Minimizing days of exposure

One of the most popular classes that I teach at utility conferences is entitled “Improving Revenue Collections for Utilities”. Part of this presentation addresses minimizing what I call “days of exposure” – the number of days of service that a customer ends up owing for if they skip out and never restore their service after being cut off for non-payment. The days of exposure is the number of elapsed days of service, starting with the previous reading date for the bill they are being cut off for failing to pay and ending with the date they are cut off for non-payment. Obviously, as the number of days of exposure increases, so does the amount you end up having to write off if the customer never pays.

How confident are you that your utility isn’t incurring needless days of exposure…?

Let’s take a look a three different timelines that highlight scenarios with varying days of exposure:

This first timeline is pretty much the best case scenario – bills are mailed within five days of meters being read, they are due 15 days after being mailed and delinquent accounts are cut off for non-payment 10 days after the due date, resulting in 60 days of exposure.

In the second timeline, bills are still mailed within five days of meters being read, but the utility is a little more lenient with due dates and delinquent dates, extending the due date to 25 days after bills are mailed and the cut off for non-payment to 15 days after the due date, resulting in 75 days of exposure.

Finally, the third timeline illustrates the worst case scenario – the utility reads meters early in the month but still waits until the end of the month to mail bills and their delinquent policies are more lenient, as in the second scenario, resulting in 90 days of exposure.

From the three timelines, you can see that policies and procedures at both ends of the billing process can impact the number of days of exposure. On the front end, mailing bills as soon as possible after reading meters limits needless days of exposure.

Many utilities have moved to automated meter reading systems, either drive-by or fixed base systems, significantly reducing the time required to read meters. A trend that I have seen with some of these utilities is to continue starting the meter reading process at the same time of the month as before automation, finishing the earlier in the month. If they do so without closing the gap between reading and billing dates, they have missed a prime opportunity to minimize the days of exposure. And without closing the gap, I don’t believe they end up reaping the full benefit of automating the meter reading process.

Requiring your customers to pay within a reasonable number of days from the billing date, and then promptly initiating the cut off for non-payment process, insures that you don’t needlessly incur additional days of exposure at the end of the process.

If you have any questions about how to reduce your days of exposure, or would like my assistance in developing a plan to do so, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

© 2011 Gary Sanders

Automating phone credit card payments

Now that you’re accepting credit cards (you are accepting credit cards, aren’t you…? If not, please read my Issue #4 here) have your customers caught on? If they have, my bet is that you’re now taking more credit card payments over the phone than you are in person. Am I right…?

Is there a problem with taking credit card payments by phone, you may ask? No, not necessarily, but as the volume of phone credit card payments increases, they can become a burden to your customer service staff. Consider the sequence of events of a typical telephone credit card payment transaction…

• Customer calls to find out how much he owes. More than likely, he doesn’t have his account number
• CSR looks up the account in the computer, tells the customer how much he owes and when the bill is due
• Customer asks if he can pay by credit card over the phone
• CSR answers “Yes, of course”
• Customer locates his credit card and reads out his card number and expiration date
• CSR scribbles credit card number and expiration date on a piece of paper
• CSR takes the piece of paper to the credit card machine at the front counter and keys in the customer’s credit card number, expiration date and payment amount
• CSR waits for approval and writes the approval number on the piece of paper
• CSR returns to her desk and reads the approval number to the customer
• Customer hangs up
• CSR must now enter the payment into the system and shred the piece of paper with the customer’s credit card information to avoid a read flag issue

In the end, how much time did this entire process take…? Three minutes? Five minutes? Longer? It’s easy to see that as word spreads among your customers that they can pay by credit card over the phone, these few minutes per payment could evolve into a few hours (or more, depending on the size of your utility) on your busiest days.

Is there a better way?

Of course there is – or why else would I be writing about this topic?

