# How to free yourself from business energy debts
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2020-01-08
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: The Hidden Challenge of Business Energy Debt in the UK
Meta Description: Learn what business energy debt is and how to navigate the challenges it poses for UK businesses. Discover common causes and solutions here.
URL: https://financedigest.com/how-to-free-yourself-from-business-energy-debtshtml

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- Businesses face plenty of challenges in the current economic climate. They need to ensure they remain competitive enough to attract new customers and clients in an ever-changing market.
- On top of that, companies need to keep on top of their expenses. Failing to do so can lead to debt, and in some cases, those that can’t repay their debts are forced to shut down.
- One of the [major challenges](https://www.financedigest.com/refurbished-medical-imaging-equipment-market-comprehensive-study-with-key-trends-major-drivers-and-challenges-2018-2026.html "Refurbished Medical Imaging Equipment Market: Comprehensive Study with Key Trends, Major Drivers and Challenges 2018-2026") to UK businesses that isn’t often discussed is the problem of energy debt. For thousands of them, it’s a significant [source](https://www.financedigest.com/uk-finance-minister-hunt-to-make-statement-at-1000-gmt-source.html "UK finance minister Hunt to make statement at 1000 GMT – source") of financial pressure that can be difficult to shake.

“We talk to dozens of businesses every day who are in some sort of debt to their current or previous supplier,” says Wayne Heap, Director of Service at energy experts [Love Energy Savings](https://www.loveenergysavings.com/commercial-electricity/). “It’s a common issue, but because few people talk about it, many don’t know where to start when they find themselves [falling behind](https://www.financedigest.com/behind-ftxs-fall-battling-billionaires-and-a-failed-bid-to-save-crypto.html "Behind FTX’s fall, battling billionaires and a failed bid to save crypto") on their payments.”

Thankfully, help is at hand. We break down what [business energy](https://www.financedigest.com/ukraine-war-energy-crisis-send-german-business-sentiment-to-lowest-level-since-june-2020.html "Ukraine war, energy crisis send German business sentiment to lowest level since June 2020") debt is and how you can move your company into the black.

**Understanding business energy debt**

### What is business energy debt?

Also known as business [energy arrears, energy debt is a cost accrued when a business](https://www.financedigest.com/top-5-ways-businesses-can-save-on-energy-costs-in-q4.html "Top 5 Ways Businesses Can Save on Energy Costs in Q4") has not paid a previous bill or did not pay the regular amount.

Over a long period of time, these [debts can reach thousands of pounds and suppliers may demand immediate payment](https://www.financedigest.com/ukraine-seeks-debt-payment-freeze-as-war-ravages-economy.html "Ukraine seeks debt payment freeze as war ravages economy") when it reaches a certain amount. This can spell disaster for [small businesses](https://www.financedigest.com/foolproof-local-marketing-strategies-for-small-businesses.html "Foolproof Local Marketing Strategies for Small Businesses").

### What causes energy debt?

There are a number of reasons why [businesses can fall into debt with suppliers](https://www.financedigest.com/why-your-business-is-vulnerable-to-supplier-fraud.html "Why Your Business is Vulnerable to Supplier Fraud"). It’s not just new [businesses that struggle](https://www.financedigest.com/pakistan-floods-add-to-pain-for-struggling-small-businesses.html "Pakistan floods add to pain for struggling small businesses").

Here are a few of the most common ones:

- **Billing and metering issues**

The Money Advice Trust found that, for small businesses, [billing and metering issues is the number one cause of energy](https://www.financedigest.com/explainer-why-europe-faces-climbing-energy-bills.html "Explainer-Why Europe faces climbing energy bills") debt.

One of the most common issues found was that [businesses were underbilled in the early stages of their contracts](https://www.financedigest.com/euro-zone-business-activity-contracted-again-in-august-pmi.html "Euro zone business activity contracted again in August -PMI"). When suppliers agree fixed contracts with businesses, they agree costs based on an estimate rather than actual meter readings and set up [low monthly](https://www.financedigest.com/sterling-rebounds-after-hitting-16-month-low.html "Sterling rebounds after hitting 16-month low") payments as a result.

