The Perfect Storm

The Perfect Storm for Business Operation Disruptions

Accounts Payable reps in multi-location corporations, such as retail chains and QSRs, encounter numerous disruptive challenges. Despite their diligent efforts, they are often held responsible for these issues. As a CFO, Comptroller, or Accounting Director in a large multi-location business, mitigating disruptive events, especially during challenging economic periods, is a significant concern.

Power Disruption: Impact on Hospice Operations

One of our hospice industry clients recently faced a significant challenge when their office lost power one January morning. Janice, the office manager, discovered the issue when she couldn’t switch the lights on and noticed the cold temperature inside. The power outage meant they couldn’t receive or treat patients. Realizing the neighboring businesses had power, she called the utility company and found out their power was disconnected due to non-payment. Calling corporate, Janice sought answers from Accounts Payable regarding the oversight of the unpaid electricity bill that led to a complete disruption of their daily operations.

In the last two years, this recurring scenario has unfolded in businesses of all sizes throughout the US. Accounts Payable staff are frequently held accountable, despite various factors contributing to disruptions that are unrelated to their department. These circumstances have escalated, becoming increasingly systemic and consistently disruptive to regular business operations.

What are these systemic factors? 

Factor #1 – Utility Vendor Invoice Delivery Practices

Utility companies often rely on traditional mail for invoice delivery instead of providing convenient online options, which may sometimes be inadequate for businesses. These invoices are complex, containing service details, meter readings, due dates, and various taxes, ranging from one to multiple pages. While some allow downloads, the process has drawbacks. Businesses must manually remember to retrieve invoices monthly, as there’s often no email notification. Additionally, setting up an account for electronic billing relies on specific personnel, risking missed invoices if they leave or are unavailable, potentially leading to service interruptions due to non-payment.

Factor #2 – Utility Vendor Due Dates

Utility companies often provide payment due dates set between 10 to 20 days from the invoice mailing date. Smaller municipalities usually lack online invoice options, leading to the shortest payment windows. Considering a 5-7 day mail delivery, and additional processing time for payment checks, meeting these deadlines becomes challenging. Even with a 20-day due date, internal payment approval processes can impede timely payments.

Factor #3 – Utility Disconnect Notices

Some utilities issue a Disconnect Notice that warns the business that they will be disconnected on a certain date if payment isn’t received.  In theory, this is a good fallback to ensure that services are not disconnected.  But when you consider that this Disconnect Notice is mailed out and takes 5-7 days to arrive in the mail, there is a risk that service is disconnected before the notice even arrives. 

Factor #4 –Postal Service Delays

The US Post Office, a regular contributor to mail delays, has exhibited this issue for years, even as stamp costs rise. In 2021, they further extended delivery times by 2-5 days, leaving Accounts Payable with very little margin for late payment errors.

Factor #5 – Work-from-Home Policies

Pandemic-related lockdowns have compounded delays in utility invoice payments, leading to prolonged phone wait times for Accounts Payable due to remote work. Representatives often cannot email invoices, opting to reprint and mail, causing a 5-7 day delay, compounded by potential mail delivery lateness. The shift to remote work has significantly disrupted utility and telecom companies’ billing and accounting functions, burdening Accounts Payable, especially in larger companies with multiple locations. For instance, a single location can demand about 4.5 hours monthly for Accounts Payable, escalating to over 100 hours for corporations with 25 locations, posing a significant workload solely to prevent service interruptions, a challenge faced by many departments since 2020.

Future Outlook and Conclusion

We foresee no improvement in that situation moving forward. During a recession, customer-facing and administrative personnel are typically the first to face layoffs. Banks are reducing branches to cut staff costs, while tech companies like Amazon are downsizing significantly, affecting customer service representatives (CSRs). The trend of poor CSR support in the last two years appears unlikely to change in 2023. 

RadiusPoint, like other leading utility and telecom expense management service providers, exists to deliver efficient solutions that ensure a measurable positive ROI for clients. Clients outsource invoice processing to us, tasking us with a cost-cutting mission. We handle all tasks, from invoice receipt and auditing to disputing charges, obtaining credits and refunds, and ensuring timely payments to avoid fees and service disruptions. Our role is to cut costs and alleviate the burden on Accounts Payable departments. If interested, reach out to us to discuss how we can assist you in optimizing your expenses. Unlock the power of effective expense management today!