£4.5m in Bad Debt benefits for large energy retailer

We helped a large energy retailer to generate immediate in-year debt benefits through tactical interventions.

Our programme delivered ~£4.5m in Bad Debt benefit and ~£8.5m in cash collection, all while maintaining customer and productivity measures within the operation.

What was our client’s challenge?

Dealing with the cost-of-living crisis and facing into Ofgem’s RFI’s, the client needed to find a balance between prompting customers for payment, and continuing to support those in financial difficulty.

There was a need for immediate in-year improvements, with a focus required on bad debt benefits, as well as an uplift in collections performance through tactical changes.

Why was this happening?

Our debt diagnostic identified:

  • A lack of proactive measures to mitigate potential debt exposure for customers, with upstream causes of debt not truly understood
  • Business processes were impacting debt journeys. i.e. Complaints with debt would recycle to the start of the debt journey regardless of debt risk – with ~£6.5m of debt having a live complaint at one stage
  • 50% of segmentation data attributes were “NULL”, which resulted in customers defaulting to standard debt journeys
  • No differentiation of messaging, pace, or channel approach across debt journeys, reducing impact and creating waste
  • Visibility of collection performance was limited. Once reviewed, we identified that 55% of internal collections teams hadn’t collected any cash within the past eight weeks on an outbound dialler
  • DCA utilisation was not optimal with segmentation issues creating additional challenges, as accounts were put into placements not suitable for the required collections strategies

This diagnostic informed the actions required for programme delivery, to ensure in-year benefits could be realised, and provide relief from internal and external pressures.

How did BFY help?

We helped our client to enhance their debt capability and collections maturity by:

  • Embedding a performance management framework, to create improved visibility of key metrics and drive a collections culture within the operation
  • Developing improved segmentation logic to feed 15 new debt collection campaigns, applying appropriate risk and strategies to ensure maximised collections and resolutions for indebted customers
  • Taking DCA’s through RFP processes, collection strategies, and commissioning to identify the appropriate DCA panel members, to include a Champion Challenge approach
  • Introducing an additional third party to drive improved internal collections, and enable flexibility between campaigns to feed programme benefits
  • Improving existing business processes to mitigate future debt exposure – e.g., additional proactive outreach towards customer cancelling their direct debits, and removing manual collections blocks on accounts
  • Creating a debt scorecard, to provide a holistic view of portfolio health and customers with higher propensity to fall into debt, based on event triggers

These initiatives allowed for a significant improvement in collections performance, ensuring that in-year benefits were achieved, all while maintaining BAU service obligations.

What results did this deliver?

Within a six month period, we helped to transform our client’s collections capability, improved their overall collections maturity, enabled best practices, and identified ‘quick win’ opportunities to drive customer resolutions.

Key results included:

  • Creation of 15 new debt collection campaigns, coupled with improved segmentation and communication suites, to drive customer engagement and resolutions
  • Our targeted campaigns delivered:
    • ~£4.5m reduction in bad debt
    • ~£8.5m increase cash collection
  • Improved liquidation on accounts placed at DCA - e.g., ~6% liquidation on lost occupier accounts
I had my reservations when we first started, however, having witnessed the huge effort that has gone in, the changes you've implemented, and quality of output I have been impressed. The collaboration across my team and BFY has been the secret of your success, and everyone involved should be incredibly proud.

Chief Operational Officer

The communication, clarity and approach has been excellent from the team. The approach to spend time to understand processes, absorb this and come back with improvements was excellent. The ability to 'look outside the box' using their knowledge and experience from project is clear.

Senior Collections Manager

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MEET THE TEAM

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Rachel Littlewood

Director

Rachel leads our Financial Optimisation work streams, working with leaders to improve profitability & cashflow

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Kev Brown

Senior Manager

Kev leads our continuous improvement and lean transformations, working with leaders to deliver our Operational Excellence programme.

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Ashley McLeod

Senior Consultant

Ashley helps clients to achieve Operational Excellence by driving continuous improvement, across people, processes, and systems.

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Wade Robertson

Consultant

Wade specialises in Transformation, Value Creation and Project Management, helping clients to identify and deliver on opportunities of significant value.

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