Utility companies that provide critical services like electricity, gas, and water are not exempt from revenue leakage. Any company that charges for their services and collects payment becomes vulnerable to revenue leakage, which can result in major revenue losses. Preventing revenue leakage will help maintain profitability, customer satisfaction, and the company’s overall financial health and solvency.
What is revenue leakage?
Unfortunately, all companies, including those in the public sector, are susceptible to revenue leakage. Revenue leakage refers to revenue losses due to bill mishandling, errors and other process mistakes, and overall inefficiencies, especially with respect to bill collection. The revenue loss that comes from revenue leakage is unintended and often overlooked, which means companies will miss out on profits for no reason other than their own shortcomings.
What causes revenue leakage in utilities?
Utilities provide services that are often difficult to quantify, such as electricity, gas, or water. While a company can bill for gallons used or the amount of energy logged at a home, these billing processes are reliant on external meters to keep track of how much of the service is used, and therefore, what the utility company should bill. When it comes to leakage, the most common sources are billing errors, poor account management, and theft or faulty meters.
Billing Errors
While revenue leakage can stem from a variety of causes, billing errors are a significant cause for utility companies. Undercharging, missing charges, and delayed charges can all impact a company’s bottom line. While many billing errors may be a symptom of a larger problem, such as poor account management or faulty meters, billing errors are a major problem for companies suffering from revenue leakage.
Poor Account Management
When billing errors, poor customer service, and a lack of account management create a negative experience, customers are less likely to pay their bills. Additionally, delays in billing, billing errors, and ineffective processes can result in overall account management issues, which means dollars are walking out the door and not into your bank. Those relying on antiquated systems and processes are especially susceptible to revenue leakage stemming from poor account management.
Theft and Faulty Meters
Unfortunately, utility companies that rely on meters to track usage are susceptible to revenue leakage due to faulty meters or meter tampering (thus resulting in service theft). When a meter is outdated and not functioning properly, or there are issues with a new meter not working properly, revenue can be lost with no way of quantifying the loss. This unique problem can contribute to revenue leakage for utility companies.
Find the source of revenue leakage
Reviewing your data and listening to your customers are two ways to determine the source of revenue leakage.
Review Your Data
Conducting regular audits of your billing system, your P&L sheets, and business processes will go a long way in identifying where your leakage is occurring. In business, the data never lies. Reviewing your data should be part of your standard operating procedure.
Listen to Your Customers
While customers are not always right, mounting customer complaints and issues typically indicate a more significant problem in the company. Mismanagement, poor account management, billing issues, and more can all be identified through customer complaints. Take the time to evaluate how satisfied your customers are, how much they trust your company and processes, and your collection rates to determine if there are larger issues at hand.
Tactics for ARM to Combat Revenue Leakage
Your accounts receivable management team can take actionable measures to combat revenue leakage at your company.
Take Preventative Measures
As the saying goes, an ounce of prevention is worth a pound of cure—which is very true regarding revenue leakage. Every dollar that is retained from eliminating revenue leakage enhances a company’s profitability. One way that you can help safeguard your company from revenue leakage is to conduct regular audits of business processes, systems, and financials.
Rock-Solid Billing Process
By having a clear and transparent billing process, customers will trust in your company and be more apt to pay their bills on time. Automated billing and collection can help eliminate human error, but it’s always advisable to review this process regularly. Additionally, providing safe and secure ways for customers to pay online can help reduce leakage.
Better Account Management
Account management is a critical business process that mustn’t be overlooked. Invest in the technology to track billing and customer contacts. Increase customer communication, train customer service reps, and have transparent and clear billing policies to manage customer accounts better. Additionally, conducting regular audits of business processes can help safeguard your business from leakage.
Update Your Meters & Prevent Fraud
Faulty meters are often the cause of billing errors and revenue leakage. By having updated technology and meters that are functioning properly, you’ll be able to identify leakage before it becomes a significant problem. Monitoring these meters can also help you spot potential issues, determine the meter’s functionality and when it needs to be replaced, and identify fraudulent activity or meter tampering.
Take Advantage of BPO Services
Another great way to combat revenue leakage is to take advantage of business process outsourcing services. By choosing a trusted BPO provider, your company can reign in revenue leakage and position the company for better bill collection and profits.
At Credence Global, we have skilled experts trained in creating efficiencies and finding solutions using the best technology available. BPO can revolutionize how you collect bills, and ultimately, it can help reduce or eliminate revenue leakage.
Stop Revenue Leakage: Get Expert Help Today
Is your company having trouble with revenue leakage, or are you looking for a way to safeguard your company against revenue leakage in the future? Contact Credence Global Solutions for a plan to prevent revenue leakage at your company today!
