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The rising number of consumers who are not paying their bills is significantly
affecting the bottom lines of UK companies, and the situation is expected to get
worse, according to research published by Talgentra.
The research uncovered some shocking statistics in the utilities, telecoms and
finance sectors as well as a high degree of complacency with limited external or
internal pressure to tackle rising level of consumer debt write-offs.
At least £10 billion in unpaid bills was written-off in 2005. Every company
questioned admitted to writing off unpaid customer bills in 2005 with 55% of
companies writing off between 5 and 9% of revenues.
In addition, 97% expect that the level of consumer bad debt write-off as a
percentage of their company's revenue will increase in 2006.
As many as 95% expect to see an increase in the number of customers with
repayment difficulties over the next 12 months. Half expect an increase of
between 5 and 10%.
General economic conditions are cited as the main reason for the expected
increase in consumers facing repayment difficulties.
Only 23% of bad debt write-off is authorised at board room level, with most
write-off decisions made at the collections or finance department level.
This could indicate that either boards do not appreciate the scale of the
write-offs or that a certain level of loss within the business is acceptable to
the management.
Improved customer profiling, the use of new technology and better integration of
existing IT systems are seen as the most important factors in increasing revenue
collection.
But despite predictions that the number of customers with repayment difficulties
will continue to rise during 2006, there seems to be little internal or external
pressure to introduce best practice techniques.
Chris Buckham, Director of Marketing at Talgentra, commented: "Consumer debt
stories tend to focus on the effects of debt on consumers themselves and there
has been little attention paid to the issue of how an inability to collect
outstanding payments is impacting on companies and the future growth of the UK
economy."
Talgentra worked with RSM Robson Rhodes LLP to validate the survey and its
findings.
Copies of Talgentra's survey "Trends in Revenue Management and Collection 2005"
can be requested at the link below.
Source:
Getting Paid
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