Utility companies are some of the most vulnerable enterprises in the United States when it comes to debt. A recent assessment of the risk incurred by utilities found that, because of their increased dealings with consumers who are more likely to default on payments, these companies may face more debt-recovery issues. Unlike many businesses, some utility companies are faced with an obligation to extend service to anyone who requests it, regardless of their credit risk. In addition, individuals who fail to pay utility bills may be more likely to face collections from a variety of creditors, creating stiff competition for utilities attempting to recoup their losses.
Further exasperating this issue is the increasing cost of doing business. Global consulting firm Strategy& reported that capital expenditure requirements for the country’s utilities are expected to grow to more than $100 billion annually through 2020. The need to improve aging infrastructure represents a large portion of these costs.
With rising costs, an ever-growing customer base and increasing debt, utility companies need to streamline their collections processes as much as any enterprise. According to Intelligent Utility, more businesses in this sector are implementing statistical analysis tools to facilitate these efforts. Statistical payment behavior modeling can help utility companies predict a number of factors regarding current and potential customers, including the likelihood of nonpayment, resorting to shutting off service or a payment transfer failing to be completed. With these resources, utility companies can determine which clients represent better investments.
Businesses can also use the statistical payment behavior modeling to enhance their collections strategy and reduce their costs. By identifying payment issues before they become serious, utility companies can take the necessary steps to mitigate their risk. In addition, companies can implement stricter collections policies up front for customers who have been designated as payment risks. Using comprehensive credit collections software, utilities can reduce their risk of customer delinquency.