I feel like this is an important enough topic to not only write about it again, but to also create a tool so you can calculate your days of exposure. First, let’s review how days of exposure are calculated…
Components of days of exposure
Days of exposure is the total number of days of service a customer ends up owing for if they are cut off for non-payment and never reinstate service. It takes into account six specific time periods:
- Days between meter readings
- Days until bills are mailed
- Days until due date
- Days until bills are delinquent
- Days until final notice is mailed
- Days until cut-off
The sum of these six values results in days of exposure. Dividing days of exposure by the number of days in the billing period (days between meter readings) yields periods of exposure. Multiplying the periods of exposure by the average residential utility bill and then subtracting the security deposit arrives at the potential bad debt write-off (or deposit refund if the security deposit is adequate).
In my experience, taking steps to reduce days of exposure is an exercise that would benefit nearly all utilities, so I’ve developed an online tool to calculate days of exposure.
Calculate your days of exposure
If you’ve attended my Improving Revenue Collections for Utilities presentation at a utility conference, you’ve had the opportunity to complete a days of exposure worksheet. If not, or if you’ve forgotten what yours was, I’ve created an online, interactive days of exposure calculator.
You enter the number of days in each of the six stages, plus your average residential utility bill and residential security deposit, and the tool will calculate your days of exposure and potential bad debt write-off or deposit refund. To calculate your days of exposure, please click here.
Are you surprised by your days of exposure?
Are your days of exposure excessive or are you left with a potential bad debt write-off? If so, please give me a call at 919-232-2320 or e-mail me at firstname.lastname@example.org to learn how a business review could help evaluate how to improve your days of exposure.
© 2018 Gary Sanders