Do you send second notices to delinquent customers?

If your answer is “Yes”, do you have a statutory requirement that requires you to send a second notice to accounts before you cut them off for non-payment?  If not, I would encourage you to take a good look at what your payback is for sending delinquent notices.

If your late paying customers behave like their counterparts at most utilities I’m familiar with, they become conditioned to not paying their bill until they receive a delinquent notice. This type of customer essentially ignores the utility bill and waits for the second notice to arrive before they think about paying their bill.

Some utilities have decided that mailing second notices is too costly for the benefit of so few customers. In this issue let’s take a look at how to determine the real cost of mailing second notices and examine some other options…

What does a second notice cost you?

Have you ever stopped to calculate the cost of sending delinquent notices?

I’ve referenced the Government Finance Officers Association’s (GFOA) Best Practice for Measuring the Full Cost of Government Service in two previous issues – here and here. At a minimum, the direct costs involved in preparing and mailing second notices include:

  • Staff time to prepare the list of delinquent accounts to receive second notice
  • Paper and consumables to print working copies of the delinquent list
  • Forms and consumables to print the second notices
  • Postage and envelopes to mail the second notices
  • Staff time and vehicle expenses to deliver the second notices to the Post Office

If you haven’t stopped to calculate these costs recently, I encourage you to do so. You may decide, as other utilities have, that the costs outweigh the benefits when it comes to sending second notices.

Are there other options besides mailing second notices?

If you are contemplating no longer sending delinquent notices, you may be wondering what other options are available to remind your customer. Options beside mailing second notices include:

  • Clearly stating on the utility bill that no second notice will be sent
  • Printing the amount due with penalty on the utility bill
  • Placing a reminder phone call

Let’s take a closer look at each of these options…

Clearly stating on the utility bill that no second notice will be sent

It’s always a good practice to include useful information on the back of your utility bill. This includes such information as office hours and phone numbers, ways your customer can pay, late fee and cut-off policies and, if you don’t send second notices, verbiage that clearly states that.

Many utilities that don’t send delinquent notices also print a bold message on the front of the bill such as “NO SECOND NOTICE – THIS IS THE ONLY BILL YOU WILL RECEIVE”. I can’t speak to how many customers actually pay attention to such a statement. However, when customers complain that they weren’t notified that their bill was late, showing them that statement on the bill absolves you of any blame for not notifying them.

Printing the amount due with penalty on the utility bill

If your response to not sending delinquent notices is “But we need to send a second notice to let our customers know how much they were penalized”, there are other ways to accomplish this. One such way is for the utility bill to show both the amount due if paid by the due date and the amount to pay, including penalty, if paid after the due date. For example, if your customer’s bill is $50.00 and is due on September 20 with a 10% penalty on September 21, your bill might look something like this:

A number of customers print utility bills which include something similar to this rather than sending second notices.

Placing a reminder phone call

If you are still interested in alerting your delinquent customers that their due date is approaching or just passed, one option is placing a reminder phone call. For some smaller utilities this could be accomplished by a person, but for larger utilities it likely means using an automated system to place the calls. Such systems are sometimes called Interactive Voice Response (or IVR) systems.

Outbound IVR systems can be installed as in-house systems or they can be totally web based in the Software as a Service (SaaS) model. We market a product called Notify that is a fully web based outbound IVR solution. All that is required is to upload a list of names and phone numbers and enter the message that you want delivered to your customer. At the scheduled start time, Notify begins calling each phone number in the list. A record of the time the call was placed and how the call was received – answered live, answered by voice mail, no answer or out of service – is logged.

If you are considering implementing automated courtesy calls, I encourage you to consult with your attorney as to any privacy act restrictions in your state that might limit how much information you can divulge in a courtesy call.