A novel alternative to security deposits

One of the great things about my job is getting to meet people from utilities across the country and learning how they do things. One such experience happened last week while speaking at a conference and I heard a new idea from one of the attendees. I found it intriguing enough to share here…

Who doesn’t want more customers on bank draft?

During the discussion about security deposits in my presentation, a participant offered that his utility will waive the security deposit for any new customer that agrees to sign up for bank draft.

As I’ve discussed here before, bank drafts are the single most efficient way to process payments. Because of this policy, the utility this gentleman works for has over 60% of their customers on bank draft. In my experience, 30-40% of a utility’s customers signed up for bank draft is impressive, but 60% is unheard of!

Significantly increasing the number of customers paying by bank draft can only help to make your utility operate more efficiently.

What are the risks involved?

Obviously, the biggest risk is the exposure of the utility if the customer doesn’t have sufficient funds in the bank to cover the bank draft. This particular utility allows one returned bank draft without penalty (assuming the customer promptly pays to cover the returned draft). After the second returned draft, the customer is required to pay a deposit.

Of course, you have all the normal recourse in the event of a bounced bank draft, including a returned bank draft fee and disconnecting service if the customer does not make restitution in a timely fashion.

Is it worth it to your utility…?

The big question you must ask yourself is – “Is it worth the risk of a few more write-offs to double (or triple) the number of customers paying by bank draft?” As with any policy, each utility must decide if implementing another utility’s policy makes sense for them.

For the utility I’ve cited here, obviously they have decided the benefits outweigh the risks. The answer boils down to how much it costs your utility to process payments.

Do you know what it costs you to process a payment?

Have you calculated what it costs to process various types of payments? If you haven’t, it might be very enlightening for you to do so. If you would like my assistance with conducting a study to determine what it costs to process payments, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

© 2012 Gary Sanders

What is your utility’s “corporate culture”…?

Three issues ago, I wrote about presenting a more customer friendly utility bill. This led a reader to ask “You advocate no-nonsense, tough policies with customers and yet, you write about being ‘customer friendly.’ How do you reconcile those two positions?”

We often read about “corporate culture” in the business world. I believe that utilities can effectively fashion an organizational culture that includes sound (some would say “tough”) business practices and policies while still being customer friendly.

Adopt sound business practices and policies

Most utilities, whether government agencies, non-profit entities or for-profit enterprises, operate as monopolies. This means your customers can’t take their business elsewhere and you have an obligation to provide a service at the lowest possible rates.

Maintaining the lowest possible rates requires operating your utility as efficiently as possible while protecting against losses. Losses for a utility can include theft of service or embezzlement, but most often are seen in bad debt accounts that must be written off.

Minimizing written-off accounts can be best accomplished by implementing policies and procedures that ensure:

I don’t believe enforcing fair and effective policies and procedures is at odds with being customer friendly if you have communicated these business practices to your customers. Failing to clearly inform customers of your policies and procedures is bad business and borders on deception.

Another imperative to being customer friendly is treating your customers equitably and applying policies fairly to all customers. This includes not granting special favors to influential or politically connected customers or friends and family members of utility employees.

Effectively publicize your policies and procedures

The key to informing your customers of your policies and procedures is to use all possible means to do so.  This includes:

It is possible to be “customer friendly” and operate an efficient utility

What is your utility’s organizational culture? Do you treat your customers fairly and hold them all to the same standards? Do you take advantage of every means possible to communicate your policies to your customers?

If you do all the things listed above, I believe it is absolutely possible to have an organizational culture that allows you to be both customer friendly and still operate a utility that adheres to sound business practices.

How does your utility measure up?

Is your utility is operating as efficiently as possible? Are you are as customer friendly as you could be?

If the answer to either of these questions is “no” (or if you’re honestly not sure of the answer), please contact me by calling 919-232-2320 or e-mailing me at gsanders@logicssolutions.com to see how I can assist you.

© 2012 Gary Sanders