The hidden engine of liquidity & risk control
Energy markets have repeatedly been characterized by volatility. However, in the past few years, fluctuations have become stronger and more persistent, driven by geopolitical tensions, regulatory interventions, and a high degree of uncertainty. This translates into higher financial burdens for customers, to the point where utilities are increasingly financing energy consumption on their own balance sheets. What was once a short-term, working capital issue has evolved into a material driver of liquidity risk, financing needs, and balance sheet exposure.
In this environment, receivables management has shifted from an operational afterthought to a competitive differentiator. Energy providers face increasing financial strain as more households fall behind on their bills, with the challenge increasingly shifting from an unwillingness to pay to a limited ability to pay. In 2024, about 5% of the German population and about 7% of British households were in arrears with their utilities. In Ireland, around 13% of B2C and 14% of B2B customers were in arrears in spring 2025. In the US, electricity customer debt has doubled since the end of 2019 to US $23 billion. In Australia, around 2.9% of residential and 3.4% of small business customers were in energy debt in mid-2024, showing that arrears are by no means limited to households. Asian utilities show even higher receivables levels — for example, state-owned utilities in India reported total receivables of $75 billion in 2023.
Receivables management is no longer a marginal function; it’s a critical factor in ensuring liquidity and financial stability.
Five main drivers can help ensure efficient, effective, and resilient receivables management.
Many utilities still apply uniform dunning processes across all customer types, yet experience shows that customer groups respond very differently to reminders, legal threats, and payment offers. Segmenting the customer base enables utilities to tailor dunning approaches to specific situations while maintaining standardized, scalable processes.
A simple but valuable approach segments customers by their capability to pay and willingness to pay (see Figure 1) and allows an initial definition of dunning levels (see Figure 2) within regulatory guardrails. A more advanced approach includes an in-depth analysis of the customer portfolio and combines customer criteria (e.g., contract type, arrears level, payment method, customer age, and last contact point). The goal is to keep the portfolio within a target band that balances cash, risk, and cost to collect. For example, a German energy supplier with several hundred thousand customers replaced a uniform, time-based dunning process with a segmentation-driven approach. The new system reduced late-stage escalation and manual handling efforts while keeping cash inflow stable, despite a challenging payment environment.
Receivables management is only as strong as its interfaces to other departments and intersecting processes. If billing data is inaccurate, addresses outdated, or contracts incomplete, even the most advanced dunning process will struggle. Poor data quality is a major but underestimated cost driver. Manual corrections and delayed issue resolution consume resources while arrears continue to grow.
In recent years, tariff complexity has exploded. We’ve seen dynamic prices with spot‑market components, index‑linked clauses, bespoke B2B arrangements, complex metering concepts (e.g., sub‑metering), and ad hoc regulatory changes (levies, caps, rebates, tax shifts). Most IT systems were not built for this level of complexity, causing significant process deficiencies.
Ensuring collectability (the legal and operational ability to enforce a claim) requires flawless upstream processes. Correct billing and customer data are the foundation, but receivables management cannot take care of quality assurance independently due to its late involvement in the customer journey. A joint approach that treats receivables management as an integral part of the end-to-end meter-to-cash process, including clear ownership and defined interfaces, is essential. Technology can strengthen this “collectability hygiene” with automated validation checks in billing runs or anomaly detection to flag outliers (e.g., sudden consumption/bill spikes, inconsistent meter reads). Where smart metering and modern meter-to-cash platforms are in place, near-real-time data reduces disputes and shortens the cycle from issue detection to correction.
Receivables management is often reactive: customers aren’t contacted until payment is overdue. Experience shows that proactive communication can prevent arrears from growing and reduces damage to customer relationships.
Almost 90% of customers in arrears pay their outstanding balances before disconnection. Reaching these customers early is critical, as in many cases a targeted reminder is sufficient to trigger payment without the need for further escalation. Utilities that apply proactive interaction models, such as outbound calls, deferral plans in self-service portals, and targeted digital nudges, see increased payment rates and reduced need for costly disconnections and legal actions. A combined approach is especially effective: low-cost, automated communication (e.g., SMS, email, or app notifications) as a first step, followed by targeted high-touch interaction for high-risk or high-value cases.
Technology can play a central role in enabling this shift. Simple analytics and rule-based scoring help identify at-risk customers early, and AI-supported models further refine prioritization by predicting payment behavior.
To respond flexibly to dunning process dynamics, many utilities involve external actors (e.g., lawyers or collection agencies) in receivables management. However, unclear interfaces, lack of transparency, and poorly defined responsibilities usually result in failed disconnections, duplicated work, and/or delayed escalation. Improved collaboration requires both organizational alignment (including clear roles and responsibilities, SLAs, and escalation mechanisms) and technical integration (automated data exchange and standardized reporting).
Utilities with tight partner interfaces report fewer delays, lower error rates, and higher transparency. For example, introducing precise SLAs with disconnection service providers, including documentation of contact attempts, can drastically reduce failed disconnections. Likewise, standardizing communication with insolvency administrators can reduce manual effort by more than half.
Data availability and accessibility, system performance, and transparency are key drivers for success. Without real-time data on arrears, customer history, and process status, segmentation and proactive steering remain theory. Increasingly, utilities deploy advanced analytics and AI-based tools to support concrete decisions, such as prioritizing cases, triggering proactive outreach, or selecting the most effective communication channel. Modern receivables management does not digitalize existing processes. Rather, it uses technical solutions to redesign workflows based on segmentation to ensure systems and leaders have the up-to-date, relevant information they need.
Receivables management has evolved from a purely operational task into a strategic capability. However, its full impact comes from embedding it into end-to-end processes supported by modern, data-driven technology. To capture this potential, utilities should:
By Lucas Könnecke, Heinrich Tissen, Olaf Geyer, Joel Hauser
cloud technology
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