Are you still sending second notices?

Do you send second notices to delinquent customers?

If your answer is “Yes”, do you have a statutory requirement that requires you to send a second notice to accounts before you cut them off for non-payment?  If not, I would encourage you to take a good look at what your payback is for sending delinquent notices.

If your late paying customers behave like their counterparts at most utilities that I’m familiar with, they become conditioned to not paying their bill until they receive a delinquent notice. This type of customer essentially ignores the utility bill and waits for the second notice to arrive before they think about paying their bill.

Some utilities have decided that mailing second notices is too costly for the benefit of so few customers. In this issue let’s take a look at how to determine the real cost of mailing second notices and examine some other options…

What does a second notice cost you?

Have you ever stopped to calculate the cost of sending delinquent notices?

I’ve referenced the Government Finance Officers Association’s (GFOA) Committee on Governmental Budgeting and Fiscal Policy’s Best Practice for Measuring the Cost of Government Service in two previous issues – Issue 3 and Issue 10. At a minimum, the direct costs involved in preparing and mailing second notices include:

  • Staff time to prepare the list of delinquent accounts to receive second notice
  • Paper and consumables to print working copies of the delinquent list
  • Forms and consumables to print the second notices
  • Postage and envelopes to mail the second notices
  • Staff time and vehicle expenses to deliver the second notices to the Post Office

If you haven’t stopped to calculate these costs recently, I encourage you to do so. You may decide, as other utilities have, that the costs outweigh the benefits when it comes to sending second notices.

If you would like assistance preparing a cost/benefit analysis of sending second notices, please give me a call at 919-232-2320or e-mail me at gsanders@logicssolutions.com.

Are there other options besides mailing second notices?

If you are contemplating no longer sending delinquent notices, you may be wondering what other options are available to remind your customer. Options beside mailing second notices include:

  • Clearly stating on the utility bill that no second notice will be sent
  • Printing the amount due with penalty on the utility bill
  • Placing a reminder phone call

Let’s take a closer look at each of these options…

Clearly stating on the utility bill that no second notice will be sent

It’s always a good practice to include useful information on the back of your utility bill. This includes such information as office hours and phone numbers, ways your customer can pay, late fee and cut-off policies and, if you don’t send second notices, verbiage that clearly states that.

Many utilities that don’t send delinquent notices also print a bold message on the front of the bill such as “NO SECOND NOTICE – THIS IS THE ONLY BILL YOU WILL RECEIVE”. I can’t speak to how many customers actually pay attention to such a statement. However, when customers complain that they weren’t notified that their bill was late, showing them that statement on the bill absolves you of any blame for not notifying them.

Printing the amount due with penalty on the utility bill

If your response to not sending delinquent notices is “But we need to send a second notice to let our customers know how much they were penalized”, there are other ways to accomplish this. One such way is for the utility bill to show both the amount due if paid by the due date and the amount to pay, including penalty, if paid after the due date. For example, if your customer’s bill is $50.00 and is due on September 20 with a 10% penalty on September 21, your bill might look something like this:

Utility Bill Payment Dates and Amounts

A number of Logics customers print utility bills that include something similar to this rather than sending second notices.

Placing a reminder phone call

If you are still interested in alerting your delinquent customers that their due date is approaching or just passed, one option is placing a reminder phone call. For some smaller utilities this could be accomplished by a person, but for larger utilities it likely means using an automated system to place the calls. Such systems are sometimes called Interactive Voice Response (or IVR) systems.

Outbound IVR systems can be installed as in-house systems or they can be totally web based in the Software as a Service (SaaS) model. Logics markets a product called Logics Notify that is a fully web based outbound IVR solution. All that is required is to upload a list of names and phone numbers and enter the message that you want delivered to your customer. At the scheduled start time, Logics Notify begins calling each phone number in the list. A record of the time the call was placed and how the call was received – answered live, answered by voice mail, no answer or out of service – is logged.

If you are considering implementing automated courtesy calls, I encourage you to consult with your attorney as to any privacy act restrictions in your state that might limit how much information you can divulge in a courtesy call.

