1. 2016 Benchmarking Insights Conference Boulder, CO
Credit & Collections
2016 Benchmarking
Insights Conference
Boulder, CO

2. Agenda Overview Coverage of the Study for Credit & Collections
Process Model for Credit Processes
Develop Account Initiation, Treatment and Collections Strategy
Collect For Service
2016 Key Findings and Points of Emphasis
Performance Profiles
Cost
Service
2016 Benchmarking Results
Cost & Staffing
Customer Delinquency
Managing Policies, Effectiveness & Efficiency

3. Overview

4. 2016 CS Benchmark Questionnaire structure
Field Service
Change of Account
Billing Field Orders (meter investigations)
Credit Field Orders
Order Management
Customer Contact
Contact Center
Local Office
Self Service
Contractors
Credit Inbound calls
Revenue Management
Credit Office and Outbound calls
Credit Field and Inbound Contact Policies
Revenue Protection: Office and Field
Back Office
Billing
Billing Field Policies
Payment Processing
Meter Reading
Manual
Mobile AMR
Fixed Network AMI
CS Support and CS IT
Employees: Safety, Staffing
Customer: Customer Satisfaction, First Contact Resolution, Customer Experience, Key Account Management,
Energy Efficiency , Outage Communications
Areas excluded:
Meter Change-out

5. Develop Account Initiation, Treatment and Collections Strategy
Develop Process To Identify Customer And Assess Risk
Develop Early Intervention Strategy
Determine Customer Treatment Path Based On Risk
Determine Final Bill Collection Strategy
These are the activities that happen in “Credit Office”.
Determine Write Off Policy
Develop Strategy For Revenue Recovery

6. Collect for service
Receive And Post On-Cycle Payment
Execute Customer Treatment Path Based On Risk
Segment (For Protections Or Field Eligibility) And Prioritize
Implement Field Cut-Out And Collection Treatment
Execute Final Bill Collection
These are the credit process steps, executed across multiple functional areas (call center, field service, collection agencies, etc.)
Implement Account Write-off Procedures
Analyze Reporting And Execute Strategy For Revenue Recovery

7. Key Findings / Points Of Emphasis
Volume
Volume of delinquent customers drives volume of Credit Transactions drives FTEs needed to complete those transactions. Volume of transactions is up this year.
Cost
Cost is driven by delinquent customers, transactions and FTEs
Mean office activity cost rose 19% (up 2nd year)
Write-offs went up for 1st quartile companies by 26%
Service
Customers >60 Days overdue was stable
About 40% of eligible customers disconnected

8. Performance Profiles

9. Credit & Collections Office Cost
Cost comparison
Total CS Cost
Excluding Write-offs
Credit & Collections Office Cost
Community Mean = $2.75
Community Composite
Community Composite
These are the customer service costs, measured in a very functional, organizational way, not in a process view.
Costs are per Accounts * Commodity

10. Credit Costs dominate in Customer Service
Write-offs is the largest single component of cost in Customer Service
When the credit work in the contact center and field service is added, credit becomes on of the the largest activities.
Total CS Cost
Including Write-offs
19%

11. Credit & Collections profile: cost
All costs went up this year. Mostly influenced by the new companies in the panel.
2015YE
2014YE
Mean Q1 Q2 Q3
Bars
Cost
Credit & Collections Office Cost Per Account * Commodity
$2.75
$2.22
$2.65
$3.03 29
$2.30
$1.31
$2.25
$2.94 16
Credit & Collections Office Cost (Including Write-Offs) Per Account * Commodity
$18.25
$12.43
$19.03
$25.41 25
$17.64
$10.12
$15.02
$25.05 15
Credit & Collections Cost (Office, Field, Outbound Calls, Ex Write-Offs) Per Account * Commodity
$4.10
$3.58
$4.29
$4.93
$3.69
$1.67
$3.34
$5.90 17
Credit & Collections Cost (Office, Field, Outbound Calls, Inc Write-Offs) Per Account * Commodity
$20.62
$15.35
$21.19
$27.47 21
$16.04
$10.35
$13.23
$22.33 13
Credit & Collections Cost (Office, Field, Inbound & Outbound Calls, Ex Write-Offs) Per Account * Commodity
$7.49
$6.23
$7.52
$8.34
$6.76
$3.98
$6.06
$9.42
Credit & Collections Cost (Office, Field, Inbound & Outbound Calls, Inc Write-Offs) Per Account * Commodity
$24.68
$19.19
$23.51
$30.71
$23.41
$13.47
$20.48
$30.76
Write-offs
Write-Offs Per Account * Commodity
$15.66
$9.62
$15.51
$22.93
$15.37
$7.67
$12.29
$22.31
Write-Offs As A Percent Of Revenue
0.882%
0.510%
0.812%
1.252%
0.939%
0.404%
0.729%
1.374%

