Managing Late Paying Customers in an Economic Downturn

“I just lost my job and I can't pay my bill.” “My company cut back on my hours, now I can't afford to pay you as much.

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by Fred Angel

“I just lost my job and I can't pay my bill.” “My company cut back on my hours, now I can't afford to pay you as much.” “I haven't worked in three months since the plant closed down; how do you expect me to pay this water bill on top of all my other bills?”

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The utility employee must have an understanding of the various payment options the utility offers and a game plan for discussing the customer's situation.
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Unfortunately, these are statements that water and wastewater utility front-line staff and management are hearing more and more frequently since the economy has taken a turn for the worse. In many communities, unemployment, home foreclosures, and bankruptcies have skyrocketed and are continuing to increase as the economy worsens. Like other businesses, water and wastewater utilities are not immune to the pressures of local, state, or national economic woes. When customers cannot pay or are late paying their bills, the impact on the local water utility can result in decreased revenues. Decreased revenues can, in turn, potentially result in the delay or cancellation of construction, maintenance, or water or sewer line replacement projects; rate increases; or written-off accounts. Staff positions may go unfilled or the utility may have to lay off staff.

The one thing a utility cannot ignore is the economic reality of the community they serve and each delinquent customer's situation. In the past, a utility may have been able to insist that a delinquent customer pay their bill in full or risk termination of water service. Such a stance may no longer be effective in today's economy. Water utilities have to look for new and creative ways to work with delinquent customers.

Three strategies a water utility can employ to effectively handle late paying customers are: having a variety of payment options; scripting responses for telephone or front-counter staff; and training employees on listening, empathy, and selling skills.

Payment Options

When handling late-paying customers the challenge is two-fold: to get the customer to pay the past due amount and current bill immediately and to encourage the customer to pay future bills in a timely manner, keeping account balances current. The key to handling late-paying customers is for utility staff to discuss and explain the options when the customer is at the front counter or on the telephone and encourage the customer to begin utilizing one of these options as a payment method rather than just not paying or delaying payment.

The utility employee must have an understanding of the various payment options the utility offers, a game plan for discussing the customer's situation with an end goal of getting the customer out of late-paying habits, and the courage to offer suggestions and guide the customer towards a future payment option that best fits his or her needs and guarantees timely payments.

There are a variety of payment options utilities can offer their customers. These include: a local address to which customers can mail payments; a lock box facility for payment drop-off; paying over the counter at the utility office or satellite offices; and paying by credit card.

In addition, many utilities have policies for granting extensions, waiving fees and interest, or charging deposits. It's important for the utility to review its policies to identify acceptable circumstances for granting extensions or waiving fees. It may be warranted, for example, for customers who have not been previously delinquent or who have demonstrated a unique hardship such as illness or death in the immediate family.

The utility should also review deposit policies to ensure that the deposit amounts cover average bills or average written-off accounts and that deposit assessments, refunds, and transfers are timely and applied to the account correctly. In addition, some utilities partner with credit bureaus to establish credit scores for identifying a customer's ability to pay their bills on time and determine deposit amounts.

Other payment options that can help customers pay bills in a timely manner include:

Direct debit – Direct debit is an automated payment service that allows a customer to have payments automatically deducted from his bank account.

Flexible due dates – Rather than having to pay the bill on the normal due date, flexible due date initiatives enable customers to defer their bill due dates by a week or two; this is particularly helpful for elderly customers on fixed incomes who receive social security or retirement checks at a certain time of the month.

E-billing – Industry experts note that approximately 40 to 45% of all households currently pay at least one bill online. About 15 to 20% of e-bill users pay their bill the same day they receive it, and 65 to 70% pay their bill within days of receipt. For utilities with robust websites, offering e-billing payment opportunities enables customers to submit automatic, one-time, or recurring payments. E-mail notifications and alerts can notify customers of pending bill dates.

Budget billing – Budget billing or average payment plans allow a customer to make a fixed monthly payment.

Third-party notification programs – These are particularly popular among senior citizens because a copy of the bill is sent not only to the customer but also to a designated family member, friend, or guardian. Although the third party is not responsible for paying the bill, they receive a copy of it, which hopefully will result in their following up with the account holder to ensure payment.

