Are you looking for a debt management solution? ‘Bad Debt’ is a term used by organisations when the user or customers do not or cannot pay their bills. It is difficult to ignore the fact that with the current economic slowdown and rising unemployment, household incomes around the world have seen a downfall, increasing the possibility of delinquency and an upsurge in bad debt charges. The ambiguities arising from global shocks such as Brexit, trade wars, and a possible recession also pose risks for utilities & similar organisations. At the same time, liberalization and intensifying competition in many markets are resulting in higher levels of switching among customers, sometimes accompanied by bad debt when final bills are not paid.
In liberalized retail markets, utilities bear full responsibility for debt collection, but their manoeuvring room in recovering the bad debt is limited by regulatory and political constraints. The focus on maintaining the best customer experience, together with service obligations and provisions such as long grace periods, protection for vulnerable groups, and winter moratoriums, makes it difficult to suspend the service even as a last resort. Public opinion and political pressure act as a further deterrent, and utility companies need to reconfirm to the public time and again that their processes are fully compliant and adhere to the highest professional standards when it comes to debt collections.
Loss of income is becoming a burden on businesses and inhibiting growth, and the situation shows no signs of improving. Sectors like Utilities, Telecom can ill afford to ignore such waste and eliminating it can generate resources to invest in future growth. In a tight economic and regulatory context, utilities need to work harder to prevent and manage bad debt if they want to stay competitive and improve their resilience. Experience shows that companies are better at weathering downturns if they have already cleaned up their credit processes and minimized overdue debt because they are able to move fast to cut costs, protect profitability, and reserve growth capacity. Thus utilities will have to take matters into their own hands. By reshaping their credit and collections processes, they can improve their ability to predict risk, reduce bad-debt charges by, and provide a better experience for customers.
Barriers & Opportunities
Data Analytics & Customer Engagement
Data Analytics isn’t all new for organisations with large customer base like Utilities, Telecom – it’s actually been around for quite some time. there are numerous utilities using – basic behavioural scoring. Analytics is a continuous improvement process to identify ever changing customer behaviour and other collections related trend. Best-practice collections strategies should use emerging trends to segment customers, targeted collection campaigns & quick adjustments to the treatment path.
Continuously improving process requires the ability to monitor the effectiveness of the strategies, performance of customer segment & other relevant KPIs. In addition, advanced data analysis using metrics and trend displays, and collection control dashboards that illustrate KPIs such as status of overdue receivables and corresponding collections actions, will provide the necessary business intelligence to adapt and extend collections activities.
Various trends where Analytics can support Debt Management –
- Reactive Collection vs Proactive Measures
- Customer Segmentation: Can’t pay, won’t pay….forgot to pay
- Customer Behaviour: Payment pattern, preferred mode of payment, initiative customer reacts to
- Predictive Analysis
- Identifying right strategy, right action for customer
- Insight for the next strategy iteration
SAP Analytics Cloud is one simple cloud solution connecting your people, information, and ideas to enable fast and confident decision making. Machine learning technology and embedded artificial intelligence help you to discover deep insights, simplify access to critical information, and empower informed decision making for all.
Developed for real-time BI, planning and predictive analytics that natively integrates to SAP, the solution can predict when proactive action is required, something typically difficult for companies to do. The accelerated value is in enhancing organization’s ability to collect cash and improving its insight into profitability indicators. It also leverages SAC content to seamlessly integrate with SAP data and SAP S/4HANA®. Advanced predictive analytics becomes the quiet driver behind dynamic operational, tactical and strategic dashboards that have been designed with SAP Fiori for a uniform and modern user experience.
Removing system Barrier
There is a basic understanding in industries like Utility, Telecom on the concepts of collections best practices, but almost all organisation lack the technology to be able to adopt best practices. Traditionally, collections have been the technology domain of the Organisation’s customer information system (CIS). Many companies struggle with weak and restrictive collections functionality in an aging CIS. Others may have a relatively new CIS in place that boasts adequate collections support but is missing key features to support today’s best-practice collections processes.
Collection managers, dependent upon the CIS platform & team to manage collections processes to implement improved collection processes. Debt is not going away. There will always be customers who default on payment. But technology has caught up with the problem, and companies now have the option to implement specialist collection software products that enable best-practice approaches.