12. Credit & Collections profile: Demographics
Days sales outstanding dropped slightly, as did % of customers >30 days past due. Percent of Receivables past due went up slightly. Fewer payment arrangements were made.
2015YE
2014YE
Mean Q1 Q2 Q3
Bars
Internal Measures
Average days sales outstanding (DSO) 33 28 34 39 26 35 29 36 41 12
Percent of Total Customers >30 days past due
25.3%
20.0%
24.0%
30.6% 19
26.2%
14.6%
25.0%
35.6%
Percent of Total Customers > 60 days past due
13.5%
7.8%
11.8%
19.5%
13.2%
9.2%
19.1%
Percent Of Receivables Greater Than 60 Days - Residential
31.7%
20.1%
36.7%
40.4% 23
16.1%
30.4% 11
Disconnects per Delinquent Account
0.47
0.60
0.45
0.25 18
 0.46
0.57
0.37
0.32 9
Demographics
Days each year not allowed to disconnect customers based upon rules set by regulatory body
100 84
104
120 66 78 14
Payment Arrangements per Account * Commodity
0.089
0.057
0.082
0.099 27
0.094
0.068
0.107
Volume of transactions occurring during the past year per Account * Commodity
2.40
1.65
2.21
3.05
1.54
1.00
1.88
2.04 13
Credit & Collections FTEs per 100,000 Accounts * Commodity
4.56
1.59
3.45
7.07
1.78
1.29
1.67
2.11 24

13. Office Costs and Activities

14. CREDIT & COLLECTIONS Staffing
New companies to the panel tended to end up in the 3rd & 4th Quartile.
Lost leverage – the office staff is chartered with analysis and policy so that field and contact center staff can be more successful. Reducing this will eventually hurt the overall results.
Mean
3.0
Quartile 1
1.6
Quartile 2:
2.9
Quartile 3:
4.3
This created a shift in the number of FTEs for Credit & Collections.
SF Page 66 – SF50

15. CREDIT & COLLECTIONS OFFICE Activity COSTs
19% increase in mean costs over last year
Credit & Collections Office Costs (Excluding Write-offs) per Account* Commodity
Office costs track closely with staffing levels – declining several years before increasing again in 2014.
Mean
$2.75
Quartile 1
$2.22
Quartile 2:
$2.65
Quartile 3:
$3.03
The cost trend shows a continuing increase in Credit Office Costs.
CR Page 4 – FL5

16. CREDIT & COLLECTIONS Process COST
This is the Activity Cost to Collect as reported.
If we apply averages to companies who can’t break out costs, we get a different picture.
Total Credit & Collections Cost per Account * Commodity
This includes all credit costs except write-offs, to the extent they were reported.
This is where we could do better for you – if you could provide the data on inbound calls and outbound calls, it would be very helpful
Mean
$5.82
Quartile 1
$3.96
Quartile 2:
$5.04
Quartile 3:
$7.58
Mean
$7.43
Quartile 1
$6.47
Quartile 2:
$7.31
Quartile 3:
$8.34
CR Page 12 – FL5

17. Credit activities versus Write-offs
Worst performing companies have seen a significant drop in write-offs since 2011, but companies with lower write-offs saw an increase in the last year.
Write-offs as a % of Revenue
Mean
0.852 %
Quartile 1
0.429 %
Quartile 2:
0.812 %
Quartile 3:
1.252 %
Conclusion: most companies invest at the level to try to improve from where they are. If they’re at a high write-off level, they invest a lot to get better. If they’re at a low write-off level, their investment levels are modest.
FL15
CR Page 21 – FL15

18. Customer Delinquency

19. Delinquent Customers Drive Cost
Transactions
FTEs
Cost
Write-offs
12% of customers will be delinquent
They’ll cause 2.4 Million pieces of work
Which will require 24 people to create
And cost $2.3 Million
Resulting in $14.5 Million in write-offs
On Average
However, there are some companies doing better than this.
How are those companies making decisions to manage:
Policies that encourage customers to pay and thereby reduce the volume of work?
Finding efficient ways to generate the transactions required for delinquent customers?
Managing employees to ensure they are efficient and effective to reduce wasted work?

