Utility Week

UTILITY WEEK | 24TH - 30TH NOVEMBER 2017 | 11 Finance & Investment Market view B usinesses across the globe are haem- orrhaging millions of pounds' worth of profit and potential revenue a year without being aware of it. Mistakes in cus- tomer billing, unused data and far from optimal business processes lead to increased profit leakage and lost revenue streams. While it could be argued this is a problem for sev- eral industries, none are suffering more than in the utilities sector, where in some cases consumers are subsidising business debt. According to Ofwat, for example, water companies are charging customers an extra £21 a year on their bills to help cover rev- enue leakage, despite water poverty – where households are unable to afford to pay their water bills – affecting almost a quarter of households. Businesses are not doing enough to pro- tect revenue streams, profits are becoming unrecoverable through preventable mis- takes in customer billing, and business pro- cesses not being followed correctly. Not only does this mean companies are losing vast amounts of money, but also represents the wider impact of unnecessary and inefficient business processes. It's all about the money The biggest challenge facing the utilities sec- tor today is a lack of understanding when it comes to unrecoverable profit, aged debt, and how to prevent money unnecessarily leaving the organisation. While pretty much every company has a revenue leak, the lack of understanding about where the holes are and how to plug them is impacting business margins and profitability – something that could prove fatal in today's competitive environment. However, this can be addressed effectively by introducing innovative revenue assurance strategies and solutions. Revenue assurance is the process of iden- tifying and monitoring all business activities that impact profit and liquidity. It polices everything within an organisation to ensure the quality of data and processes are opti- mal, with the aim of improving profit mar- gins and cashflow while keeping revenue coming in. Revenue assurance is a relatively complex subject but businesses need to take the time to understand how, when done cor- rectly, it could benefit them, potentially sav- ing them millions of pounds along the way. By addressing this lack of understanding and awareness, utility providers will also put themselves in favour with industry regula- tors, who are putting an emphasis on and encouraging businesses to reduce unrecover- able revenue. Don't forget the customer Regulators, such as Ofwat, are starting to put pressure on companies to deliver more for less, to service customers better and to meas- ure up well against other industries when it comes to revenue assurance. To do this, organisations need to operate effectively and efficiently – no mean feat against a challeng- ing economic backdrop born of Brexit and welfare reform. By learning from organisations already doing revenue assurance well – in particular the telecoms sector – less mature industries (of which the utilities sector is one) can get a head start by avoiding previously made mis- takes and setting up proven best practices. Both of which are more important than ever as regulations, such as PR19 – the next price review in the water industry – start to take effect. The key messages of these regulations couldn't be clearer for the utilities sector – efficiency and innovation are expected as business-as-usual to keep bills affordable, and bad debt must be reduced. Alongside this, the service delivered to customers needs to be improved through the better under- standing and more sophisticated interroga- tion of the vast amounts of valuable data these organisations are sitting on. There has never been a better time for utility providers to up their game when it comes to revenue assurance than now. Help is at hand Organisations without suitable revenue assurance are not only facing reputational damage, the wrath of industry bodies, and profit loss, but are also missing opportuni- ties and revenue streams simply because they are not aware of them. It is also worth highlighting that in the utilities sector – primarily water – organisa- tions are cash negative. This means utility companies are borrowing significant sums of money from the banks against the value of their assets, the cost of which is hugely expensive, and while this is common prac- tice in the market, it doesn't make sound business sense. Help is at hand, however. Revenue assurance has the ability to significantly reduce the overall borrowing these organisations need to make for future investment. It also presents providers with areas of untapped revenue, allows them to stay com- petitive, and is the only way to create a truly sustainable business. Employing revenue assurance specialists – either on a consul- tancy or project-only basis – who place an emphasis on quality to fully plug the holes in a business, can help organisations recoup debts and translate them into profit, gain market share and implement best practices which will stand them in good stead for the future. Luke Pelham, director for energy and utilities, SQS How to minimise bad debt Revenue assurance offers companies that carry a large amount of customer debt a lifeline by eradicating preventable mistakes and tightening up business processes. Luke Pelham explains how. Key points Water customers pay an extra £21 a year on their bills to cover revenue leakage. The biggest problem is that companies oen do not understand where they are leaking money. Data and processes should be optimised with an eye to profit and liquidity. Utilities should learn from market-leading sectors in this field, such as telecoms. Revenue leakage not only denies com- panies valuable cashflow but causes reputational and regulatory damage.

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