With preparations for PR19 now well underway, the second of our three-part Billing and Collection in Water series looks at how Water Utilities can optimise the management of their customers in debt.
At the heart of PR19 is the drive toward more affordable bills, and great customer service, both of which fundamentally depend upon a high performing Billing and Collection function. Ofwat has set, what some consider, some of the “toughest ever” regulations, with the most significant focus on debt reduction seen in recent Price Reviews and supported by some eye-opening statistics:
- Customer debt adds £21 to each customer’s annual bill
- Water supplier’s average “Bad Debt Charge” is 2.3% of revenue; well over double that of Telco (at 0.9%), and worse than Retail Energy (typically in the region of 1-2% in the residential market.)
We see that there is huge opportunity for water suppliers to rise to the challenge, but what does “best practice” mean and how can you take steps to respond?
Area one: Operating Billing and Collection as one
In our first blog we showed the first step can be preventative, by looking inward at your operation to break down the silos between Billing and Collection, sharing insight between functions to “turn the tap off”. It is an important building block toward better performance; with a significant proportion of annual write-off tracing back to upstream bill quality issues, some water utilities are already reaping the rewards of closely aligning Billing and Collection activities.
Area two: Unlock the value in your data
Ofwat have made it clear that the better use of, and sharing of data is critical to drive improvements across customer management. We agree that there is untapped value in data that will be pivotal in generating insight, and that demonstrating how to unlock it is key to success. In our experience, the ‘best in class’ suppliers have placed focus on investment in analytics, with associated tool sets and hardware to support deep data insight across a significant number of data sources. This can enable segmentation of customers (supplemented by credit and social data) to create more tailored collections approaches, and to monitor and proactively guide customers toward more suitable tariff renewal options. For vulnerable customers in particular, a data-led approach will enable further supplementation of data through collaborating with both water and energy suppliers to enrich existing data and tailor treatments.
Area three: Use Customer Experience improvements to complement debt recovery
Typically collecting debt in particular carries the trade-off between reducing the debt position and risking the wrath of the customer through complaints. Should water utilities have to make a choice between SIM (soon to be WaterworCX), and debt? Our work with suppliers indicates that general customer experience improvements can complement and reduce the risk in chasing debt. Providing a varied set of channels and opportunities to make payments early, and supporting customers to pay using Debt Collection Agencies (DCAs) that tailor payment plans to the individual situation will support customers to manage their payments.
PR19 is a big marker for water suppliers in how they view their customers in debt. For many in the industry, the first step will be taking a fresh look at the billing and collection operation, and working out what “best practice” means to operational delivery, and most importantly, your customers.