Interactive Voice Response (IVR) telephone systems allow the entire phone credit card payment process to be automated, resulting in improved efficiency for your office and more flexibility and security for your customers.

With an IVR phone payment system, your customers are no longer limited to paying during normal business hours – they can call at any time of the day or night to pay. Your customers can also feel safer about paying by credit card since they no longer have to risk giving their card number to another person over the phone. With an IVR phone payment system, they enter the credit card information directly on the phone keypad or speak the numbers.

Staff time drops from several minutes per payment to several minutes per day to import and balance the payment batch for the day.  With Logics’ PhonePay IVR payment system, phone payments are entered directly into a payment batch, further eliminating the need to import a file each day.  All that is required is to reconcile and update the previous day’s batch each morning.

I have compiled a Return on Investment (ROI) analysis that I’ve used for Logics customers to determine if investing in an IVR phone payment system makes sense.  If you are wondering if an IVR phone payment system would be cost effective for your organization, I can prepare the same ROI analysis for you. All you need to do is supply a few variables by clicking here.  I will then e-mail you the completed ROI analysis.

If you have any questions about IVR phone payment systems in general or Logics PhonePay in particular, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

© 2011 Gary Sanders

Improving final bill collection rates

It is no secret that the key to avoiding bad debt and write-offs is getting your customers to pay their final bills. Today, let’s take a look at some steps you can take to improve your final bill collection rate.

Timeliness of Sending Final Bills

How frequently do you mail final bills?

• If you bill once a month (or less frequently) do you wait until the next regular billing to send final bills?
• If you bill several times a month, do you still mail final bills with the next regular billing cycle for any customers who have left?

If you answered “yes” to either question, I encourage you to consider sending final bills more frequently. I recommend mailing final bills every week, for accounts that were closed during the previous week, even if it means only printing a few bills. It is only human nature that the sooner someone receives a bill, the better likelihood that they will pay the bill. Anyone who has ever moved to a new home or apartment is well aware that there are expenses associated with the move. And you want to be sure that your final bill is paid before your former customer starts buying furniture for their new home!

Get a Forwarding Address

When a customer calls to let you know that they will be moving and requests that you terminate their service, do you ask for a forwarding address? If not, I strongly encourage you to start doing so. Only the most conscientious of customers will make an attempt to pay a bill they never received. Being sure that your customers receive their final bills is the single most effective way to insure that they will pay that final bill.

US Postal Service Endorsements

Applying the proper US Postal Service endorsement makes a big difference as to what is done with a bill if you mail it to your former customer’s old address and they have a change of address on file with the Postal Service. Below is a table of the four types of endorsements offered by the Postal Service:

Source: http://pe.usps.com/text/qsg300/Q507d.htm

As you can see, which type of endorsement you use makes a difference as to what happens if the bill can’t be delivered as addressed. I encourage you to be sure that you are using the type of endorsement that best suits your organization’s needs.

Do you send delinquent notices to final billed accounts?

If you don’t send delinquent notices to final billed accounts, I recommend that you start. In the confusion of moving and getting settled in a new home, bills can be misplaced. Often, a delinquent notice is all a customer needs to remind them that they haven’t paid their final bill.

If you have questions about your final bill procedures, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

© 2011 Gary Sanders

Enterprise e-mail – now available to organizations of any size

This issue is primarily targeted at utilities that do not use organization-wide e-mail addresses and calendar, but even if your utility does use an enterprise e-mail system, don’t stop reading just yet – you might learn how you can save money!

I have noticed that a number of our customers, and even some of the Rural Water Associations that I work with, do not use organization-wide e-mail addresses. Instead they use personal e-mail addresses from one of the popular free e-mail services or they use their internet provider’s e-mail service. For example, rather than using an e-mail address of myname@utilityname.org, these customers use myname@freeemail.com or utilityname@internetprovider.com.

Is there a problem with this practice?

