Too many customers aren’t paying their bills. And while their reasons may be legitimate, if you’re an energy supplier, your cash flow is likely to take a major hit. You must be able to efficiently collect bill payments while ensuring that you don’t disenchant valuable customers with heavy-handed tactics. How can suppliers keep debt under control while maintaining customer loyalty?
Rising debt in Australia
Mortgage stress, childcare, petrol and healthcare are just some of the expenses impacting the consumers. As the cost of living continues to soar, problems paying energy bills are becoming the norm for financially vulnerable customers, according to NSW Ombudsman Janine Young. In NSW, over 145,000 households and small businesses are now in “energy debt”. One in 10 owes more than $1000.
It’s a similar picture in Victoria. Data from the state’s Essential Services Commission shows that an increasing number of consumers are having their energy supply cut off as a result of not paying their bills. Between April and June 2017, more than 8,500 customers were disconnected for not paying their electricity bill and 5,000 for not paying their gas bill (up 46 and 28 per cent from last year, respectively).
The subsequent cash flow issues pose major concerns for small and large suppliers alike. The temptation may be to harden attitudes, introduce more aggressive, indiscriminate arrears management strategies and increase manual intervention. However, successful debtor rehabilitation requires a more proactive and personalised approach.
It’s time to consider tailored treatment paths
Accurate segmentation and early intervention are key to successful collections. By segmenting customers, suppliers can gain a better understanding of the attributes of “can’t pays”, “wont’ pays” or merely “forgot to pays” . This allows for a more personalised and effective approach to collecting payments.
Start by creating a risk score based on a range of definable factors such as external credit scores, address, number of reminders, dishonoured payments and on time payments to date. Try to include a near real-time snapshot of payment behaviour. Performing an external credit check when customers move to a new contract will flag up any potential payment problems. Make sure your credit system can manage this assessment automatically. Once criteria are established, debtors will roll automatically between segments depending on behaviour, and new customers will automatically be allocated to the most appropriate group.
Automation lowers cost to collect
Once you have developed a scoring and treatment strategy, it’s time to automate. Using configurable workflow, you can tailor a collections strategy for each segment, automating the frequency, timing and tone of communication necessary to collect debts while maintaining consumer loyalty. For example, for those most at risk of default, a text message ahead of the bill being sent out with the due amount highlighted will help budgeting. Providing a link to the payment processor for immediate payment is better still. A reminder of any early pay discounts could help prioritise energy bill payment over other bills; a less risky customer may only need a gentle reminder.
This automation of early stage arrears management also lets you free up more staff to deal directly with struggling borrowers. This improves collector productivity and lowers the cost to collect. With reporting tools, you can keep an eye on strategy effectiveness, testing, learning and adapting according to your needs and changing debtor behaviour.
The rising energy debt in Australia is a problem for both customers and suppliers, but overzealous collections processes are not the answer. By opting for a granular approach to segmentation, and implementing and automating tailored treatment plans, utilities can walk the fine line between managing debt and meeting regulatory requirements, while doing the most important thing of all – strengthening customer loyalty.