Energy and utilities companies face accelerating changes from the highly competitive energy industry. These challenges include increased volatility in energy prices, an evolving regulatory environment, unfavorable economic conditions, investor pressure on performance, and rapid technological developments. In this time of fast-paced change, one of the key priorities for utilities is streamlining their receivables management.
A report published by Ernst & Young found that the 12 largest European electricity and gas utilities had an aggregate cash opportunity between 6-14 billion Euros by sales. Elimination of this surplus could reduce the net debt of these companies up to 7%.
Utilities receivables management performance can be affected by drivers including customer portfolios, billing arrangements and contract terms. While sending an invoice to a customer does not guarantee a bill will be paid on time or in full, organizations can ensure that bills are generated and delivered in a timely manner.
Problems at any stage of the billing process might lead to a bill not being generated. The most common problems can include missing accounts for new customers, not assigning meters to customer accounts in a billing system, inadvertent bill or print blocks applied to customer accounts, outstanding work items preventing bill generation, or accidental transfer to other suppliers.
Not creating or sending bills can impact both customer experience and business performance. It can lead to customers receiving an unexpected demand for previously unbilled energy usage. Customers struggling to make ends meet may receive a large energy bill if their supplier failed to produce a bill, causing undue customer stress and negative public perceptions. From a customer perspective, delayed bills put extra pressure on their budgets.
From a business perspective, delays in realizing revenue impacts working capital and lead to higher cost to serve due to increased customer calls and complaints. Dissatisfied customers also impact a brand’s reputation as well. To protect customers, U.K.’s regulatory body Ofgem partnered with Consumer Futures and Energy U.K. to release a factsheet2 on the issue of “back-billing”. The documents states that if suppliers are at fault, they cannot demand payment for unbilled energy used more than 12 months before the error was detected, leading to revenue leakages.
In 2013, a Big Six U.K. energy provider undergoing a system migration faced billing issues that impacted a million customers. Customers went months without bills. The errors meant customers were then hit with hefty demands for back-payments. Customer service lines were jammed with an extra 120,000 calls a day from complaining customers, sending phone waiting times soaring. Energy watchdog Ofgem directed the energy provider to pay £26m “for failing to treat customers fairly.”
Solving the unbilled challenge
Analytics has become fundamental to improving business processes. Utility providers must use data-driven, information-enabled operations to improve customer and business outcomes. Analytics helps utilities focus on preventing revenue leakages through identifying and prioritizing unbilled accounts to deliver maximum benefits, as well as streamlining workflows to avoid any bottlenecks. Managing unbilled accounts efficiently and effectively requires transformational interventions:
- Business analytics for predictive completion — Analytics help speed up clearance and generate more value. Predictive analytics models can segregate accounts based on their probability of clearance. This helps prioritize easy accounts first, while complex accounts requiring extensive research are identified for allocation to business process experts.
- Automated validation and workflow management tools — Technology can remove duplicates from the workflow and prioritise unbilled accounts. This improves operational efficiencies. A robust workflow management tool can reduce manual intervention to assign tasks to users based on based on their skills or specialties.
- Automated performance management dashboards — Dashboards provide end- to-end visibility of unbilled accounts with customisable reporting. Managers can drill down to micro-level data and track trends to take corrective actions.
- Ernst & Young (Cash on the meter – Electricity and gas utility receivables: performance and leading practice) http://webapp01.ey.com.pl/EYP/WEB/eycom_download.nsf/resources/Cash_on_the_meter.pdf/$FILE/Cash%20on%20the%20meter_May%2009.pdf
- Ofgem (Back-billing: A guide for domestic energy consumers) https://www.ofgem.gov.uk/sites/default/files/docs/2012/07/back-billing-leaflet-2012_0.pdf