Debunking myths surrounding early arrears outsourcing in utilities

The utilities sector is facing considerable challenges when it comes to managing customer debt. Rising living costs coupled with sluggish wage growth has meant that energy prices are rising much faster than earnings, leaving a growing proportion of the population struggling to pay their utility bills.

However, not all bills are unpaid because of income deprivation. There are a number of reasons why a customer might not pay – a customer might dispute the amount or not understand the bill, for example. It’s important that utility companies take all reasons into account and have joined up systems throughout the entire debt cycle to deal with each individual case effectively.

Adopting a robust early arrears strategy

The most effective way to engage a customer that is failing to pay their bills on time is to have a robust early arrears strategy in place. Early arrears typically covers debt up to 30 days old, so tends to consist of customers that are in the early stages of experiencing payment difficulties. Effective strategies are important here, as often a reminder is all that’s needed to get a customer back on track. Appropriate intervention at this early stage is proven to be the most effective tactic in reducing bad debt.

Here, the use of data analytics has an important role to play in spotting early warning signals, as it can help monitor changes in customer behaviour. This proprietary and third party data can be used to positively influence customer behaviour whilst their debt is still in a manageable situation.

In-house teams stretched by rising debts

One major problem that has arisen from the rising number of customers struggling to pay bills on time is that in-house debt teams are having to deal with more and more cases, and as a result may struggle to handle the workload. With operational costs under pressure, it’s not always feasible to recruit more team members and in addition, the time it takes to train up new people to an effective level can simply be too long to deal with the large number of customers struggling with late payments.

With ever-growing customer debt and their own operational budgetary issues, proactive utility companies are now realising this is something they can no longer ignore, and as a result, are now beginning to recognise the benefits of appointing a specialist outsourcer to help.

Outsourcing early arrears to improve results

Whilst the use of Debt Collection Agencies (DCAs) is already widespread for late stage collections, utilities are now beginning to enlist the help of outsourcers to manage early arrears, where previously they have relied on in-house teams. Enlisting the help of a specialist outsourcer at this stage can dramatically reduce bad debt levels and allow utilities to recover what is owed in the most ethical and efficient way possible.

Historically however, many companies have voiced concerns over outsourcing their early arrears functions. Many fear that outsourcing could result in a loss of control over their customer relationships and reputation. And as early arrears collection is often a white-label service, with outsourcers acting under the utility company’s name, many raise concerns over what will be said on their behalf.

An experienced outsourcer will be able to quell these fears by acting as a true extension of the utility company, protecting core brand values. Specialist customer service outsourcers can outperform in-house teams at the crucial early arrears stage, allowing utilities to focus on core activities. In order to achieve this, however, the utility brand must be mirrored and customers should be given a totally seamless experience – with the outsourcer committed to protecting the brand as if it was their own.

Enlisting the help of a utilities specialist

Choosing a utilities customer service specialist to deliver early arrears services can ensure that strategies are personalised to the individual client’s needs and results are delivered quickly. Utility companies should look for a partner that can bring to the table an effective mix of modern collection tools with tried and tested best practice utility debt techniques, to ensure that customers are dealt with fairly, and data is recorded accurately.

The importance of a customer-centric approach

Whilst many DCAs are experts in debt collection, most specialise in the final stages of collections. Early arrears collection requires a completely different approach and skill set – it means really understanding customer reasons for non-payments. When it comes to this type of collection, what is needed is a customer-centric and empathetic approach. Outsourcing early arrears collection to a customer service specialist with end-to-end debt capability can allow utility companies to benefit from proven debt collection expertise which can both improve results and help protect customer relationships.

Ultimately, outsourcing early arrears collections to experts can improve results and help recover debts faster. But with existing customer relationships at stake, take care to choose an outsourcer that will treat your brand as if it was their own and protect loyal customer relationships. The right customer service experience during early arrears collections is crucial – not only to increase customer rehabilitation, but also to foster customer loyalty in a marketplace where utility companies continue to have to work hard to earn it.

Lloyd Birkhead, managing director at Grosvenor Services Group, part of outsourced customer contact specialist Echo Managed Services