Utilities are the third largest expense item for most companies, directly following labor and materials. Unlike other payables, utility bills are unique in that they typically lack purchase orders, require manual GL mapping, and vary greatly from one provider to the next – each provider has varying bill systems, bill periods, and bill level detail. While utility bills are complex, they also offer a great opportunity for saving. And the larger your utility spend, the greater your opportunities for savings.
In our recent webinar, Utility Bill Data: AP Secrets for Success, we shared how AP (Accounts Payable) and finance professionals hold the key to unlocking new savings opportunities. Simply paying the utility bills isn’t enough; when properly tracked and analyzed, bill data can help identify billing errors, recoup unnecessary expenses, and provide visibility for savings opportunities. Armed with this information, AP and finance professionals become the new company heroes!
Here are common errors – unique to utility bills –and ways to handle them when they occur:
- Overlaps in billing periods. There are several reasons for overlaps; for example, a corrected bill. Once a bill that has been corrected comes through for processing, often it’s paid again. It’s a best practice to have mechanisms in place to ensure you’re not re-processing corrected bills for payment.
- Significant cost increases. Would you notice a 100 percent, 120 percent or even 160 percent increase from one month to the next? Do you have “triggers” in place to catch anomalies such as this so that you can contact the utility before payment? It’s not always a utility mistake – sometimes a variance indicates a leak, such as on a water bill. Reaching out to facility counterparts will demonstrate your initiative – and the value of examining bill data.
- One time charges. These charges may be expected or not, and they happen quite frequently on utility bills. One example is when you have a “peak demand” pricing plan with your utility, where you pay discounted rates on some days in exchange for higher rates on designated event days. You can then track the days these charges occur – you would expect it in July or August, but probably not April. Examining the data helps you identify and rectify these charges.
- Deposit and initiation fees for new service. Is this fee appearing on an established account? If so, it’s probably an error. You may even be able to get the fees waived or refunded if you have a good history of on-time payments.
- Estimated bills. With the proliferation of smart meters, utilities do not always perform true meter readings but instead charge based on estimates. These estimates can vary greatly from actual usage and end up costing your organization money. While you can’t be at every site to watch for the meter reader, you can contact your utility with concerns if you don’t believe your sites are receiving true meter reads or if you have had several consecutive estimated reads and need a true reading.
As you can see, there are many opportunities for errors and missed-applied charges, but one of the biggest challenges is having the time to analyze it all. More than 9 percent of utility bills end up missing or late because it takes the average company 17.4 to 29.8 days to fully process a bill, while utilities allot just 21 and a half days from the bill date to the due date. There’s not a lot of time left for analyzing the data!
In spite of all these challenges, AP professionals can really lead the way to savings. As we’ve outlined
in our FREE e-book, Utility Bill Data: Accounts Payable’s Secret Weapon for Managing Costs and Addressing Stakeholder Questions, the following steps will help you build a foundation for solid utility bill data strategies:
- Capture the detailed cost and consumption data on each utility bill, such as service dates and energy measures like kilowatt-hours, demand and demand charges.
- Conduct pre-payment audits. Identifying potential billing errors – such as the overlapping bill periods or one-time fees – before paying the utility bill to ensure you pay for only what you used.
- Create a baseline to support trend analysis and reporting. With line item data, identify charges by resource (energy, waste, telecom, etc.) over a period of 12 months and create baselines for each. This data will be really useful for finance and also energy and facility teams as they look for year-over-year or month-over-month trend data analysis. Baselines also allow AP and finance to identify facilities that qualify for energy efficiency programs.
It’s important to remember that not only does good data management benefit AP and finance teams, it creates a solid foundation to identify opportunities to improve efficiency, measure and verify energy programs, and support sustainability goals. Reliable data is key to reducing billing errors and creating a comprehensive energy and sustainability management strategy.