Although each of these payment options enables a customer to pay a bill when due, they are useless unless the utility employee speaking with the delinquent customer understands the programs, explains their intents, and encourages the customer to sign up and use them.

Scripting Responses

When discussing a delinquent customer's account either over the telephone or in person, the utility must have a strategy for handling the conversation. Scripting responses will enable customer service representatives to have a game plan for creating a situation that meets the needs of both the customer and the utility. It's important to have a wide range of options and solutions to present to the customer. While listening to the customer's comments, it's important to think through the conversation and determine which strategies could be implemented in order to receive payment.

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Payment options are useless unless the utility employee speaking with the delinquent customer understands the programs, explains their intents, and encourages the customer to sign up and use them.
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The customer service representative must remain customer-focused throughout the conversation, responding to the customer's concerns in a positive manner. For example, rather than telling a customer what the utility cannot do, instead tell them what it can do. Late-paying customers may be under immense pressure, angry, or confrontational. To diffuse these situations, avoid phrases such as “You'll have to...” This implies that you are demanding that the customer do something. Instead say, “You'll need to...”, which is less confrontational.

Never start a sentence with the word “no.” Customers never want to hear this, and they almost always respond negatively and defensively. Instead offer a positive alterative by starting with, “Yes, we can help you...” Suggest what you can do or offer by stating, “The best way to get this done is...” and finish the suggestion with the term “fair enough”. This term implies that you are offering a reasonable solution to the customer's problem. It's non-threatening and makes your offer almost impossible to refuse.

Every utility has policies and procedures it must follow; but customers rarely want to hear about them. Rather than directly referring to these rules, which may antagonize a customer, use the phrase, “In order to be fair to everyone...”

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Delinquent customers can sometimes be emotional, irrational, or upset. Empathizing with the customer creates understanding and enhances communication, allowing you to find a common solution.
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While conversing with the customer, find out what the customer is seeking by utilizing the following phrases:

“Can you explain to me what happened?” This encourages the customer to rationally think about his situation, shows that you are interested in his story, and provides you with time to listen and think of a solution.

“Let's see what we can do to resolve this.” This implies that you have a solution in mind that will benefit both parties.

Listening and Empathy Skills

Delinquent customers can sometimes be emotional, irrational, or upset, and often go into details that are not necessarily pertinent to the problem that they are experiencing. Before responding to a customer, listen for the main thoughts and do not get lost in discussing things that are not essential to resolving the issue at hand.

Use verbal and nonverbal communication skills such as eye contact, head nodding, smiling, and body language to encourage customers to express their viewpoints. Verify key points or ease a customer's anger by saying, “I see...” Clarify comments by asking, “Is this what you see as the problem?” or “I don't understand; Can you explain it to me again?”

Empathizing with a customer means trying to understand the customer's viewpoint by imagining how they are feeling. Being empathetic allows you to find a common solution, creates understanding, and enhances communication. Express empathy towards a customer with these simple phrases: “I'll be glad to...”; “What would you consider fair?”; “Would you be willing to...?”; and “Thank you for calling this to my attention...”

The Art of Selling

In addition to getting the customer to pay a delinquent amount, the customer service representative can also try to change the customer's late payment habits. This requires the art of “selling.” For many water utility personnel, selling is not considered part of the job description. Yet, when dealing with delinquent customers this is the most important step in the process.

After listening to the customer's concerns, the representative's goal is to make sure the customer understands the options available to ensure payment today and in the future. The representative's response should be clear and simple: “The best way to handle this is...” or “Let's talk about ways to prevent this from happening again...” are two ways to conclude a conversation about paying a delinquent bill and meeting future payment obligations.


When handling customers who are delinquent, it's important to do more than just resolve the current problem. A utility wants its staff to collect the past due amount and get the customer to pay future bills on time. Rectifying a customer's delinquent status begins with showing him that you care about him as an individual, that you are concerned about his predicament, and that you will offer solutions to help.

By offering a variety of payment options, scripting responses for telephone or front-counter staff, and training employees on listening, empathy, and selling skills, the utility sets the stage for increasing revenues, decreasing delinquencies, resolving problems, and improving customer satisfaction.

About the Author:

Fred O. Angel, Jr. is the Customer Operations Administrator for Chesterfield County Department of Utilities. He can be reached at 804-748-1861 or by email at

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