Being the CIO of a utility company is not an easy job right now. The speed of deregulation rollout and plethora of mergers and acquisitions in Australia, for example, has resulted in many power suppliers using a combination of multiple technologies, systems and processes to serve different segments across multiple states. Imagine trying to resolve integration issues and reporting challenges and manage maintenance costs while the management team keeps the pressure on to improve efficiency, provide better performance visibility, and ensure the systems, marketing, sales, billing and credit teams do their jobs properly.

To make matters worse, nimble retailers have seriously started to erode incumbent market share. With a truly customer-centric approach and a highly streamlined meter-to-cash revenue process, they are eliminating manual intervention, accelerating cash flow and remaining highly agile to market opportunities.

The meter-to -cash revenue cycle

Over the last few years, as retail contestability has moved across states in Australia, energy retailers have added new functionality to handle a meter-to-cash process, a new commercial and industrial time-of-use-based billing engine, a CRM system, a new state-specific mass market billing package, an arrears management programme, etc. – each new application often requiring its own database and set of interfaces to other applications and external systems. Given the resource pressures, time constraints and continual evolution of market rules, this lower risk approach was probably the most prudent, allowing utilities to enter new markets quickly and gain first mover advantage. However, switching levels in many states of Australia have not abated and operational and competitive pressures are forcing utilities to re-address their entire meter-to-cash revenue processes.

Moving to busines proces integration

One of the most widely lauded approaches in the drive for improved efficiency, better customer service and increased agility is business process integration, which focuses on optimising complex end-to-end business processes. Three concepts have emerged as the enablers of better process integration.

  • Consolidation
  • Automation
  • Analytics.

Consolidation

The use of several disparate and loosely integrated applications tied together with inflexible static interfaces presents several significant challenges to a utility or retailer trying to address the efficiency and consistency of their meterto- cash revenue process.

  • Customer service: Typical customer-related processes overarch multiple applications. Examples may be to activate a customer transfer, update a meter reading entry, change a budget billing plan or create installment plans. Speed of access to accurate data is everything. Moving between multiple applications during a customer-related process is time consuming and prone to error.
  • Data accuracy: The management of several applications with their own customer databases, combined with a separate meter data repository, causes problems, as each database has different definitions, data structures, and data element relationships. In fact, the data is often duplicative, missing or contradictory, with a lack of consistency in its validation or editing. Such accuracy problems significantly impact the ability to bill, collect revenue and manage the customer relationship.
  • Agility: Running multiple applications results in having to manage several different approaches to business rule definition. Some may have fairly configurable means to adapting rules, others will require vendor customisation, but none will be identical – all of which will impact the agility of an organisation to adapt to competitive pressures or regulatory change.
  • Cost: Lack of true integration between applications means automation and seamless data flow between them is difficult. Data from one system, such as tariff management, may have to be manually configured to ensure compatibility with the different billing systems, and each billing system may require additional resources to appropriately format data for 3rd party exchange. Managing multiple applications is also expensive in training time, maintenance and license fees.

Repositioning a centralised customer and meter data source at the core of an integrated and streamlined meter-tocash revenue process offers considerable benefits:

  • Customer service staff see a single, complete and consistent picture of a customer environment, including all recent interactions and account situations. This improves staff efficiency and call handling times, reduces repeat calls, and creates an overall better customer relationship.
  • All functional teams, including billing, sales and credit management, see one up-to-date data source and the need for large numbers of complex data exchanges to multiple external systems is reduced. Other internal functions such as forecasting, settlement and reconciliation and field services, are also assured of data accuracy and relevance.
  • he closer integration of CIS components such as rating and billing tools allows the configuration, testing and implementation of the most profitable, customer-centric and regulatory-compliant pricing strategies for customers.
  • The use of one integrated database facilitates the use of standard audit logs to record all changes and corrections, and improve the transparency required for financial reporting from auditors and regulators.
  • A consolidated meter-to-cash revenue cycle allows for a unified approach to business rule definition. A process that enables all steps to be configured by one standard flexible rules engine ensures agility and consistency.

Automation

While application and database integration removes much unnecessary data interchange and reformatting, improves data accuracy and provides a more consolidated approach to process optimisation, automation is the key tool in delivering process consistency and efficiency. For maximum gains, effective collaboration among business process participants is required to primarily define each customer facing process and then establish where automation will reap the most benefits.

Automation is achieved throughout each process through the use of an appropriate work flow engine to get the right information to the right place at the right time at the lowest cost. It connects processes, people and systems, and describes business operations, tasks or transactions that simplify and streamline a business process. Configuring a process with a workflow engine ensures a structured approach to gathering consistent and relevant customer information, automation of tasks and accurate allocation of activities and tasks to the relevant teams/people.

Flexible workflow engines

The most flexible workflow engines automate call scripting, process flow management and work queueing, ensuring desk top supervision of tasks, service orders and customer requests from initiation to completion.

Once a call is made to the contact centre, for example to set up a new account, a question flow engine will provide a clear and consistent means of gathering all the relevant and appropriate customer information for the process in question. Once the information is captured, the process work flow engine defines all the steps and tasks in the process that need to be addressed and by whom, which are then automatically allocated and monitored until completion by the work queue tool (Figure 1).

Benefits of deploying a process wide work flow tool include:

  • More efficient, consistent and timely execution of the business process through better coordination between people and processes
  • Improvements in quality and productivity with a reduction in errors and manual execution steps and a resulting lower overall cost to serve
  • Visibility of all stages of the process for a more accurate picture of progress
  • Deadline monitoring and escalation procedures, which allow for a more timely completion of the process
  • Easy tracking of accountability and performance
  • Ease of adaptation of the process through desktop configuration rather than software coding.

