Are you taking advantage of debt set-off?

Back in March, in issue #6 we took a look at improving final bill collection rates (you can read it here if you missed it).

Have you taken all the steps I suggested and are unpaid bad debt accounts still a problem for you?

Is your utility located in a state that has a debt set-off program?

Are you taking advantage of the debt set-off program?

If the answer to the first two questions is “yes” and you’re not already participating in your state’s debt set-off program, I strongly encourage you to do so. Let’s take a look at what debt set-off is and why you should use it if it’s available in your state.

What is debt set-off?

A debt set-off program provides a way for local governments (and some utility districts) to collect unpaid debts from debtors’ state income tax refunds and, in some states, lottery winnings. The local government files a claim with the state (or an agency designated to process such claims) and, before income tax refunds are issued, any claims are set off against the taxpayer’s refund.

What states offer debt set-off programs?

I am familiar with many Logics customers in North Carolina, South Carolina and Virginia that already make very effective use of debt set-off programs in their states. In addition, a quick web search indicates that Kansas and Wisconsin also offer debt set-off programs for utilities. A few other states also offer debt set-off programs, but only for state agencies.

The North Carolina Debt Setoff Clearinghouse has a very informative web site with information about how the program works and statistics of how much has been collected. If you doubt whether participating in such a program is worthwhile, take a look at the amount that has been set off, even for some of the smaller entities.

Are you taking advantage of your software to interface with debt set-off?

Does your software vendor provide a way to interface with your state’s debt set-off program? If you are a Logics customer, both Logics Classic and Eagle Utility Management Systems have the ability to select accounts that should be submitted to debt set-off and create the file to send to the state.

What if your state doesn’t offer a debt set-off program?

If you live in a state with a state income tax that doesn’t offer a debt set-off program, I encourage you to lobby your state legislature to implement one. The North Carolina League of Municipalities and the Municipal Association of South Carolina were instrumental in lobbying for debt set-off programs in their respective states. If you belong to a municipal or county association, bring this to their attention and get their assistance in lobbying your legislature. Doing so will definitely reduce your bad debt and help your bottom line!

What if your state doesn’t have a state income tax?

Let’s just say, I’m jealous!

If you have any questions about debt set-off programs, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

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© 2011 Gary Sanders

How do you process mail payments?

If you are still entering mail payments into your billing system one by one, it may be time to take a look at some other options. Today, let’s look at what some of those other options are…

Bank lockbox service

Many banks offer a lockbox service where payments are mailed to a post office box at their processing facility, rather than to your office. The lockbox opens the mail, scans the payments, deposits the checks into your account and provides a file with the information for each payment. This file is then available for you to download and import into your billing system to create payment transactions.

A lockbox service reduces your office workload tremendously. You no longer have to open the mail, enter the payments, prepare the bank deposit or take the deposit to the bank.

However, there are drawbacks to a lockbox service. Many utilities find the cost associated with a bank lockbox service to be prohibitive. Because most bank lockbox services are fully automated and rely on scanning the bill stub to determine the account number, payments received without a bill stub pose a problem. This includes checks received from your customers who pay using their bank’s online bill pay software. Of course, if you are using the AR-Box solution that we discussed in January in issue #2 (you can read it here if you missed it), this won’t be a problem. Many lockbox services send payments received without a bill stub to your office, either by mail or via courier to the local branch of their bank, delaying the posting of the payment.

If you’ve looked into a bank lockbox in the past and determined that it was too expensive, please don’t stop reading yet…

Remittance processing systems

In-house remittance processing systems have become increasingly popular in recent years, especially since the passage of the Check 21 Act. With a remittance processing system, you purchase a scanner that scans both the bill stub and the customer’s check. As the mail is opened, bill stubs and checks are matched and fed into the scanner. The scanner reads the customer’s account number from the bill stub and the check information from the MICR line as well as using optical character recognition (OCR) software to read the amount of the check and captures digital images of both sides of the bill stub and the check. The checks can then be deposited electronically with your bank using remote deposit and a file is exported to be imported into your billing system to create payment transactions.

This is a huge time savings to the utility in not having to enter payments individually, prepare a deposit or take the deposit to the bank.

Be wary of remote deposit only systems

Many banks sell, or in some cases provide at no cost, check scanners that only scan checks for remote deposit purposes. This is a huge time savings for the bank, but not so much for the utility. If you are considering implementing a check scanning solution wouldn’t you also want to also reap the benefit of not having to manually enter payments? If your bank approaches you about implementing a check scanning solution, be sure it can also scan bill stubs and produce a payment file so that you maximize the benefit of installing the system.

If you have any questions about lockbox or remittance processing solutions or would like to know vendors we at Logics have worked with, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

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© 2011 Gary Sanders