Finding the Good in Bad Debt

Bad debt management is a key driver of financial performance for telecom and cable operators. But it also presents a major challenge, with the risk and cost of nonpayment needing to be balanced against opportunity costs.

Bad debt management techniques have a far-reaching influence. They impact much more than the control of nonrecoverable income and fraud, and should be an integral part of optimizing customer acquisition, development, and retention. If that happens, even relatively advanced operators can boost their earnings by one or two percentage points, our research shows.

Bad debt is costly for telecom and cable operators. Nonrecovered subscriber acquisition costs and nonrecoverable commissions can quickly add up, making it essential both to control the level of risk and to have an efficient recovery process in place. Fraud – when customers do not intend to pay their bills and will never become valuable – is particularly expensive, and requires tight control. In total, write-offs from bad debt and fraud can amount to one to two percent of revenue.

But for most operators, the opportunity costs of managing bad debt are even greater than the direct costs.

Finding the Good in Bad Debt