Billing and Collection Efficiency
A common problem for many water utilities all over the world is the effective billing and collection of water fees. Effective billing and collection systems are critical for ensuring the financial sustainability and viability of water utilities. Improving billing and collection activities has an immediate impact on the revenue streams that can, in turn, help the utility in improving services[1].
Effective billing and collection practices depend on two main components:
- Internal factors, such as customer databases, the extent of metered and unmetered service provision, tariff and billing structures, delivery of bills, and facilities for customer payments, and
- the institutional arrangements under which service providers operate and provide services determine whether such practices will remain sustainable in the long term.
Internal factors
Important characteristics of an efficient and effective billing and collection system include:
- Apply regular billing cycles (in most utilities a monthly cycle)
- Produce bills which are validated and sufficiently detailed
- Submit bills to the right person and make sure the customer database is correct and regularly updated
- Issue bills which are based on the quantity of water used as indicated by meter readings
- Arrange for effective and reliable reading of meters
- Ensure that all connections are metered, and meters are regularly calibrated
- Facilitate payment of bills by customers, preferably through banks or, where this is not possible) by providing convenient opportunities for customers to pay cash
- Implement fair but strict payment procedures, including systematically disconnecting customers (private, industrial, and institutional) who do not pay their bills on time
- Continuously monitor the performance of the billing and collection system and where applicable identify and take action on illegal connections.
Computerized billing and customer databases
A computerized system of billing and a complete and updated customer database are a must if a service provider is looking to maintain high billing efficiencies. A computerized system will allow the service provider to track customer records (by zone, ward, circle, district, etc.) and understand, monitor, and study historical trends so that improvements can be brought about in areas that require attention.
The billing and collection system must be supported by robust accounting, recordkeeping, regular systematized checks, and clear procedures. In some cases, a geographic information system or aerial pictures can help in updating customer records and for getting a robust record of all properties and hence all potential water customers.
Water meters and meter reading
A requirement for volumetric charging is that all connections are metered, and all meters are in working order. Effective metering is also dependent on how robust the practices are, such that the consumer cannot cheat the system by tampering with the meters. It also depends on the repairs and replacement policy of the service provider for water meters, the quality of meters and the timely identification of faulty meters, and installation of meters even in poor and low-income settlements.
In many countries water utilities have tackled the problem of meter-based charging practices in poor communities by using prepaid meters. The basic idea behind the use of prepaid meters is to facilitate those who may be denied access to water because they cannot pay upfront. Water from prepaid water meters typically costs more than water billed from the utility but it gives the concerned persons the flexibility to avail of water services even if they have not made an upfront connection payment for a fixed water connection. Typically, such meters work by inserting a plastic card with a chip into the slot that is provided in the water source. To get more water, money can be added to the card, e.g. at a convenience store.
Automatic meter reading is a technology that allows for automatic collection of data from the water meter and transfers it to a central database for billing. This means that billing on actual consumption, rather than on an estimate based on previous consumption, can be calculated. Such technologies include handheld, mobile, and network technologies based on telephony platforms (wired and wireless) and radio frequency. One of the common technologies being used by many water service providers across the world are the handheld data loggers that enable meter readers to record readings easily.
Outsourcing
In some cases, water providers have put the entire billing and collection process in the hands of companies with proven expertise in such fields. It allows them to focus on the activities for improving quality of services. Under such outsourced models, the experts provide a fully managed service starting from bill generation and payment collection, to credit and debt management.
Institutional Factors
While effective billing and collection practices depend on many internal factors and these could be addressed directly at the service provider level, the institutional arrangements under which operators operate and provide services determine whether improvements in billing and collection will remain sustainable in the long term.
Isolating water supply and sanitation activities and creating separate revenue and cost accounts is fundamental if improved billing and collection are to have a favorable impact on services. This will help water supply and sanitation managers appreciate the financial impact that improvements in billing and collection activities can have for the delivery of more efficient services. For example, in many municipal W&S departments, revenues were routinely paid into the municipal accounts, outside the control of the management of such departments. Separate accounts will force providers to be financially accountable for services, ensuring that revenues obtained from water supply and sanitation functions are truly spent on the same services.
Service providers would also need to operate under conditions of a hard budget constraint, where they are finally made financially accountable for revenue deficiencies. It is often wrongly assumed that this means that they should be financially fully self-sufficient. That is not the key issue—in many countries, local governments or utilities benefit from intergovernmental transfers, but they still operate under a hard budget constraint because they have to budget effectively and then operate within the budgets.
[1] This article represents a summary of a World Bank – Water and Sanitation Program field note of April 2008 titled: Developing Effective Billing and Collection Practices
