Billing transformation lead to $2.7b write-off

10 Feb 2015

As featured in DisruptiveViews

If you thought telecoms operators were the only ones to suffer from the big billing glitches that catch the attention of the press and alienate customers you’d be very wrong. Even statutory bodies can get it badly wrong, and with serious financial implications as this story from South Africa illustrates.

IT Web reported that four years after the City of Johannesburg denied it had a billing crisis – after thousands of complaints – and then saying it was rectifying the situation it had denied existed. But that’s only the start!

In a seemingly “never-ending billing crisis,” due to post-implementation issues with a R580 billion ($50.04 billion) project to move to put all disparate departments on one SAP platform, the council received over 80,000 complaints about grossly-inflated readings and inaccurate bills.

Sounds like a billing transformation project that went horribly wrong – but the repercussions in lost revenue are mind-blowing. Unlike telcos, there is virtually no loss of customers because this is local government we are talking about and there is no chance of losing them to churn. Of course, this does not excuse the City of Johannesburg, but highlights even more greatly just how critical billing is – not just for calculating what is owed, but in being accurate and timely for collecting revenues.

It was revealed in the city’s latest annual report for the year to June 2014, that revenue collection had finally ‘improved’ to a level where it was collecting 94% of all bills. You read right, that was the ‘improved’ level. That means that 6% of all that was billed was lost. (Perhaps they could use some revenue assurance technology as well.)

Nevertheless, the city claims significant progress in “eliminating billing issues” and says it is now in an “improved state of responsiveness to billing issues” due to its open days and revenue step change program, which led to “a marked improvement in the resolution of queries”.

Yet, the auditor-general (AG) has found consumer debts are increasingly being impaired, with R15.5 billion ($1.4 billion) written off in the 2014 year, in addition to R14.4 billion ($1.26 billion) in 2013. The AG’s report says this accounts for 76% of all consumer debts.

Councilor Victor Penning was quoted saying the write-offs were a result of the ongoing billing crisis, which led to the city’s write-offs growing by between 3% and 6% monthly (yes, monthly). He argued the city’s 94% revenue collection was not an accurate figure, because this was the amount it collected after write-offs and did not show the entire picture.

“The situation is exacerbated by the fact that many residents are not getting bills because the city chose to move to e-delivery through MMS, a project it initiated towards the end of 2013. Penning says this shift means many people are not getting bills because they cannot view them, and then have to guess how much should be paid, and cannot deal with erroneous statements immediately,” IT Web reported.

The city’s annual report notes it approved its new ICT strategy during 2014, which is a bid to turn it into a smart city, improve broadband capacity, and upgrade its SAP system which is needed because the current system is unable to adequately collect and extract dashboard data, which means the city cannot go back to the source and determine what is broken.

Another councilor said the city was facing a ‘long slog ahead’ thanks to a ‘toxic mix’ of a culture of non-payment in South Africa, a fear bills are wrong, and a consumers’ belief that they can get away with non-payment because of inadequate systems. It would probably be fair to say the last point is common worldwide, but the amounts being written of surely dwarf those recorded by even the biggest telco billing failures.

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