The impacts on collections are likely to be similar to what happened when the UK retail energy market opened to competition and when the non-household water market in Scotland opened to competition. However, the pace of change is likely to be faster due to the learning gained by customers in those markets, which are very mature now, and prevalence of easier switching.
What has already happened?
Ever since the day ‘Open Water’ was first announced, suppliers and wholesalers have been preparing. Some businesses have decided not to compete and sold portfolios of business customers, others have been enthusiastically getting ready. Many have been forecasting the medium-long term outcomes for water wholesalers, retailers and customers – but only time will tell.
Given the bad debt and collection costs typically represent 20-40% of the water retailers cost base there will be a real need to tightly control and manage those costs, particularly in a competitive marketplace. Organisations that have been mostly focussed or coping with the market opening will soon be turning their attention to on-boarding, billing and servicing customers and of course mitigating and managing their exposure to bad debt.
What can be done to smooth the transition?
Very often organisations have a perception that collections and bad debt costs are unavoidable, and to an extent some are, but there is much that can be done to mitigate the risk and optimise outcomes. Advanced analytics can provide invaluable insight to inform acquisition, proposition and collections strategies and identify the most profitable customers, in area and out of area. Automated tailored debt follow-up based on internal and external customer profiles and behaviours can reduce the cost of collections activity, accelerate cash-flow and reduce bad debt.
There is also much that can be done with regards to continuous process improvement, optimising collections systems functionality and staff development and training. The insight gained from collections and recoveries provides a unique lens and opportunity to improve all processes that impact upon the customer journey and reduce cost to serve and increase customer satisfaction.
Sandy Duckett is Principal Utilities Collections and Recoveries Specialist at Arum