Some call it a “utility death spiral.” European utilities are struggling to adapt and maintain profitability in the face of alternative, green energy sources.
As a whole, Europe has shifted support toward renewable power. The EU has shifted its policies and government subsidies in favor of its “20-20-20” targets, which includes a 20 percent reduction in carbon emissions, an increase in renewable energy to 20 percent of energy consumption, and a 20 percent improvement in energy efficiency. The agenda has upended the practices of Europe’s energy giants.
According to October 2013 article in The Economist, the EU’s top 20 utilities have lost more than half a trillion euros in share value. To make matters worse, utilities have been slow to invest in renewables and hold little market share (7 percent of capacity in Germany, for example).
The very nature of coal and natural gas production also puts these utilities at a disadvantage. Nuclear power production is difficult to reduce, and solar and wind power are free, leaving coal and natural gas to suffer the brunt of reductions in demand.
“In short, they argue, the growth of renewable energy is undermining established utilities and replacing them with something less reliable and much more expensive.”
Some argue a shift in business model is in order. But as these long-term solutions work themselves out, there are steps utility producers can take today to reclaim revenue and increase profitability. The answers lie within their balance sheets.
Regain Revenue Through Collections and Recovery
Within new business models, there is a need for more proactive and effective collection and recovery strategies to capture more revenue and increase profitability. Here are three best practices that will help implement pre-emptive accounting processes that flag accounts before becoming seriously delinquent, and improve the efficiency and performance of collections outcomes.
1. Designate a single, centralized collections management system.
To ensure consistent collection policy and activities, organize collections management under a single authority, from the start of the collection process through to recovery or abandonment.
Focusing on one central collection center makes industrialization easier, a key factor in effectiveness and cost control. Management, control of activity and the ability to introduce quick changes are also improved.
2. Employ and train a dedicated collections staff.
Specialized and dedicated personnel for collection and recovery operations will result in better outcomes than relying on non-specialist staff handling collections as a subsidiary task. Collections must follow a consistent, documented pattern to follow delinquent accounts through the recovery lifecycle, and to meet reporting and accounting standards.
All roles and job descriptions—from collection manager to skip tracing agent—must also be clearly defined and documented to create accountability and streamline processes.
3. Employ advanced collections technology.
To design, enforce and measure successful collection strategies, some enterprises have invested in specialized systems that support their full portfolios. From pre-collection to early collection to the pre-legal stage, followed by legal proceedings and eventual write-offs (and sell-offs) of portfolios, a consistent strategy is best accommodated by a single system.
Making full use of today’s flexible, responsive operational and IT systems provides corporations with the agility to respond to new and emerging risks, diversify cash flow, improve revenue generation and increase profit margins.
Learn More About Capturing Revenue in a Competitive Market
To dive deeper into these new requirements and best practices in collections and recovery, download our free whitepaper, Collections and Recovery: Meeting the Needs of a Changing World.
Photo Credit: aaron_anderer via Flickr