Social Service agencies in and around Atlanta, GA, are used to fielding calls from people looking for help with their gas or electric bills. But last November, as news spread that the city's water utility was moving to collect on the $35 million in outstanding customer debt, it was suddenly the water bill that prompted a flood of calls.
On the heels of a hard-won water rate and sales tax increase earmarked to help pay for $3 billion in sewer improvements, the Atlanta Department of Watershed Management determined that it had little choice but to rein in its outstanding accounts—nearly a quarter of the city's 134,000 active customers.
"We're asking people to step up to the plate, and they have done that," said Janet Ward a spokeswoman for the utility company during an interview with a local news agency in the days after the utility began shutting off between 400 and 500 delinquent customers a day. "Now we need to make sure and make them understand that we are doing everything we can to keep their rates down and do the work that has to be done. Recovering money that is by rights ours and that is out there is one of the best ways to do that."
Anytime you sell a service, it is a sure bet that eventually you will be faced with collecting on past due accounts. While no one wants to be the bad guy in these situations, best management practices (and good old common sense) dictate that you need to collect the money that's owed to you.
In this issue of the Safe Drinking Water Trust eBulletin we'll take a look at ways to ensure that your own operating expenses don't find their way to someone else's collection department.
Additional Resources
http://www.toolkit.cch.com/text/P06_2700.asp [1]
Get it in Writing.
Clearly, one of the best ways to increase revenue without resorting to raising water rates is to establish and enforce a fair "collections" policy. Getting tough on collections, especially in small systems where you are apt to run into your customers down at the local coffee shop, isn't a fun prospect.
It's hard to tell people, "Pay up or we'll shut off your water!"
That is why it is best to have a collections policy written down on paper—then stick to it.
That doesn't mean that the policy shouldn't have built-in ways to cut your customers a little slack. However, it is important to remember that each gallon of water you supply costs the system a certain amount of money to produce. If one customer doesn't pay his or her bill, then your other customers eventually wind up paying their share.
It's just not fair to your prompt paying customers to ask them to subsidize those who don't pay or are always late. Remember, your budget was based on estimated monthly collections. Past due accounts make it harder to balance your budget, pay your employees, and pay for your supplies. Past due accounts, if allowed to multiply, weaken your system's financial foundation.
In order to attack the problem of past due accounts, your board must commit to:
1. Establish a written collections and termination (shut-off) policy.
2. Put the policy into practice.
3. Monitor the effectiveness of your policy each month.
Tip: Check out the links below for examples of collection policies.
Additional Resources
www.cityofzion.com/publicworks/water.html [2]
www.mcwd.org/html/320_termination.html [3]
Don't Be Afraid to Ask.
It may seem obvious at first, but after your Board has written, reviewed, and implemented a collection policy, the best way to begin collecting outstanding customer debt is simply to ask for the money. Whether by letter or telephone, it is important to inform your customers exactly how much they owe, the date payment is expected and the consequences of not paying.
When it comes to uncollected debt we aren't just talking about nickels and dimes. Estimates of unpaid debt owed local governments nationwide range from $10 billion to $40 billion each year. The clear result of not collecting on these debts is that those who do pay their bills are charged higher fees to make up for the loss.
A compassionate and understanding attitude should be reflected in all your collection communications—remember you could be dealing with friends and neighbors who have merely fallen on hard times. The old adage, 'Put yourself in their shoes,' works well in these situations. Be firm, but tactful.
It is also a good idea to have several "past due" letters on hand since experience shows that some slow paying customers may ignore notices that appear to be a "canned" administrative response, or if they have received the exact same letter month after month. Keep it fresh. A good collection letter should:
• Never be confrontational.
• Briefly explain the nature of the problem, such as how much the past due amount is and how long the bill has been outstanding.
• Politely ask for prompt payment or some form of notification if the customer cannot pay and to let you know why so that some alternative payment plan can be created.
• Explain you system's termination policy; and
• Offer resources that help those who need assistance in paying their utility bills.
• Contain a return envelope to make paying the outstanding bill as easy as possible.
Tip: Check out this month's "Success Stories" section to view sample collection letters.
Additional Resources
www.nesc.wvu.edu/ndwc/articles/OT/SU04/PastDue.pdf [4]
Give'em an Incentive to Pay.
Now, it's important to remember that when collecting outstanding debt you should never resort to strong-arm tactics. (No threatening to break kneecaps or to send a customer to "sleep with the fishes" is necessary.) Harsh tactics, besides possibly being illegal, could also make customers more resistant to pay.
Establishing a well-defined late fee is a good incentive for prompt payment. The old saying, 'You can catch more flies with honey than you can with vinegar' holds true when dealing with your overdue accounts—and many customers will view avoiding a late fee as a "sweet deal."
Another tool that can be used to help delinquent customers who are facing temporary financial hardship is to allow them to pay off their overdue account in installments. To avoid having to carry the customers' debt over for a long period of time and to ensure that every one is treated fairly, a water system should have a clearly defined extended payment plan in place. Generally, most systems require that the outstanding debt be paid by the customer in no more than six installments and that the most recent bill be paid at the same time as the first installment.
Additional Resources
http://www.cc.state.az.us/utility/water/rules-water.htm [5]
Termination: The Last Resort.
After every collection method at your disposal has been exhausted, termination of service may be your only alternative.
Termination can be a very powerful incentive to get delinquent customers to pay their water bills. Nothing else will get your point across quite as clearly as when a customer goes to turn on their shower in the morning only to realize that nothing is coming out.
Each state has specific laws governing what steps a water utility must take before it can terminate a customer's water service. Check the Additional Resources link below for a listing of state specific information.
Remember, the best way to deal with delinquent customer accounts is to have a clearly written policy in place and to enforce it. While the job may not always be glamorous, it is important to keep in mind that your customers have requested your service and are expected to pay for it. Your system's financial health depends on it.
So, get out there and start working with your customers to reduce your system's outstanding debt levels before things get out of hand.
Additional Resources
http://consumeraction.gov/utility.shtml [6]