Not really, but it does present a face to the public that your utility is small and not very progressive – the same message that not having a website conveys. You do have a website, don’t you…? (If not, take a look at my very first issue here.) Would you like your customers to view your utility as being more in touch with the times? Of course – who wouldn’t?

So let’s take a look at why this is… Most likely, it’s because the utility does not want to make the investment to support an enterprise e-mail system. Traditionally, this has meant purchasing and implementing the most widely used server-based e-mail software. And, if you have remote users, this requires installing a Virtual Private Network (VPN) so those users can access the e-mail server. Resistance to implementing an in-house e-mail server could be due to any of the following reasons:

• Cost of purchasing the software
• Inadequate server infrastructure
• Lack of technical support

Upon closer scrutiny, aren’t all of these reasons cost-based? If you have to upgrade a server to support enterprise e-mail, there is a cost associated with that. Hiring outside technical expertise costs money as well.

Is there another option?

Of course there is! Google Apps from Google provides the following applications for just $50 per user per year:

• Gmail
• Google Calendar
• Google Docs
• Google Groups
• Google Sites

So if your utility has 10 employees who need e-mail and calendar access, the cost is $500 per year plus the registration fee for your domain name. Google Apps is web-based, so you can access your e-mail, calendar and documents from anywhere.

In addition, if your organization is required by public records laws to maintain an archive of all e-mails, Google Apps with Postini meets that requirement.

At Logics, we switched from an internal server based e-mail system to using Google Apps at the end of August last year. You may have noticed that we changed from using e-mail addresses with logics-software.com domain name to logicssolutions.com. The reason for this was our transition to using Google Apps. The migration to Google Apps was seamless and, I must admit, very easy (I don’t necessarily adapt to change any better than anyone else, even though helping folks change is my business). I can now access my e-mail and calendar any time I have internet access without having to connect to our office VPN. Plus, I love the easy integration with my Android phone!

If you have questions about Google Apps or would like assistance making the case to convince your board to implement an enterprise e-mail system, give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

© 2011 Gary Sanders

Are you still not accepting credit cards?

Does your utility accept credit cards?

If your answer is “No”, then my next question to you is “Why not?”.

I’ve heard many reasons why utilities still don’t accept credit cards…

• The fees are too expensive.
• It’s not fair for all of our ratepayers to pay for a few customers who pay by credit card.
• My board doesn’t want to.

The bottom line is this is 2011 and your customers expect to be able to pay by credit card. Where else do your customers do business that only accepts cash and checks?  The grocery store, the gas station, even fast food restaurants now accept credit cards.

Beyond providing reliable utility service to your customers, your most important objective is getting paid for that service. A portion of your customer base may not be able to come up with the cash to pay their utility bill when it’s due, but I will wager that many of these same customers have a credit card (or credit cards) with enough of a credit limit to pay their utility bill. So why not let them pay you?

Let’s take a look at the reasons that many utilities cite for not accepting credit cards…

The fees are too expensive.

There is a cost associated with processing credit card transactions. But these fees can be negotiated. If your bank or current credit card processor refuses to negotiate a better fee structure with you, take your business to a merchant partner that will. A number of our customers at Logics have received very aggressive rates from Bankcard Associates. If you would like more information about Bankcard Associates, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

It’s not fair for all of our ratepayers to pay for a few customers who pay by credit card.

At first blush, this argument seems to make sense. But, upon closer scrutiny, it doesn’t hold water. You accept cash and checks, don’t you?  What is the cost to your ratepayers to process cash and check payments?  Nothing…?  Think about it a little more – your cashiers have to count their cash drawer and add up their checks as a part of balancing every day, don’t they?  You have to prepare a bank deposit. This bank deposit has to be taken to the bank. Mail payments must be opened. Walk in customers paying by cash or check want to stop and visit, resulting in unproductive time for your staff. Have you scrutinized your bank statement lately?  How much is your bank charging you per deposit?  Some banks even charge a fee per item (that’s a check to you and me) deposited. There are obviously costs associated with accepting cash and check payments, too. (I’m not advocating not accepting cash and checks, I’m just pointing out the not-so-obvious reasons why the “all bear the burden of a few” argument doesn’t stand up.)

