Utilities and revenue management: what strategies to reduce DSO?

Lack of liquidity in Energy & Utility companies is often the result of inadequate management of cash receipts. When DSO(Days Sales Outstanding), the indicator that captures the average number of days it takes a company to collect a receivable, is too high, this ends up having a very strong impact on utilities. It in fact affects the company’s cash flow, the company’s ability to invest and its competitiveness in the market.

How then to avoid the extended time between service sale and payment? Let’s look together at some steps to improve revenue management in Utilities with the goal of reducing DSO.

Simplify payment methods: offering alternative payment methods (credit cards, ability to pay online, mobile app, QR code, etc…) and allowing users to view their bills, reminders, and overdue payments in their personal area can help users in bill payment procedures and prevent inconveniences in the procedures that can make the bill balance time longer. > Learn how to simplify payment methods with the CreditSuite Mobile app .

Risk analysis and customer segmentation: By assessing the credit risk of individual customers in advance, the chances of non-collection are reduced. Indeed, acceptance of a new customer should be anticipated by a careful analysis of his or her credit risk, right from the choices made at the business level. Thus, business policies should be established to curb credit risk such as systems to search for information on probable bad payers, credit approval procedures, and systems in the company that reward collection rates rather than rates on newly acquired customers.

Speed up the action: the likelihood of recovering a debt is greatly reduced as time passes. It means that the more days go by without doing anything, the more the company will see its chances of recovering its credit fade. Timelines and thresholds for operational intervention on collections, payments, reminders, suspensions and disconnections to delinquent customers must therefore be defined, including through the introduction of workflow management tools and dedicated information technology.

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Reduce errors: errors in billing and administrative management due to poor organization and information sharing among different departments often reverberate into problems in dealing with delinquent customers. Is the printing and mailing process handled properly? Do invoices reach the customer on time and in multichannel mode? Do payment reminders and reminders start automatically when due? Attention to these processes can result in significant time savings and shortened recovery times.

Customize actions on delinquent customers: debt collection actions have different ‘effectiveness depending on the different past behavior of the customer. For this reason, it becomes advisable to always customize actions on customers: thanks to process solutions based on automated IT procedures, it is possible to create routines that react to certain events (e.g., a bill that has expired or is about to expire) by scheduling certain actions (e.g., text message reminding the customer of the impending deadline).

These are just some of the activities that can be put in place to reduce the average time to collect a loan. The result of implementing the right procedures is a reduction in average collection days and delinquency rates. Improving revenue management is possible. Ask us how.

DigitalSuite Italy supports the Utility sector in Credit management to empower business liquidity needs and govern the entire credit management process from invoice issuance to the management of legal action reminders, reminders and postings to reduce collection time and improve DSO.

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