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Utility Payment Conference Making Debt Sales a Part of Your Recovery Strategy Cynthia M. Henry, MBA Director, Collections Division Orlando Utilities Commission
OUC Customer Base § § § 200, 000 Customers 80% Residential 20% Commercial Very transient population Most jobs are service related
History § 1998 conversion to a new CIS system § Impact of 911 § Subsequent downturn in economy. High unemployment, bankruptcies, etc. § Trickle down affect to OUC’s collections efforts.
CIS System Impact § The 1998 CIS system conversion resulted in a dysfunctional delinquency system. § The delinquency system never provided the types of results that we expected. § As a result, our bad debt write off percentage sky rocketed to. 84 % § Many accounts sent to outside collection agency.
Economic Downturn- 911 § Resulted in high delinquencies § Increased bad debt write-offs § Many accounts sent to outside collection agency
Needs a title or continued § We began putting together strategies to proactive minimize future bad debt write offs and address the current delinquencies and bad debt: § Implement dedicated collection call center § Outsource to vendor to make automated courtesy call to delinquent customers § Review all collection policies to procedures to ensure that we were addressing the gaps.
Needs a title or continued § Review deposit procedures § Review all deposits for adequate coverage. § Now, the big question? § What can we do with accounts already written off to bad debt.
Bad Debt Sales § 2003 sold $12 million portfolio § 43, 000 accounts, (May 1993 - April 2002) § 2005 sold $7. 5 million portfolio § 28, 000 accounts (May 2002 - December 2005)
How did we do it? § Research, research § Talked to companies that were currently purchasing bad debt. § Information on internet § Spoke with consultants § Banks and credit card companies have done this for quite some time § Late 1990’s some larger utilities began selling bad debt (Duke, PECO, etc. )
First Steps § Determine and develop file of accounts to sell. § Determine accounts to exclude: (bankruptcies, deceased, etc. ) § Determine the balance limits to include § Review accounts carefully – look for accounts that can be transferred to other active accounts.
First Steps (continued) Look for government accounts, accounts that you many not want to sell- example apartments, large commercial, etc. § You will be working closely with your IT department to determine how files will be generated and sent. § You will need to determine what information you want to include in your file.
First Steps (continued) § Remember, the more information you include the more marketable the file. § Most vendors will pay a higher fee when you have as much information as possible.
Some of the items that we found to be helpful in selling our file was to include: § Account number, account type § Date of charge off, social security numbers § Service address, account name § Home and secondary telephone number § Balance at the time of sale; turn off date § Date of service initiation
Information is KEY § If you are thinking of selling in the future, start evaluating your accounts now. § Determine what information, you currently have available. § You may find that you want to put some new procedures in place for capturing information that you don’t capture now. § We found that we put new processes in place after our first sale.
Getting the Best Price § OUC advertised our file through an RFP bid process. § During the first sale there were five (5) replies. § Second sale- we sent RFP to 19 companies (eight responses). § Age of the receivables. § The value of the portfolio. § The information that you make available in your portfolio.
Price of the File § Age of the receivables. § The value of the portfolio. § The information that you make available in your portfolio. § How “clean” is the file? § Types of accounts being sold. § Good negotiation skills
Success of the Sale Process • The purchase price of the file. • Communication to other departments in the company. • Be sure to include other departments impacted by the sale: Ø Customer Service (call center) Ø Legal Department, IT department Ø Purchasing (Supply Chain Management) Ø Credit and Collections
Success of project (continued) • Train employees • Interview and research vendors • Fully analyze the current write-off portfolio • Worked closely with your legal staff to develop contractual language and determine if there will be any roadblocks.
Benefits from selling Bad Debt • • Eliminated aged accounts Reduced call time at call center Increased cash flow (time is money) Eliminated uncertain recovery efforts from agency. In our case, some accounts were aged at four (4) years. If the agency had not recovered by this time, what was the probability that the agency would recover the balance.
Benefits (continued) • Reduced the time and efforts that my staff had to spend maintaining the aged accounts. That staff time was redeployed to work on collection efforts that were more effective for my department.
Summary • The process is time consuming and complex the first time. • The rewards and benefits outweigh the upfront efforts. • If you sell one time, I can assure you that you will do it again.
Cynthia M. Henry, MBA Director, Collections Division Orlando Utilities Commission 100 Anderson Street Orlando, FL 32801 407 -423 -9166 [email protected] com