Utilities: a new way to look at collections

On Behalf of | Dec 3, 2021 | Community Association Law

Utility service agencies often have to succumb to unwarranted debt. Seasonal debt might be expected with utilities, but managing debt is necessary if any business is to survive economic downturns. Maryland utilities also need to be strategic about how they take on debt and then allocate it for amortization.

In utility law, there are constraints on how utilities can collect their due balances. Considering a change in how collections are led starts with factoring in the following.

Cost-cutting

Helping customers during economic uncertainty is a factor, and cutting costs in other areas can balance the risks. Utilities need to accept debt to a degree, so part of any risk management plan must account for debts that are likely to be incurred each year. That specific amount gives you a trajectory regarding how much cost to cut. In this example, a likely area to cut is funding in acquiring leads with debt.

Improve profitability

A public utility that relies on external agencies for its balance sheets can, instead, start its own teams. The more you use in-house resources, the greater your profitability, and the more your experience scales. Any research done on your specific consumer becomes a vital asset in improving profitability. The data you collect on your clients gives you insight into why people aren’t paying and how they can. As you strategize for a collections framework, consider these options:

– Grace periods
– Disabilities protections
– Seasonal moratoriums
– Service obligations

Keep a growth trajectory in line

Another healthy practice for public utilities is being proactive in creating growth opportunities. Providing services that are, for example, cheaper for you to distribute can improve profits overall. Using the resources you now have in a more efficient way calls for you to eventually do less work.

If you find that your collections department is understaffed, know that numerous agencies are in the same boat. With the idea of prolonged economic crises, however, it’s important to manage risk by assessing credit during customer acquisition.