My board doesn’t want to.

This is a tough one. Some boards are more progressive than others and if your board is dead set against accepting credit cards, you may not have any options. But I would encourage you to take an informal survey and keep track of every time a customer asks if you accept credit cards. Use this information to make a presentation to your board. If you would like assistance in preparing a presentation for your board, give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

If you don’t accept credit cards, I strongly encourage you to consider doing so. Your customers will thank you.

© 2011 Gary Sanders

A look at cut-off policies

Let’s talk about your cut-off for non-payment policies, specifically how much you charge and to which accounts you assess the fee.

How much is your cut-off fee for non-payment?

At the 2010 Logics User Meeting, I presented the results of a Delinquent Accounts Study that we conducted.  Of the 56 Logics customers that responded to the survey, 54 of them assessed a cut-off fee which ranged from $10 to $125 as shown in the graph below.

As illustrated by the graph, 27 customers, or half of the study participants, charge a fee of $25.75 or less. I would argue that a fee in this range doesn’t begin to recover the cost to the utility of administering the disconnection and subsequent reconnection after the account pays.

The Government Finance Officers Association’s (GFOA) Committee on Governmental Budgeting and Fiscal Policy’s Best Practice for Measuring the Cost of Government Service states “The full cost of a service encompasses all direct and indirect costs related to that service. Direct costs include the salaries, wages, and benefits of employees while they are exclusively working on the delivery of the service, as well as the materials and supplies, and other associated operating costs such as utilities and rent, training and travel. Likewise, they include costs that may not be fully funded in the current period such as compensated absences, interest expense, depreciation or a use allowance, and pensions. Indirect costs include shared administrative expenses within the work unit and in one or more support functions outside the work unit (e.g., legal, finance, human resources, facilities, maintenance, technology).”

With this in mind, the cost of a disconnection for non-payment includes, at a minimum, the following direct costs:

• Office staff salary and benefits to review and prepare the cut-off list
• Paper and consumables to print working reports and the final cut-off list
• Field staff salary and benefits to disconnect the service
• Field staff salary and benefits to reconnect the service after the customer pays
• Gas and maintenance expenses for the vehicle(s) used by the field staff

Without even taking into account indirect costs, it’s easy to see where $25 probably doesn’t begin to cover the cost of a disconnection for non-payment.

If your cut-off fee isn’t high enough to recoup the cost of administering the cut-off and subsequent reconnection, I encourage you to increase your cut-off fee. If you need assistance determining what an equitable cut-off fee would be or preparing the case to convince your board, give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

When do you charge the cut-off fee?

Do you adhere to the best practice of charging the cut-off fee to every account on the cut-off list as soon as the list leaves your office? Or do you still follow the practice of contacting the field service technician each time an account on the cut-off list comes in to pay to see if the account has been cut off yet or not, and only charge the fee if the account has actually been cut off?

I firmly believe that it is inherently unfair to charge the cut-off fee only to accounts that have actually been cut off. Why should accounts that are farther from your office, and therefore end up being cut off later than accounts closer to your office, be given additional time to pay? Let’s face it, every account on the cut-off list is seriously delinquent and has had ample opportunity to pay before cut-off day. Not to mention the added confusion in the office when the cashier has to contact the field service technician every time a customer on the cut-off list comes in to pay.

In the Delinquent Accounts Study that I mentioned above, 76% (41 of the 54 customers) have a policy of charging the cut-off fee to every account on the cut-off list when it leaves the office. I was surprised that number wasn’t higher. If your policy isn’t to charge the fee to every account when the cut-off list is prepared, I strongly recommend that you consider changing your policy.

