The Bottom Line

Patrick Carberry explains how to quickly enhance your bottom line without revenue growth.

“Utilities are under pressure to find ways to enhance their bottom line without increasing their top line”
-Patrick Carberry, Bottom Line Impact

The combination of the poor economy and the push to get customers to conserve has severely restricted the ability of utilities to increase their revenues. In our recent survey and conversations with our utility clients, we found that most utilities are under pressure to find ways to enhance their bottom lines without increasing their top line.

One of the swiftest ways to improve profitability without increasing revenue or slashing budgets is to reduce your bad debt expense. Based on actual results and analysis at over 100 utilities, a typical utility can expect, in less than 3 months, to reduce this year’s write-off by 10-20 percent. How much top line revenue would you have to produce to get this much bottom line impact?

Geographic mobility statistics indicate 14 percent of the population and 33 percent of apartment dwellers move every year; 60 percent of movers relocate within the same county, 80 percent within the same state. The implications of these findings illustrate that the majority of the people initiating and terminating service are coming from and going to a location still in your service territory. If you can properly identify all the responsible parties on an account, then there is a greater likelihood that you can turn their write-off into a current receivable on an active account. Because a utility has more tools and leverage, it is much easier and faster to collect on an active account than an inactive one.

Skip tracing
Almost every utility is already successfully skip tracing and performing balance transfers on a regular basis with very positive results. The key is to recognize that you can improve upon your current processes and that there is still an abundance of lost revenue available to collect. Because you already utilize these processes everyday, very little has to change. Skip tracing more efficiently and effectively and transferring balances more intelligently, will allow you to quickly reduce your write-off. When you enhance your customer identification on the front end, you can also permanently reduce your write-off going forward.

To fully leverage this best practices process, a utility needs to identify, match, transfer and collect.

To identify, use your CIS system to capture and store as many identifying attributes on your customers as you can – such as full name, SSN, DL#, birth date, phone numbers, email address, and employer. Identify all responsible parties, including spouses and roommates. Verify and update these identifying attributes regularly.

Matching involves finding active customers who also have write-off balances. Use all the identifying attributes available for all responsible parties to match written off accounts to an active account. You should look at all relationships between the accounts, including the non-obvious ones. Utilities should recognize that most of what is found is probably not fraud or intent to hide. It is name changes, misspellings, transposed digits and data entry errors.

Transferring is moving the written off balance to an active account taking into account all your rules and regulations (i.e. you can not transfer balances across state lines, statutes of limitation on old balances and so on). You should only transfer balances you can reasonably expect to collect.

Once the balance has been transferred, normal collection procedures will apply. Our analysis shows that most utilities collect between 80-95 percent of transferred balances.

With the understanding that there is lost revenue slipping through the cracks, a review of your current processes can pay big dividends and have a real bottom line impact. There are simple things you can do to recover more lost revenue and there are experts who can help.

Patrick Carberry is Co-Founder and President of Bottom Line Impact. Mr. Carberry has spent the last 20 years consulting with over 125 utilities. He is the architect of the Automated Revenue Miner that has recently assisted utilities with the identification and recovery of over $50,000,000 of lost revenue.