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Early Arrears Debt: getting utility customers back on track

From the Knowledge Centre

Published February 29th 2016 in Debt Recovery & Revenue Management by Lloyd Birkhead

With more than 2.5 million UK households reported to struggling to pay their water bills, a robust early arrears debt strategy can be the most effective intervention to get customers back on track, and reduce bad debt levels. But, with in-house teams stretched by mounting debt cases, what more can utility companies do to recover payments quickly whilst protecting their customer relationships?

It's widely acknowledged that the utilities sector is facing considerable challenge when it comes to the management of both domestic and business debt. Living costs and energy bills are rising faster than earnings, meaning a growing proportion of the UK population are facing a struggle when it comes to the payment of their utility bills.

But, unpaid bills are not always as a result of income deprivation, sometimes a customer will dispute a bill or not understand it, resulting in non payment. It's vital to take all reasons for non payment into account and join up systems throughout the debt cycle to deal with each individual case effectively.

The importance of a robust early arrears strategy
A robust early arrears strategy can be the most effective way to engage and rehabilitate customers who are failing to pay their bills on time. Early arrears debt consists of customers who are in the very early stages of payment difficulty. Often a reminder is all that's needed at this point to effectively get a customer back on track. Intervening early is proven to reduce bad debt later down the line.

Spotting early warning signals is clearly important and data analytics can play an important role here - helping to monitor changes in a customer's behaviour. This can then be used to positively influence consumer behaviour whilst debt is still manageable.

Rising debts stretching in-house teams?
With increasing numbers of customers struggling to pay bills on time, in-house debt collection teams are being stretched and required to handle more and more cases. Given that in the sector operational budgets are under pressure, it's not always possible to recruit and train the additional team members needed to cope with the growing number of payment arrears.

With debt rising and budgets at best flat, appointing a specialist outsourcer can be one way that utility companies can look to manage debt in a cost-effective manner.

The benefits of outsourcing early arrears
In the utility sector, the use of debt collection agencies (DCAs) to manage later stage debt recovery is a widespread practice. And now, utility companies are looking to enlist the help of specialist, proven outsourcers to also manage their early arrears collections. The benefit is clear; a dramatic reduction in bad debt levels can be achieved and monies owed can be recovered in an ethical and efficient manner.

However, choosing to enlist an outsourcer to manage the early arrears function is not without it's concerns. Many utility companies fear a loss of control over both their reputation and their customer relationships. An outsourced early arrears service is usually "white-labelled" with the outsourcer acting under the utility company's name - many therefore worry about what will be said and done on their behalf.

Choose the right outsourcer to quell these fears; one who will act as a true extension of your company and protect your core brand values as if they were its own. For example, a specialist customer service outsourcer can not only outperform in-house teams at the crucial early arrears stage, but also mirror the utility brand and provide customers with a totally seamless brand experience.

A customer-centric approach delivered via a utilities specialist
If you're considering outsourcing your early arrears services, look for a utilities customer service specialist that can bring to the table an effective mix of proven debt collection tools and strategies and the skills and experience to impact positively on customer satisfaction. Ensure also that strategies are tailored to your particular needs, and not off the shelf.

Many traditional DCAs are experts in debt collection, most specialising in the later stages of recovery. Early arrears collection requires a completely different skill set and a customer-centric and empathetic approach. Choosing a customer service specialist with end-to-end utility debt capability and experience rather than a traditional DCA can allow a utility company to benefit from proven debt collection expertise which both improves results and protects valuable customer relationships.

With existing customer relationships at stake, choose an outsourcer that will treat your brand as if it was their own. The right customer experience during early arrears collections is vital - not only to enhance customer rehabilitation, but also to foster customer loyalty in a sector where companies are having to work harder to earn and keep it.


About the author

Lloyd Birkhead

Managing Director of Echo's wholly owned subsidiary, Grosvenor Services Group.

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