Nick Boxall-Hunt says utility companies need to become more human in their collection strategies if they want to buck the UK-wide trend of rising bad debt.
Consumer bad debt is continuing to grow and currently stands at around £1,579 million for the UK’s energy, water and telecoms markets. To highlight the scale of the problem, research from PwC shows a 60 per cent rise in bad debt levels across the energy sector over the past five years, with water utilities not far behind with an increase of 44 per cent. According to the research, bad debt across energy utilities rose from £400 million in 2011 to £640 million in 2015 with UK Water firms showing a similar trend from £263 million to £379 million. Only the telecoms sector showed a marginal improvement with debt levels dropping by £20 million to £560 million over the same period.
So, what is the solution?
If you take the money and the process out of the equation, this becomes a particularly human issue and one that carries significant emotional content. How should you approach debt collection – strictly or with compassion? Using a one-size-fits-all approach is too simplistic and thus, in reality, most companies use profiling (financial or demographic) in order to apply different strategies within their debt management processes.
The issue of discussing debt, although sensitive, should not be over-complicated. Sometimes the customer who is in debt may not even be aware that this is the case.
A proactive communication strategy will notify customers of the position they find themselves in. The opening of this conversation need not be a taxing one – a simple text message may suffice to start the engagement process inviting a call to the company to whom money is owed. This would allow the customer to engage on their terms and allow a dedicated, skilled team to handle the calls in a collaborative manner.
This has benefits on both sides of the customer,experience equation:
- The person calling in is ready to do so and is more open to dialogue.
- The person receiving the call is fully prepared to handle the call. The output of this is that the engagement is more productive and allowing the debt team to focus on the most pressing cases – ones that are actively avoiding paying.
Bad debt in numbers
- Bad debt across energy utilities rose from £400 million in 2011 to £640 million in 2015.
- Bad debt for UK water firms rose from £263 million to £379 million in 2015.
- 63 per cent of UK adults experienced debt recovery procedures.
- 16 per cent paid late because the bill was higher than expected.
- Data from the RFI suggests that between two and three times as many customers are allowed to switch with a debt (typically 430,000 a year) than are prevented through debt objection (typically around 170,000 a year).
- The average debt of customers who are prevented from switching rose from £268 in 2013 to
£418 in 2015.
- One in five households across England and Wales now say they feel their bills are unaffordable.
- According to Ofwat, water sector bad debt has risen by 4 per cent in four years.
- This effectively adds “a hypothetical £21 a year” to the bills of customers in England and Wales.
Can’t pay, won’t pay
For those refusing to pay, it will be mostly due to financial reasons and utility companies therefore need to show more empathy towards their customers’ predicaments. Following this initial discussion, email communication is often used to provide additional information around sources of financial support. Again, the approach needs to be one of collaboration, working with the customer to ascertain all the financial options available to them to enable them to pay their bill. Engaging early with them and showing understanding to their situation is the best way to tackling those who won’t pay.
With bad debt, most of the focus is understandably on the customers, but what about utility company employees? Again, it comes back to the human touch. Giving staff positive feedback during the debt management process will help support those staff taking their customers through what could be a traumatic and uncomfortable time.
Positive feedback also keeps the staff engaged as they get to see that, despite the emotionally complex nature of this process, they are having a positive impact on their customers’ lives. This reduces staff absenteeism and churn, ensuring your colleagues and your company are at their most productive.