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£10 billion in unpaid bills written-off by utilities, financial institutions and telecom operators
Rising numbers of customers who are not paying their bills is significantly affecting the bottom lines of UK companies - and the situation is expected to get worse, according to research published today by Talgentra, which specialises in revenue collection.
The research uncovered some shocking statistics in the utilities, telecom and finance sectors - as well as a high degree of complacency with limited external or internal pressure to tackle rising level of consumer debt write-offs.
- At least £10 billion in unpaid bills was written-off in 2005.
- Every company questioned admitted to writing off unpaid customer bills in 2005 with 55% of companies writing off between 5 and 9% of revenues.
- 97% expect that the level of consumer bad debt write-off (as a % of their company's revenue) will increase in 2006.
- 95% expect to see an increase in the number of customers with repayment difficulties over the next 12 months. 50% expect an increase of between 5 and 10%.
- General economic conditions are cited as the main reason for the expected increase in customers facing repayment difficulties. Insolvency - the inability of the consumer to repay their debts- was cited as the principal cause of bad debt.
- Only 23% of bad debt write-off is authorised at boardroom level. Most write-off decisions were made at the collections or finance department level. This could indicate that either boards do not appreciate the scale of the write-offs or that a certain level of loss within the business is acceptable to the management.
- Improved customer profiling, the use of new technology and better integration of existing IT systems are seen as the most important factors in increasing revenue collection. However, despite predictions that the number of customers with repayment difficulties will continue to rise during 2006, there seems to be little internal or external pressure to introduce best practice techniques.
Chris Buckham, Director of Marketing at Talgentra, said: "Consumer debt stories tend to focus on the effects of debt on consumers themselves and there has been little attention paid to the issue of how an inability to collect outstanding payments is impacting on companies themselves - and the future growth of the UK economy."
As part of Talgentra's annual survey "Trends in Revenue Management and Collection 2005", over 545 senior managers responsible for revenue collection were questioned. They represent a cross sample of UK companies operating in the utilities, telecom and finance sectors. These companies share common ground in that they are owed money by customers for loans and credit cards or they provide services in advance of payment.
Phil Wood, an independent consultant from Edit Consultancy, a company which helps organisations implement collection systems, said: "Household bills totalling billions of pounds are not being paid. While a certain level of loss is an accepted part of lending or supplying on credit, what is not be acceptable is failing to do everything possible to reduce this loss to an absolute minimum. Otherwise, good customers are paying the price for those customers who do not pay their bills."
Talgentra worked with RSM Robson Rhodes LLP, a top accountancy firm, to validate the survey and its findings. Copies of Talgentra's survey "Trends in Revenue Management and Collection 2005" can be requested at www.talgentra.com.
For more information about Talgentra please visit www.talgentra.com or 18.05.2006, Talgentra
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