Later, they require the difference be paid, and [businesses often don’t have the resources](https://www.financedigest.com/workforce-management-the-next-cloud-resource-for-businesses.html "Workforce management; the next cloud resource for businesses?") to cover outstanding charges.

- **Declining revenue**

Even when billing is set up correctly, the [revenue available to businesses](https://www.financedigest.com/covid-19-is-impacting-the-high-speed-steel-market-size-business-revenue-forecast-leading-competitors-and-growth-trends-2031.html "COVID-19 Is Impacting The High Speed Steel Market | Size, Business Revenue Forecast, Leading Competitors And Growth Trends 2031") to make their payments is constantly in flux.

Reasons for declines in revenue include:

- **Changes in consumers habits** — Consumer values and technologies mean businesses have to [continually adapt](https://www.financedigest.com/scholz-if-germany-continues-to-adapt-we-will-make-it-through-winter.html "Scholz: if Germany continues to adapt, we will make it through winter") to keep up, and some get left behind. Newsagents, for example, have seen significant declines in sales of newspapers in the wake of the digital and [green revolutions](https://www.financedigest.com/why-2022-signals-the-green-revolution-in-investing.html "Why 2022 signals the green revolution in investing"), and takeaways with no online presence struggle to be discovered by new customers.
- **Seasonal changes** — Some [businesses offer](https://www.financedigest.com/surgical-equipment-market-high-trend-opportunities-offers-future-business-growth-by-2030.html "Surgical Equipment Market High Trend Opportunities Offers Future Business Growth by 2030") products that are in low demand at certain times of year. Ice cream parlours, for example, are likely to see much less footfall in January than in July.
- **Increased competition** — Smaller businesses can be undercut by large [companies moving](https://www.financedigest.com/wait-and-see-u-s-companies-curb-investment-as-they-await-fed-moves.html "Wait and see: U.S. companies curb investment as they await Fed moves") in nearby or by the success of an online competitor.
- **Personal circumstances**

[Small businesses](https://www.financedigest.com/how-guest-blogging-service-benefits-your-small-business.html "How Guest Blogging Service Benefits Your small Business?") are more at risk to financial problems if their day-to-day operation relies heavily on one person.

Personal circumstances like a death in the family, a relationship breakdown or a long-term illness can mean that [business owners](https://www.financedigest.com/the-top-5-demons-of-a-business-owner-and-how-to-overcome-them.html "The top 5 demons of a business owner and how to overcome them") are away from their work for an extended period of time, losing potential revenue as a result.

**How to prevent energy debt**

The best [way to get out of business](https://www.financedigest.com/five-ways-businesses-can-prepare-themselves-for-the-digital-economy-be-kaler-pilgrim.html "Five ways businesses can prepare themselves for the digital economy – Be Kaler Pilgrim") energy debt is to prevent it from occurring in the first place. Here are some of the easiest [ways in which you can protect](https://www.financedigest.com/the-best-ways-to-protect-your-business-from-cyber-threats-in-2021.html "The best ways to protect your business from cyber threats in 2021") yourself.

- **Switch to a fixed contract**

One of the traps many businesses fall into is being put on a deemed contract. Deemed contracts are on average 80% more expensive than negotiated contracts (Source: [Ofgem](https://www.ofgem.gov.uk/consumers/business-gas-and-electricity-guide/understand-energy-contracts-businesses)).

If you’re [currently on a deemed contract](https://www.financedigest.com/pharmaceutical-contract-packaging-market-current-impact-to-make-big-changes-2020.html "Pharmaceutical Contract Packaging Market Current Impact to Make Big Changes 2020"), you can switch your contract to a different tariff or a different supplier. [Suppliers of deemed contracts aren’t able to charge](https://www.financedigest.com/tesco-to-charge-online-booker-suppliers-new-fulfilment-charge.html "Tesco to charge online, Booker suppliers new fulfilment charge") you a termination fee, so you don’t need to worry about budgeting for the switch.