Automated billing model

An excellent example of how automation can streamline the revenue cycle is in handling bills. Introducing a continuous automated billing model can enable a utility to eliminate delays in billing and exceptions in the handling process. Customer bills should be passed though a configurable and automated checking system.

Billing exceptions should not delay the billing cycle and bills passing configurable validation criteria should be passed directly to the print house for production and delivery. Bill exceptions should be addressed using a workflow engine, with exceptions allocated to teams to be checked online (not paper-based). As each exception is addressed, it should be revalidated and passed to the print house for distribution to the customer without delay.

Analytics

As application consolidation and workflow tools ensure processes are more tightly defined, integrated and automated, operating under a static business strategy is not an option. Analytics is the third tool in the CIO’s tool belt that adds intelligence to both data and process. Used in a customer facing context, analytics is the ability to segment and group customer types, predict behaviours and personalise contact. Used organisation-wide, more sophisticated analytics or business intelligence tools allow utilities to make real-time shifts to strategy and processes in response to market changes by monitoring, measuring and understanding changes in key company performance metrics.

While the use of customer analytics is becoming relatively common across utilities, particularly in deregulated environments where sales and marketing require more in-depth customer analysis, the use of business intelligence tools is a fairly new concept and requires a more strategic implementation strategy.

For key performance metrics to be measured, a business intelligence implementation needs to primarily establish what those metrics are, work out what the underlying historical and current data sources need to be, and then tie them all together with a dashboard user interface enabling highly visible and personalised display of operational data, with a drill-down capability for further analysis for more accurate decision making. (Figure 2)

Indeed, business intelligence tools incorporating dashboard delivery have proven to be the most successful approach, with the Aberdeen Group reporting that “more than 70% of companies that have adopted some sort of corporate performance management (CPM) or business intelligence programme have generated high impact improvements in key performance metrics regardless of industry segment of company size” (Figure 3).

In the meter-to-cash process, customer analytics and business intelligence can be combined to allow retailers to understand their customers better, identify patterns of behaviour, analyse root cause of key issues, and implement the most appropriate course of action.

For example, for an energy retailer operating in the highly competitive Victorian Energy market, the two most important goals may be increased revenue and better cash flow.

  • Business intelligence metrics can be used to visually track customer behaviour and show sales performance per agent, per geographic location or per promotional activity. If adjustments to sales and marketing plans are required, customer analytics tools could then be used to identify the most appropriate target groupings for acquisition as well as those customers most likely to respond to cross-sell and up-sell strategies.
  • Cash flow emphasis could translate to the use of business intelligence indicators to visually highlight the impact of payment arrears and delayed invoicing and billing disputes, thereby allowing immediate rectification if critical thresholds are breached. Deploying customer analytics to then segment the database of customers in arrears into high, medium and low risk accounts would enable a more targeted collections strategy with faster recovery times and miminised debt write off, with the business intelligence dashboard enabling real time tracking of collections success.
  • Pulling it all together – credit collections

While consolidation, automation and analytics each offer significant benefits to utilities and retailers in their own right, deploying all three components yields truly significant cost savings, efficiency gains and customer service improvements. An example of this could be in the area of debt collection or arrears management.

Why is debt collection a key process within the meter-tocash revenue cycle? Overall debt statistics in Australia are alarming:

  • Annual increase in household debt is over 14%
  • 13% of households are already in debt
  • There is a double digit increase in personal bankruptcy
  • Credit card debt alone is in excess of $30 billion
  • Overall consumer debt in Australia is expected to reach $110 billion by the end of 2008
  • Increasing interest rates and fuel rates will impact a customer’s ability to pay their utility bill. 

The traditional approach to arrears management is based around the theory of “chase the oldest debt first” with high levels of manual intervention. However, utilities deploying an integrated credit management tool that can use up-todate comprehensive customer data for customer analytics and behavioural profiling, combined with work flow tools for process automation, are realising significant benefits in increased levels of debt recovery and customer service while reducing the costs of service.

For example, profiling consumer risk with the level of debt allows for a segmented approach to early stage collections strategy. Combining this with customer behaviour patterns that will predict what collections approach is the most appropriate from past successes e.g. letter, phone call, text message, allows for a more personalised approach.

Automating the whole process ensures the most appropriate action is used at each step of the collections process, accelerating high risk ‘won’t pay’ debtors to more intensive collections strategies while deploying a personalised and sympathetic approach for the individuals who can’t pay – a proven approach to assist in their rehabilitation and subsequent retention as customers. Developing a ‘propensity to pay score’ from past behavioural analysis can also be used to direct arrangement eligibility.

The results are impressive. An Australian water utility implemented an integrated credit management solution that reduced arrears levels from Aus$9 million to Aus$450,000, and UK utilities such as npower and EDF have seen repayment levels increase to 98% and cost of collection figures 40% lower than the industry average. This was achieved by deploying profiling tools and automating key processes within their revenue management cycle.

A busines imperative

While the advent of SOA offers utilities hope that data sharing between best of breed systems such as outage management, CIS and asset management will be somewhat simplified in the longer term, Australian power suppliers are losing market share now to more agile retailers who operate a tightly integrated and automated meter-to-cash process. Consolidating typical customer facing CIS components such as billing, credit control, customer care and CRM onto one platform, with unified workflow and analytics capabilities, is proven to improve a retailer’s ability to target profitable customers, minimise billing disputes and increase debt collection rates.

And let’s not forget the efficiency gains as the CIO has reduced the number of applications to maintain, interfaces to build, manual tasks to perform, and time to adapt to market changes More money, quicker, for lower cost while keeping the customer happy - who wouldn’t agree that as a business imperative?