Again, if you need help making the case to your board, feel free to give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

© 2011 Gary Sanders

Online banking checks – Is there a better way?

If your utility is like most that I’m familiar with, every month you receive more and more checks from your customers who pay their utility bill using their bank’s online bill pay software. Are you familiar with what I’m referring to – those checks that come stuffed with several in one envelope, or in some cases, many of them in one large manila envelope? If you’re not, ask your customer service staff who open and process mail payments – they will know what I’m talking about!

Did you realize that these payments can take a week (or longer) to reach your office from the time your customer initiates the payment process online? Then when the payment finally arrives at your office, the return bill stub is not included, so your staff must rely on the account number that your customer entered into the online bill pay software.

Many times, the account number your customer is using with the banking software is incorrect. For instance, if you have recently upgraded software and changed account numbers, your customer could still be using the old account number. Or if your customer has transferred from one address to another, the account number linked to the payment could still be the account number from the previous address.

Then, of course, there is the customer service dilemma with customers who end up being cut off for non-payment because they didn’t allow enough time for the payment to reach your office before cut-off day. Your customer most likely assumes that, because the bill was paid online, you will receive the payment immediately, not a week or more later. No utility likes unhappy customers – especially when it can be prevented.

Is there a better way?

Of course there is – or why else would I be writing about this topic?

Most banks do not print their own online bill pay checks. Instead, they outsource this process to one of a half dozen or so check writing services. Two of the largest check writing services are CheckFree (now known as Fiserv) and Metavante. If they do enough volume with your utility, both CheckFree and Metavante will direct deposit your daily payments and provide you with an electronic file of each account that was included in the deposit for that day.

However, the file format from each check writing service is different, so you will need different import processes for each of them. And then there is the issue of your customers who have the wrong account number stored in their bank’s bill pay software. Each of those will reject when you import the file into your collections software.

Consider the AR-Box product from Creative Payment Solutions. For just 12 cents per transaction with no monthly maintenance or file transmission fees, AR-Box consolidates online banking checks from all of the major check processors into one file, electronically deposits the checks and and delivers an import file to you within two days of your customer initiating payment online. As an added benefit, AR-Box provides a way to correct invalid account numbers in the import file so that, in the future, these payments will correctly post to the proper account.

Many of our customers at Logics have implemented AR-Box and they all rave about how fantastic the service is. If you have any questions about AR-Box, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

© 2011 Gary Sanders

Does your website work as hard as your employees?

I will be writing a bi-weekly e-mail that will focus on topics of interest to people like you who are responsible for operating a utility system as a business. Whether your utility operates as a municipal enterprise fund or is a self-sustaining utility, you are well aware of the challenges to operating efficiently. The purpose of my bi-weekly e-mail is to share thoughts and ideas that I have come across in my 30 plus years of working with municipalities and utilities and assisting them in becoming more efficient and reducing costs.

One of my job responsibilities is demonstrating Logics’ Eagle Utility Management software for prospective customers. Before each demo I like to customize the point-of-sale receipt to print the utility’s name, address and phone number. I also use the prospect’s office address as the service address of my test account so that the mapping tab will display a map to the utility. To accomplish this, I do a web search for the utility and visit their website.

I am frequently surprised at how difficult it is to find the office address on some utility websites. This leads to the question of “what is the purpose of your website?”. It seems to me that a good website should, at a minimum, provide easy access to the following information:

• Office address
• Driving directions to your office
• Office hours
• Phone numbers
• Requirements to apply for service
• Different ways your customers can pay
• Frequently asked questions

If your website doesn’t easily answer these questions for your customers, they are going to pick up the phone and call your office. Why burden your customer service staff with answering such mundane questions as how to find your office or what are your office hours when your website can do this for you?

© 2011 Gary Sanders

All ready to go!

I have everything in place to kickoff my bi-weekly newsletter next week! Look for the first issue on Tuesday, January 4.