Some of the best practices followed across the globe are –
- Rapid change cycles executed by domain experts: Analyse, Optimize, Implement
- Strategy changes no more an IT change request
- Scalable & Flexible when it comes to including new changes/attributes that are based on analytical trends
- Design transparency, improved performance & integration with 3rd party DCAs
- Offers tailored treatment based on customer segmentation
- Allows Champion – Challenger strategy and success valuation
SAP BRIM – Financial Customer Care with Debt Management using BRF+
Business Rule Framework plus (BRFplus) provides a comprehensive application programming interface (API) and user interface (UI) for defining and processing business rules. It allows you to model rules in an intuitive way and to reuse these rules in different applications.
Flexibility in changing Business rules in Collection process enables Revenue Management team to –
- Make their collections rules progressively more targeted, as they become more and more sophisticated with their analytics and customer segmentation
- Add more sophisticated customer characteristics (e.g. components of credit risk scores, payment behaviour) as the data becomes more readily available
- Adapt their rules to changing macro-economic conditions (e.g. recessions, political climates, etc) or changing customer behaviours (e.g. greater mobile use, email use)
- Respond rapidly to unforeseen events
Leveraging BRF+ features to improve Debt Management
Scenario 1: Business running on SAP with Debt Management using legacy Dunning procedure
Debt Management using SAP’s Legacy Dunning Procedure was limited to few attributes like
- Days in Arrear
- Amount of Debt
- Creditworthiness score
Combinations of these parameters were used to define levels and activities where defined as per Business need.
Debt Management with BRF+ is robust, scalable, and way ahead in its offering compared to its predecessor. It is a framework of Business rules which can use a wide range of attributes to determine the correct path for a customer.
- Master Data
- Transactional data
- Derived values using formula e.g. oldest item, energy/non-energy debt
- Function Module (data from external system/other modules/calculation of attributes not possible through formula)
Advantage of moving to Debt Management using BRF+
- No additional licenses required
- Whole loads of attributes to define strategy
- Simplifies the process of identifying the right collection path, sequence for a customer based on changing payment behaviors, credit history, Debt parameter, etc.
- Web based UI enabling Business User to control the strategy changes
- Supports multiple strategies and at run time identifies the strategy or path to be executed on a customer
- Supports Champion Challenger concept and reports on Success valuation of the strategies
Scenario 2: Business running on SAP but Collection strategy on 3rd Party Solutions
Because of limited functionalities offered by the Dunning procedure, many companies moved their Debt Management solution to other 3rd parties offerings. SAP too understood the need of the Businesses and introduced BRF+ for managing Debt. This has been a game changer for various organisations especially in the utilities, telecom sector who had no option but to move to 3rd party offerings.
SAP may lag on jazzy screens compared to the 3rd party solutions but on functionality offerings, it’s no less. GUI look and feel also now has been taken care through FIORI.
The real value what Business gets using SAP Debt Management using BRF+ are
- Simulation in system before actual batch run controlling unforeseen scenarios
- No additional license cost
- Huge saving on TCO as the solution is in the same SAP system.
- Data Storage
- Annual Maintenance
- No hassle of managing multiple real time interfaces to keep data up to date in the Debt management system
- Improved Customer Service and savings on AVHT as Business User will have to refer to only one system for all the customer relevant information
What comes along with BRF+
BRF+ is like a container for the complete business rules and provides out of box integration with various other processes along with Debt Management. Power of BRF+ can be leveraged in
Billing and Revenue Innovation Management
- Discount/Charge Activation
- Charge Plan Activation
- Charge Plan Parameter Value Determination
Sales and Distribution
- Output Determination
Revenue Account Reporting
- Integration with Source System (SD, Hybris Billing, CRM, etc.)
- Account Determination (POB Attributes, Contract Asset, Contract Liability, Recognized revenue, Deferred Cost)
Industry Solution – Utilities
Advanced Metering Infrastructure Event Management
Why Choose Acuiti Labs for your Debt Management Transformation?
Acuiti Labs is an SAP Silver partner and a digital firm that delivers business and technology consulting services, transforming businesses with pioneering and latest solutions. We have proven expertise in delivering successful SAP BRIM based transformation, thus offering complete support for your Business objective on Debt management.
When it comes to Debt Management transformation, we have collaborated with several clients across industries like Utilities, Telcom, Postal, Port and supported them in containing their Debt position not only by technology implementation but also by offering Industry best practices.
Our professional SAP experts have Big 4 consulting experience and strong technology capability in the area of SAP BRIM, Analytics, AI, Big Data, Mobile & other Cloud technology. We are best placed to understand your Business objective and co-create the required solution.