20. Percent of Customers Delinquent
Managing Policies…
Delinquent Customers
Some percentage of customers will be delinquent every month.
Percent of Customers Delinquent
Mean %
Quartile 1: 6.61 %
Quartile 2: 9.38 %
Quartile 3: %
Some companies are able to manage polices to reduce customer delinquencies…
Less than expected
ST5 v CR15
The largest companies were excluded to enable most companies to see their results.
CR15/ST5

21. Transactions per Delinquent Customer
Delinquent customers will require you to take action – like sending late notices.
Transactions per Delinquent Customer
Mean
Quartile 1: 18.97
Quartile 2: 32.20
Quartile 3: 39.94
Regulators dictate the number of times you have to reach out to a customer before disconnection.
Less than expected
CR125/CR15
CR15 v CR125
The largest companies were excluded to enable most companies to see their results.

22. staffing Managing Efficiency…
You’ll need to employ people to generate that work.
Transactions per FTE
Mean 104,916
Quartile 1: 119,767
Quartile 2: 89,171
Quartile 3: 68,844
Some companies have developed efficiencies to do more with less staff…
Less than expected
CR125/SF50
CR125 v SF50

23. Cost Transactions lead to FTEs lead to Cost…
Some companies are able to manage performance to produce lower cost.
SF50 v FL5
CR125 v FL5

24. Cost per Delinquent Customer
Managing Effectiveness…
cost
Without a doubt, you spend money to deal with your delinquent customer base.
Cost per Delinquent Customer
Mean $32.30
Quartile 1: $18.33
Quartile 2: $31.03
Quartile 3: $36.40
Some companies are able to keep cost to a minimum by managing effectiveness…
Less than expected
CR125 v FL5

25. Percent of Customers > 60 Days
Change in
Your delinquent customer base will indicate how much work you need to do. The change in the delinquent customer base will indicate how effectively you are doing the work. …
Percent of Customers > 60 Days

26. Managing Policies

27. Managing Policies
Find ways to work within regulatory boundaries but to effectively encourage customers to pay on time…
Send out notices as early as possible
Disconnect customers as soon as they are eligible
Do what you say your going to do (don’t send out disconnect notices to customer who can’t possibly be disconnected)

28. Field Order Economies
Some companies are able to achieve very good performance for % of past due customers…
…and still keep the number of field orders to a minimum.
FS50 / CR10
FS50 / CR10

29. Timing of Credit Actions
The typical credit cycle is between 20 and 45 days. Why are some companies so far outside that cycle?
Next Bill
CR Page 70 – CR115

30. Days to Credit Action vs. Delinquent customers
Some companies are able to achieve better than expected results.
Worse than expected
Better than expected
CR Page 70 – CR115

31. Managing Effectiveness

32. Managing Effectiveness
Regulators often dictate the number of interactions with a customer before you can disconnect them. Often including
A couple of outbound calls
A disconnect notice
A field visit
And, you’ll have to visit the customer premise to disconnect
You may not be able reduce the number of transactions, but you can optimize the effectiveness of outbound transactions.
Change the outgoing message
Change the look of the notices
Measure the effectiveness of your activities. If it’s not working, figure out how to make it work, because you have to do it anyway.

33. Effectiveness Measures In Use
More than 50% of companies are measuring the results of outbound calls. Less than 40% measure the effectiveness of payment arrangements. If you’re required to offer payment arrangements, it’s important to understand what’s working and what’s not.
Most companies are actively using this information to manage their credit activities with through changing strategies, polices, processes or actions.
Some track the effectiveness of individual calls/reps (42, 24, 30, 41)
Company 22 is the one that filled this out and has 90% of their customers current.
However, they also have one of the highest write-offs results within the group.
Note also the small discrepancy between those companies saying they track the relationship of deposit policy to results and those who can actually report the results.
Payment Arrangement Measures
Results of Calls
CR Page 46 – CR35
CR Page 48– CR45

