What causes energy debt?
Businesses can fall into energy debt for a variety of reasons with their supplier. New businesses are not the only ones that have to grapple with this issue. Here are some of the main reasons why business energy debt exists:
Billing and metering issues
The number one reason why small firms end up with business energy debts is primarily due to inaccurate billing and metering, according to the Money Advice Trust. It was fairly common for these smaller companies to receive inaccurate bills in the early stages of their contracts, only to find out later on that they were underpaying and were suddenly unable to manage the larger repayments.
Even with a fixed tariff contract, suppliers calculate the cost through estimations instead of actual meter readings. This results in lower monthly payments set up at the start, only for these same bills to skyrocket later down the line.
If a supplier does bill a company correctly, a business can still end up in energy debt with its ever-changing revenue. Here are some reasons why a business’ revenue may be in decline:
- Changes in consumer purchasing habits
- Increased competition within the market
- Seasonal changes
Personal circumstances of each company
A smaller business that has its day-to-day operations reliant on one single person puts it at a higher risk of being in financial trouble. Business owners may be away from their work for an extended duration due to any of the following personal circumstances:
- Death within the family
- Long term illness
- Being involved in an accident in or outside of work
- A relationship breakdown
How can I stop energy debt?
What can I do if I have business energy debt?
The world economy is constantly changing every day, placing businesses in a state of flux. This means that even if you have the most comprehensive business strategy outlined, it is still possible to be in energy debt at some point.
Failure to pay does allow a provider to cut off your gas and electricity supply. With this in mind, business energy debt should be seen as a high priority, especially if it affects productivity and prevents you from generating revenue. Fortunately, there are steps your firm can take to help you should you find yourself in this scenario.
Contact your supplier at the first instance
You should contact your supplier in the first instance after becoming aware that you are in commercial energy debt. Talking through your individual circumstances and explaining why you weren’t able to make the payments on time can often be the best way to find a suitable solution. The majority of commercial suppliers will work with you to set up an affordable repayment plan to cover what is owed. After all, this is in everyone’s best interest.
In addition to this, you will need to demonstrate that you are still able to pay for your current gas and electricity supply as well as any arrears accrued.
Renegotiate your payment plan
If you have agreed to a new repayment plan and are still finding it difficult to make these payments, ask your supplier about whether these payments could be reduced and repaid over a longer period of time. Remember that the longer the period, the more interest a supplier may charge. You should also note that if a supplier passes the business energy debt onto a debt collection agency, your credit rating could be negatively impacted. Always try to come to a reasonable agreement with the supplier first before things escalate and get out of hand.
From the supplier’s perspective, they will want to be sure that you’re able to pay for your current energy supply. If they are able to understand that the current repayment plan will limit your ability to make payments, they may be persuaded to change the terms.
Escalate the case to the Energy Ombudsman
A provider will not always agree to the changes that you have suggested. If you believe the provider is being unreasonable or treating you unfairly and the situation has not been able to be resolved within eight weeks, you do have the option to escalate things further. In this situation, you can put your case forward to the Energy Ombudsman Services.
The Energy Ombudsman Service has been approved by Ofgem to independently handle disputes between consumers and suppliers. They will be able to investigate your complaint and make a recommendation based on how it should be appropriately resolved.
Managing a business, no matter what its size, is tough work. There are limitless considerations and decisions that company owners have to make on a daily basis. Staying in the black isn’t always straightforward with ever-changing market factors at play. However, making smarter decisions can at least help you keep on top of your energy bills.