accessible payment policies.
This can be further enhanced by offering multiple payment options and even a consumer portal.
Early intervention with payment reminders:
In the utilities sector, forgetfulness is the most common cause of past-due bills. This can easily be solved with the help of automated reminders such as SMS, email, and phone calls.
These precautionary measures are crucial to preventing debt from developing in the first place.
Flexible payment plans:
Flexibility in paying bills is something we don’t see a lot. But at the same time, it is a crucial aspect of utility billing if you want to ensure timely payments and prevent bad debts from occurring.
Offering installment plans for struggling customers helps increase the likelihood of recovering overdue balances while maintaining customer relationships.
2. Partnering with Specialized Agencies
Choosing the right agency:
Working with a debt collection agency that specializes in utility accounts can increase recovery rates.
When selecting an agency, ensure it complies with industry regulations and has a proven track record of ethical collections.
Maintaining brand reputation:
A professional collection agency understands how to recover debts without damaging your brand’s reputation, which is crucial in retaining long-term customers.
3. Leveraging Technology for Debt Collection
Consider partnering up with a debt recovery agency providing automated solutions for utilities debt collection.
Automated billing and reminders:
AI-driven risk analysis and automated invoicing can help businesses identify high-risk accounts and streamline their recovery efforts.
Predictive analytics:
Using data analytics, businesses can identify patterns in late payments and proactively intervene before debts become unmanageable.
Customer self-service portals:
Allowing customers to manage and pay their bills online with minimal friction increases payment compliance.
CTA Card: Discover our utility debt recovery software – cut losses by 30%.
Discover our utility debt recovery software
Case Study: From Outstanding Balance to Positive Resolution
This case study is from our parent organization, Cedar Financial, which specializes in utility debt recovery solutions.
One U.S. based utility provider was facing a growing challenge: an increasing number of unpaid customer accounts.
With outstanding balances piling up, the company struggled with cash flow issues and an administrative burden that diverted resources from essential operations.
Their internal collections team had tried to recover the debts but met with limited success.
Frustrated by the inefficiency of their approach, they realized they needed a more strategic and specialized solution to tackle the problem effectively.
Challenges Faced
The utility provider faced multiple hurdles that made debt collection particularly difficult:
- A high volume of delinquent accounts: Thousands of unpaid bills created a significant strain on the company’s financial stability.
- Customer reluctance to engage: Many customers ignored payment reminders or refused to discuss repayment options.
- Legal complexities: Strict state and federal regulations made it difficult to collect overdue payments without risking compliance violations.
- Resource strain: The in-house collections team was overwhelmed, leading to inefficient recovery efforts.
Recognizing these challenges, the company decided to seek the expertise of a professional debt recovery agency that specialized in utility debt collections.
Strategy Implemented
To turn the situation around, the utility provider partnered with a reputable collection agency that offered a structured, customer-centric approach to debt recovery.
The strategy focused on:
1. Multi-Channel Communication
Instead of relying on a single contact method, the agency engaged customers through personalized phone calls, emails, and SMS reminders.
This increased the chances of reaching debtors and initiating conversations about repayment.
2. Flexible Repayment Options
Many customers were struggling financially, so rigid collection demands were not effective.
Instead, the agency introduced structured repayment plans, allowing customers to settle their debts in manageable installments.
3. Compliance-Driven Approach
Ensuring full adherence to debt collection laws, the agency carefully navigated federal and state regulations, preventing legal risks and protecting the company’s reputation.
4. Customer-Centric Recovery Tactics
Rather than employing aggressive collection methods, the agency focused on respectful, solutions-oriented conversations.
By treating customers fairly, they not only increased the likelihood of repayment but also helped preserve long-term customer relationships.
Results Achieved
The impact of these strategies was evident within just a few months. The utility provider saw a dramatic improvement in their recovery rates and overall operational efficiency:
- 85% recovery rate on outstanding balances, significantly reducing financial losses.
- Reduced administrative burden, as the collections team no longer had to chase down unresponsive customers.
- Stronger cash flow, allowing the company to reinvest in infrastructure, service improvements, and operational stability.
- Preserved customer relationships, ensuring that previously delinquent customers could continue using the service without friction.
Conclusion
This case study acts as a solidifying piece of evidence that demonstrates how a structured, professional approach to debt recovery can lead to exceptional results.
By implementing a multi-channel, customer-focused strategy, the utility provider successfully reclaimed lost revenue while maintaining a positive brand image.
So, all in all, unpaid utility bills don’t have to be a losing battle. With the help of proactive strategies, leveraging technology, and partnering with the right experts, you can recover debts efficiently and protect your business.
Connect with us to learn how CollectCo can help you reclaim lost revenue and strengthen your cash flow with the help of powerful features like:
- Automated Collections
- Omnichannel Communication
- Streamlined Debt Recovery
Ready to take the next step?
