Reducing Commercial Cycle Duration

Reading - Billing - Collection is a normal Commercial Cycle for Utility Company. The duration to complete one full cycle is important for the cash flow of the company. The lesser it takes, the faster that the money can be collected over the consumptions used by customers.

Old fashion Utility company often forget the important of short Commercial Cycle Duration. Let us say that the electricity company produces a bill monthly. Most of the old fashion utilities company will spend the whole month reading customer's meters, resolve some anomalies/exceptions and bill all the services at the end of the months. By doing this, the company has an average of 15 days for its commercial cycle.

Why? Because the customers read on 1st day will get their bill on the 1st day of next month, while the customers read on 30th day will also get their bill on the 1st day of next month. Thus, the average will be 15 days more or less. What does 15 days commercial cycle means? It means that in average, that electric company will collect the money 15 days after the customers have consumed the electricity.

For us, it might not mean a lot. But for an electricity company whose revenue is million and million of dollars, this 15 days delay means something. Upper management of utility company should start thinking the best way to reduce the commercial cycle. One ideal set-up is to have daily cycle, where the customer is read and at night, the bill is produced and ready for delivery and collection the next day. This case, the commercial cycle will be reduced into 1 day. This is assuming that there is no anomalies or exception on that bill.

Reducing commercial cycle is not an easy task as it will affect the core business process of utility companies. In depth analysis and study should be paid attention to understand the risk of implementing the changes. Customers can be affected as well if they are not properly informed. Always put a team for change management to do this kind of task.