By Meg Waters
With perpetually lean budgets and tight staffing, water and wastewater utilities tend to stay on legacy billing systems well past their prime. A major system upgrade is a heavy lift, and if what a utility is doing is still working—more or less—then staying put may seem more appealing than fully revamping billing.
This attitude is certainly understandable, but it overlooks some key improvements that a software upgrade could offer, not just for budgeting and planning, but also for customer service and even revenue generation.
Tight Budgets Demand Modernization
At the typical U.S. water utility, staff travel set routes every month to collect usage information. Walk-by or drive-by automated meter reading (AMR) and advanced metering infrastructure (AMI) have become more widespread but not yet ubiquitous. Many utilities still have employees physically reading water meters and jotting down the results on paper. Back at the office, these staffers upload or key in usage data, and a system that’s been in place for more than a decade generates paper invoices to send out to customers.
Considering the current pace of digital acceleration, this is a remarkably clunky way to run a business. It also, according to software provider Bynry, adds 20 to 40 hours to each billing cycle for a midsize utility and extends the time new staff members need to reach full productivity by three to four months.
“A lot of folks are running on very legacy systems,” says Barrett Hansen, CEO of Current Software, a cloud-native billing platform. “In visiting utilities, I’ve seen Post-It notes on monitors with instructions for what button to press and when, and I’ve thought, ‘When was the last time you needed notes for how to use Amazon or Facebook?’ The answer is that you don’t need notes because those systems are so intuitive. Billing systems should be just as easy to use.”
Utilities that upgrade to a cloud-based solution with a modern interface usually find that it’s easier to use and it streamlines billing processes. On the back end, this may mean manual meter readers can key usage data into the system via a cell phone, rather than writing on a clipboard. On the front end, it means smoother customer interactions, reducing time to payment.
“Utilities are being asked to do more with less, to make sure payments are quicker and improve the customer experience without adding headcount,” says Anita Peterson, vice president of customer service at billing software provider InvoiceCloud. “When all the workflows involved a lot of paper, they had the workforce to handle that. But as budgets have been getting tighter, they have looked for ways to modernize their technologies.”
How Updated Billing Systems Improve Planning—and Revenue
Billing software that minimizes data entry and streamlines communication with the utility’s enterprise resource planning (ERP) or customer information system (CIS) can significantly reduce the volume of routine manual work that an infrastructure of disparate legacy systems may require. Online portals enable customers to answer questions, adjust account information, and update billing preferences on their own, without picking up the phone. And autopay eliminates, in most circumstances, the question of whether a customer will pay on time.
“When SaaS [software-as-a-service] solutions started to become available, modernizing billing and payments was seen as a customer service nice-to-have,” Peterson explains. “Now it’s evolving to be utilities’ strongest financial lever. Even for customers who do not choose autopay, a modernized billing system can remind them when their due date is approaching. The number one reason people don’t pay on time is that they forget. Paperless billing and autopay encourage customers to pay earlier and give utilities more predictability in how funds will come in.”
More modern systems also improve billing accuracy, which removes the exceptions that lead many customers to delay their payments. Some systems have AI-driven error checking that compares a given month’s meter read with the same customer’s historical usage. Readings that seem out of line can be escalated to a human for investigation and remediation.
In some cases, utilities deploying the latest software discover that they’ve been underbilling for years. “We’ve definitely seen situations where billing has been incorrect and the system is so complicated that no one realized it,” Hansen says. “With one customer, we estimated the amount they should be billing and then, after migration, looked at what they were bringing in. The numbers didn’t match, and when we researched the issue, we discovered that they had been underbilling by $50,000. The visibility they gained with the new billing technology enabled them to find that revenue.”
Plus, the visibility modern billing systems offer into customer usage trends and payment behaviors enables utilities to improve budgeting and forecasting processes. “You can see trends in usage patterns and payment behaviors, then generate forecasts based on that data,” says Victor Cross, senior account executive for Euna, which provides a financial suite for public-sector organizations. “That helps utilities understand what to expect in terms of future cash flows and where to put their resources.”
For example, an organization that effectively projects which customers are likely to pay late for the next quarter can focus collections efforts on those accounts. “These billing systems enable utilities to send customers the message: ‘Let us help you pay your bill on time or get caught up on your delinquent bill,’” Cross adds.
All told, software vendors report that utilities transitioning to modern systems with an autopay option tend to see a noticeable increase in revenue. “Anecdotally, from the year before to the year after utilities switch, we see an average 3% to 5% increase in payments collected,” Hansen says. “And that 3% to 5% improvement in revenue is cash the utility can spend on capital improvements or whatever else they need to do.”
Making the Transition
Each utility is different, and since wastewater organizations tend to have simpler billing processes, they may be less likely to find a billing modernization project worthwhile. Still, utilities that make the transition are usually impressed that the initiative modernizes more than just technology.
As they weigh whether a billing software upgrade is right for their organization, water and wastewater utilities should consider four key steps:
1. Evaluate the Business Case
To determine whether the business case for an upgrade makes sense, Bynry suggests that utilities perform a few calculations.
- Determine how much you’re spending on the manual process. Multiply the average time, in hours, to resolve an exception by the number of exceptions your organization logged over the past quarter. Divide that number by three to get the time staff members spent on manual reconciliation per billing cycle, then multiply by those team members’ hourly pay.