If you have any questions about second notices or would like more information about Logics Notify, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

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© 2011 Gary Sanders

Are you missing out on the easiest way to collect payments?

Do you offer bank drafting to your customers as a way of paying their bill each month?  If your answer is “No”, my next question is “Why not???”.  If you don’t offer bank drafts, you are missing out on the easiest method there is to collect payments.

It always surprises me when I encounter a utility that does not offer bank drafts. At a recent speaking engagement during a Rural Water Association Annual Conference, I posed the question “Does anyone not offer bank drafts?”  Astonishingly, at least 15% of the people in the room raised their hands!

I’ve also presented demonstrations of Logics’ Eagle Utility Management system to three different utilities recently that don’t offer bank drafting. One even told me “Our board won’t let us”. I know that some boards are behind the times (I wrote about this in issue #13 and you can read it here if you missed it) but that one took me totally by surprise!

What is bank drafting?

Bank drafting (also known as direct debit) allows the utility to initiate a paperless payment transaction whereby funds are automatically deducted from your customer’s bank account and deposited into your account. All your customer has to do is give your utility the authorization to draft their bank account by providing their account information. While I’m unable to speak for other software vendors, Logics’ billing software prints a message on the bill reminding your customer that their bill will be drafted on the draft date.

As the draft date approaches, an electronic file is prepared in a standard format known as ACH, for Automated Clearing House.  This ACH file is transmitted to your bank regardless of what financial institution your customer banks with. The ACH system then handles the process of deducting funds from each of your customer’s bank accounts and depositing it in the utility’s bank account.

The entire process is paperless and eliminates the need for opening mail payments or receipting a payment over the counter. Nor does a deposit have to be prepared and taken to the bank. Most (note that I said most, not all – there are exceptions) customers who sign up to pay by bank draft insure that funds are in their account to cover the draft, so very few drafts are returned for insufficient funds.

Again, I’m not able to speak for other software vendors, but Logics’ billing software completes the process by creating a batch of payments from the draft transactions. That saves even more time and effort by eliminating the time consuming task of entering payments.

So, if it’s that easy, why are some utilities not taking advantage of bank drafting…?

There are three possible reasons why a utility wouldn’t offer bank drafting:

  • Your bank doesn’t offer ACH bank drafts
  • Your software doesn’t support bank drafting
  • You’ve never offered bank drafts before

Let’s look at each of these reasons in more detail…

Your bank doesn’t offer ACH bank drafts

Back in the day, only larger banks participated in the Automated Clearing House and offered ACH bank drafts. Now, even most regional and community banks accept bank drafts. Even if they don’t have the processing capability themselves, smaller banks often have a relationship with larger banks to offer ACH capability. If your bank can’t accommodate your needs by offering ACH bank drafts, it’s time to seriously consider changing banks. Any cost from your bank should be nominal and should not be an impediment to offering bank drafts.

Your software doesn’t support bank drafting

Much like banks, if your software doesn’t offer the option to create ACH bank drafts, it may be time for new software. All software should provide certain basic functionality. Let’s face it, this is 2011, and bank drafting needs to be part of that solution. If your software doesn’t provide the capability to offer bank drafting, ask your software vendor why. Believe it or not, many utilities don’t realize all the features their billing software offers. Could it be that bank drafting falls in this category for you?

You’ve never offered bank drafts before

Many local governments and utilities fall victim to what I call the TTWWADI syndrome – that’s the way we’ve always done it (or in this case, that’s the way we’ve never done it)!  If the reason you’ve never offered bank drafts is because you’ve never checked into it, now is the time to get started. It should be as easy as one phone call to your bank and another to your software vendor. They each should be able to assist you with their part in getting started.

Bank drafting really is the most cost efficient way to collect payments. If you would like assistance in putting together a cost/benefit analysis of offering bank drafts please give me a call at 919-232-2320or e-mail me at gsanders@logicssolutions.com.

Trust me when I say your customers will appreciate it and you will wonder why you waited so long to get started with bank drafts!

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

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© 2011 Gary Sanders