34. payments arrangements defaulted
Policy changes may lead to fewer broken arrangements. Companies with the fewest broken arrangements offer fewer arrangements.
Payment Arrangements per Delinquent Customer
Percent of Arrangements Defaulted
Mean
47 %
Quartile 1
23 %
Quartile 2:
59 %
Quartile 3:
68 %
Mean 1.11
Quartile 1: 0.65
Quartile 2: 1.03
Quartile 3: 1.29
CR125.5 / CR15
CR Page 92 – CR150

35. Effectiveness
Percent of Collection or Disconnect Visits That Generated a Payment
Mean
33 %
Quartile 1
32 %
Quartile 2:
29 %
Quartile 3:
27 %
Mean
19 %
Quartile 1
15 %
Quartile 2:
10 %
Quartile 3:
2 %
Percent of Notices that Generated a Payment
CR Page 80 – CR130.2
CR Page 80 – CR130.1

36. PERCENT OF OUTBOUND CALLS THAT GENERATED A PAYMENT
Mean
35 %
Quartile 1
41 %
Quartile 2:
Quartile 3:
30 %
CR Page 80 – CR130.2

37. Managing Efficiency

38. Optimize the efficiency of outbound transactions
Use electronic / automated means as much as possible for notices to customers
Use AMI disconnect capabilities when allowed

39. OUTBOUND ELECTRONIC COMMUNICATION CHANNELS USED FOR CREDIT NOTICEs
82% of companies use automated IVR calls for late payment notices.
Total Respondents
Disconnect Notice
Late Payment Notice
None
11.11%
7.14%
Autodialer outbound call with live agent
44.44%
50%
Automated outbound call using IVR
25.93%
82.14%
22.22%
17.86%
Mobile app push notification 0%
Text messages
3.7%
3.57%
Other
10.71%
Disconnect Notice 20 21 22 23 24 25 26 27 29 30 31 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49
None ♦
Autodialer outbound call with live agent
Automated outbound call using IVR
Mobile app push notification
Text messages
Other
Late Payment Notice 20 21 22 23 24 25 26 27 28 29 30 31 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
None ♦
Autodialer outbound call with live agent
Automated outbound call using IVR
Mobile app push notification
Text messages
Other
CR Page 83, 84 – CR135

40. CUSTOMER Interaction WITH AUTOMATED COMMUNICATIONS
Companies have given customers the ability to interact with automated systems when they are used.
Total Respondents
Disconnect Notice
Late Payment Notice
None
11.11%
7.14%
Autodialer outbound call with live agent
44.44%
50%
Automated outbound call using IVR
25.93%
82.14%
22.22%
17.86%
Mobile app push notification 0%
Text messages
3.7%
3.57%
Other
10.71%
IVR 20 21 22 23 24 25 26 27 28 29 30 31 32 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
Resp % No ♦
3.33%
Extend due date
73.33%
Make payment arrangement
76.67%
Make payment
93.33%
Other
16.67%
CR Page 86 – CR140
Mobile app 20 21 22 23 25 26 27 29 30 31 32 36 37 38 39 40 42 45 46 47 48
Resp % No ♦
19.05%
Extend due date
61.9%
Make payment arrangement
66.67%
Make payment
80.95%
Other
9.52%
CR Page 87 – CR140

41. Routine Use of AMI Remote Disconnect Capability
40% of the companies now use remote disconnect capabilities routinely. An additional 15% are testing it. 22 23 24 25 26 27 28 29 30 31 32 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
Yes ♦
39% No
61%
CR Page 101– CR190

42. Areas of Focus and Opportunities

43. areas of Focus and Opportunity
Volume
How to improve the efficiency of transaction volumes to reduce the work effort required?
Cost
How to ensure activities are most effective, getting the most for your money?
Service
How to make sure policies are consistent and communicated to customers to ensure their cooperation?

44. Thank You for Your Input and Participation!
Your Presenters
Ken Buckstaff
Debi Cook
Gene Dimitrov
Rob Earle
About 1QC
First Quartile Consulting is a utility-focused consultancy providing a full range of consulting services including continuous process improvement, change management, benchmarking and more. You can count on a proven process that assesses and optimizes your resources, processes, leadership management and technology to align your business needs with your customer’s needs.
Visit us at | Follow our updates on LinkedIn