- Estimate your revenue leakage. Audit a subset of accounts to make sure each is categorized in the right rate class and to determine whether any payments are more than 30 days late. Multiply out the lost revenue from either misclassification or missing payments within your sample group to estimate revenue leakage across your entire customer base. (So, multiply by 20 if the audit sample represents 5% of your customers.)
- Evaluate against expenses involved in upgrading. Compare the sum of these two factors with the total cost of upgrading, including software licensing or subscription fees, required hardware purchases (if any), implementation and system integration costs, data migration, and staff training.
As you weigh the pros and cons of a billing software modernization project, make sure to factor in benefits that you can’t quantify, such as improved customer satisfaction due to handier self-service and fewer billing errors, higher satisfaction for employees who can focus on more strategic tasks, and the financial management improvements enabled by visibility to usage patterns and payment predictability. Budgets become more accurate and rate-change requests become easier to explain when data is at the team’s fingertips.
2. Establish Your Desired Future State
Take a hard look at your current processes. Even if a new tool could fully accommodate them, should it? Or are your workflows more complex than they need to be? Perhaps staff in the past requested one-off workflows that are no longer necessary. Maybe team members have developed workarounds over the years that you would like to bring back in line with organizational policy.
“Really interrogate what function specific activities are serving and whether they are driving behavior you find valuable,” Hansen says. “Some of the exceptions you make are important, like making sure lower-income folks can pay their bills on their own terms. But sometimes policies that have grown up over time are supporting payment behaviors that are a lose-lose, and there’s no reason to continue them year after year.”
This is a good time to reach out to peer organizations to understand where your practices are outliers, and to work with your board to change how tasks are managed, if necessary.
As an example, Hansen says Current has worked with utilities whose delinquency process allows customers to choose which charges to pay and essentially incentivizes them to put payments toward water, which the utility might shut off, before wastewater, which it won’t. Although originally intended to improve customer service, the policy leads to customers gaming the system, paying their water bills while wastewater charges accumulate month after month. Everyone involved would be better off if, instead, the utility focused resources on identifying customers unable to pay their full bills and built a robust payment arrangement program.
These types of policies can also drag down the efficiency of billing and payment processes.
“Look at how other water utilities handle delinquencies and why you’re doing it this way,” he says. “Is there an opportunity to bubble up to the powers that be, ‘We have a full-time employee assigned to manage this convoluted process, with all the associated paperwork, and we’re hearing from the market that this is non-standard. Can we eliminate this specific policy to better meet our objectives?’”
3. Plan Your Optimal System
When you know your desired future state, shop for a system that will support you on that road. “The platform should support today’s needs while growing with your utility over time,” Peterson says. “You don’t have to rip the Band-Aid off and replace all your systems at once. You can start with a couple of ways to modernize, then work toward a fuller system over time.”
Reporting is a key consideration. “You don’t want to end up with just a bunch of big tables,” Hansen says. “You want graphs and charts, and to be able to break usage down by tiers, by locations, etc. Understanding the foundational usage patterns aggregated in different ways is the cornerstone of budgeting, financial planning, and any case for rate changes.”
Perhaps the most important element of system design is the customer interface. “You can have the best technologies in place, but you can’t create value unless customers actually use them,” Peterson says. “Having paperless billing or autopay that customers can sign up for with a couple of clicks helps make those options the most popular payment routes. Utility customers don’t compare their experience with other utility payment platforms; they compare it with other digital experiences they have on a daily basis.”
Many utilities also work with their software provider to emulate the organization’s current billing format. “The goal is to mirror the paper version they’re used to so that they don’t have to relearn what their invoice looks like,” Cross says. “If the change will be noticeable to customers, the utility can also give them a step-by-step explanation of what’s changing to guide them through the transition.”
4. Be Thoughtful About Implementation
Utilities deploying a new system should bring in as much historical data as possible — data on customers, their payment history, usage statistics, and more. “A lot of times, when utilities change systems, importing decades of data is a burden that they choose to forgo,” Hansen says. “But then how do they know if the data they are looking at for current periods is anomalous? They may not be able to compare current trends against the last drought cycle, for example. Having historical data helps a lot with long-term visibility.”
Integrating with other systems is another key challenge during implementation. “Your technology partner should work well with your other vendors, such as the bill-printing company,” Peterson says. “That way, when a customer signs up in the billing portal to go paperless, the bill-printing company knows that they should stop printing their statement, starting immediately.”
Cross, Peterson and Hansen agree that modern systems should be much more intuitive to use than legacy billing platforms. Still, Hansen says, “training is part of change management, so utilities moving to a new platform need to make sure everything is comfortable for their staff.”
Peterson adds a final pair of considerations that utilities should keep top-of-mind during a software upgrade: security and compliance. “Utilities are trusted custodians of both financial and customer data,” she says. “Keeping it safe is crucial.”
Meg Waters is a contributing writer for Water Finance & Management. She has been working in business-to-business financial journalism for more than two decades. She is the editor in chief of Treasury & Risk, a publication for corporate treasury professionals. Before joining Treasury & Risk, she served as the editor in chief of BPM Magazine and the managing editor of Business Finance.
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