Post - Blog
How utility providers can transform their cash allocation process in the current cost-of-living crisis
- 1 year, 1 month ago (2023-04-04)
- Junior Isles
Craig Naylor-Smith, CEO, Parseq
All Energy 2024
To say that utility companies have been coming under recent, intense scrutiny is somewhat of an understatement.
With the UK in the middle of a cost-of-living crisis, driven partly by ever-escalating energy costs, all eyes have recently been on the bills being dished out by energy suppliers. Indeed, everyone from the UK government to businesses, and from energy regulators to the public, have been analysing exactly why bills have been rocketing ever skyward.
The Office for National Statistics explains how electricity prices in the UK rose by 66.7% and gas prices by 129.4% in the 12 months to January 2023 – some of the main drivers of the annual inflation rate. Furthermore, the ONS reports how more than three-quarters (77%) of adults said a rise in their gas or electricity bills had caused their cost of living to rise over the past month, when asked between 22 February and 5 March of this year.
Against this background, it can be easy to forget that energy suppliers are businesses. Like businesses from all sectors, utility firms have a need to invest to remain efficient. On occasions, this will involve spending significant sums “up-front” to remain profitable for the long-term.
The importance of IT for UK utility providers
IT is vital for the success of utility firms.
Not only does it enable them to become more efficient and productive, it also allows them to improve their levels of customer service – which is even more essential during the current cost-of-living crisis. Investment in IT also helps to reduce waste – again, an essential function for utility providers who cannot be seen to be throwing away the very product that many people are struggling to pay for in the first place.
IT investment is big business on a global level. The digital transformation market is expected to register a CAGR of 20.8% and revenue is projected to increase from $492.43 billion in 2021 to $2669.48 billion in 2030.
How can utility firms invest in this digital transformation, without being criticised for over-investing in the face of the current cost-of-living crisis?
The problems with legacy utility payments
The utilities sector collectively processes multiple millions of pounds of payments every month. Indeed, it is these payments that are being scrutinised more than ever before in the face of rising bills across the entire UK.
However, for many utility providers, the actual cost of processing this cash remains excruciatingly high. Whether payments are received through traditional channels such as BACS, debit card or cheque or by more recent payment methods via online banking, faster payments or Apple Pay, they all need allocating by the utility firm.
Yet the fact is that many are nowhere near geared up to efficiently deliver this critical function.
What also comes with multiple manual payment processes is the high possibility of mismanagement. Utility providers face the risk of potentially business-crippling errors such as mis-allocation or cash being held within an ever-growing suspense account. Consequently, their ability to access cash is dramatically reduced, ultimately damaging the financial health of the organisation.
How utility payments can be revolutionised through technology
Technologies such as optical character recognition (OCR) and intelligent character recognition (ICR) can fully support the cash allocation process.
They can be deployed to automatically capture fields such as the customer’s name, total value, and customer reference number, and therefore play an effective part in the payment matching process that follows. With the advancements in software and technology platforms available, payment matching rules and procedures should be intelligently applied with in-built machine learning capability.
Advancements such as these will ultimately save utility firms a lot of money. No longer will they be reliant on labour-intensive models which are leaving them exposed to risk.
Effective and efficient cash allocation
Combining bank data and validation data files with identified remittance criteria enables efficient matching without manual intervention.
The payment matching process can also be enhanced through regular comparison with a debt report so long as it contains a ledger of all outstanding debts. Those companies that are one step ahead will also be taking advantage of APIs (Application Programming Interfaces) and full system integration, benefiting from a streamlined end-to-end payment process with optimal efficiency gains.
Putting the customer experience at risk
Businesses that regularly fail to allocate funds face a huge and costly burden of tracing payments. The customer communication cycle becomes wrongly focused on missed payments through several emails, letters and debt collectors when in fact payment has already been made, severely impacting the overall customer experience.
IT outsourcing
Outsourcing providers specialising in IT offer the latest payments technology without utility providers needing to buy such systems directly. Crucially, the upfront cost of such technology will be met by the outsourcing provider rather than the utility company itself.
Outsourcing specialists also incorporate other essential functions. These include data-storage and disaster recovery, which are vital in today’s nano-second social media world in which the slightest transgression is flagged instantly by ever-vigilant customers, which can tarnish a carefully nurtured corporate image.
Conclusion
By transforming the cash allocation process, businesses can vastly streamline their systems and free-up invaluable resources.
During a cost-of-living crisis, utility providers will continue to face intense scrutiny. However, by showing they are actively looking to the future and are committed to stopping the “waste” of resources that might have previously hindered their operations, they face the real possibility of assuaging even the most critical observer.