Back in March, in issue #6 we took a look at improving final bill collection rates.
Have you taken all the steps I suggested and are unpaid bad debt accounts still a problem for you?
Is your utility located in a state that has a debt set-off program?
Are you taking advantage of the debt set-off program?
If the answer to the first two questions is “yes” and you’re not already participating in your state’s debt set-off program, I strongly encourage you to do so. Let’s take a look at what debt set-off is and why you should use it if it’s available in your state.
What is debt set-off?
A debt set-off program provides a way for local governments (and some utility districts) to collect unpaid debts from debtors’ state income tax refunds and, in some states, lottery winnings. The local government files a claim with the state (or an agency designated to process such claims) and, before income tax refunds are issued, any claims are set off against the taxpayer’s refund.
What states offer debt set-off programs?
I am familiar with many of our customers in North Carolina, South Carolina and Virginia that already make very effective use of debt set-off programs in their states. In addition, a quick web search indicates that Kansas and Wisconsin also offer debt set-off programs for utilities. A few other states also offer debt set-off programs, but only for state agencies.
The North Carolina Debt Setoff Clearinghouse has a very informative web site with information about how the program works and statistics of how much has been collected. If you doubt whether participating in such a program is worthwhile, take a look at the amount that has been set off, even for some of the smaller entities.
Are you taking advantage of your software to interface with debt set-off?
Does your software vendor provide a way to interface with your state’s debt set-off program? If you are a current customer, both Classic and Eagle Utility Management Systems have the ability to select accounts that should be submitted to debt set-off and create the file to send to the state.
What if your state doesn’t offer a debt set-off program?
If you live in a state with a state income tax that doesn’t offer a debt set-off program, I encourage you to lobby your state legislature to implement one. The North Carolina League of Municipalities and the Municipal Association of South Carolina were instrumental in lobbying for debt set-off programs in their respective states. If you belong to a municipal or county association, bring this to their attention and get their assistance in lobbying your legislature. Doing so will definitely reduce your bad debt and help your bottom line!
What if your state doesn’t have a state income tax?
Let’s just say, I’m jealous!