See how much you could save by switching your energy provider with [our free online quote comparison tool](https://www.loveenergysavings.com/commercial-electricity/).

- **Find out what you need to pay and what you don’t**

You may not be required to pay everything that you think you do.

For example, legislation introduced in 2018 dictates that suppliers cannot [bill mico-businesses for energy](https://www.financedigest.com/new-uk-pm-will-need-to-take-urgent-action-on-energy-bills-ofgem-ceo.html "New UK PM will need to take urgent action on energy bills – Ofgem CEO") that was used more than 12 months prior. The only exception to this is if you’ve hindered the supplier’s ability to retrieve meter readings.

It’s possible that your supplier is charging you for things you don’t use. Look through your bills and highlight anything that’s unclear; speaking to your supplier about it can highlight any incorrect charges that could reduce your bills.

For more information, see [this guide](https://www.citizensadvice.org.uk/consumer/energy/energy-supply/problems-with-your-energy-bill/energy-bill-seems-too-high-or-low/) from the Citizens Advice Bureau.

- **Double-check your details**

Ensure that your payment details are set up correctly. Often it can take a few months for a supplier to get in touch about missed payments, by which point you’re already in debt.

If your contact details are incorrect, you could go the best part of a year before you learn about your debt, which might be unmanageable.

Double-checking all of your details before you agree to a contract [means that none of these problems occur and you don’t](https://www.financedigest.com/spiralling-azure-costs-dont-necessarily-mean-your-cloud-strategy-is-off-course.html "Spiralling Azure costs don’t necessarily mean your cloud strategy is off course") miss payments unknowingly.

**What you can do if you have business energy debt**

Most markets are a constant state of flux, so even with the best preparation, you might fall into energy debt at some point.

Suppliers are entitled by law to [cut off your gas](https://www.financedigest.com/gazprom-gas-cut-tempers-economic-hopes-after-ukraine-grain-deal.html "Gazprom gas cut tempers economic hopes after Ukraine grain deal") or electricity if you fail to pay. For that reason, business [energy debt should be considered](https://www.financedigest.com/eu-will-consider-making-countries-fill-gas-storage-energy-chief.html "EU will consider making countries fill gas storage – energy chief") a priority debt.

Thankfully, there are a few steps you can take to help you.

- **Speak to suppliers as soon as possible**

As soon as you [become aware of your energy](https://www.financedigest.com/croatias-coast-turns-to-solar-in-bid-to-become-energy-sustainable.html "Croatia’s coast turns to solar in bid to become energy-sustainable") debt, contact your supplier and fully explain your circumstances. Give any relevant reasons why you aren’t able to pay. Most [suppliers will try to give you time to pay](https://www.financedigest.com/why-it-pays-to-pay-on-time-the-impact-of-delayed-payments-on-supplier-relationships.html "Why it pays to pay on time: The impact of delayed payments on supplier relationships") what you owe in the form of monthly repayments.

You’ll need to show that you can pay for your ongoing fuel as well as contributing to arrears. Suppliers may agree to increase your monthly payments to offset the debt.

- **Renegotiate payments**

If you’re already on a repayment plan but are struggling to afford it, discuss with your supplier whether they could lower the payments and extend the repayment period.

Suppliers [need to know](https://www.financedigest.com/ukraine-and-russia-what-you-need-to-know-right-now-3.html "Ukraine and Russia: What you need to know right now") that you can pay ongoing bills as well, so if you stress that the current repayment plan will limit your ability to do so, it may persuade them to change the plan.

- **Escalate the matter**

Occasionally, suppliers may not agree with your suggested changes. If you believe your supplier has treated you unfairly or your query hasn’t been resolved within eight weeks, you can escalate your case to the [Ombudsman Services: Energy](https://www.ombudsman-services.org/sectors/energy).

The Ombudsman will investigate your complaint and make recommendations about how it should be sorted out.

**Escape high [energy bills to help your business](https://www.financedigest.com/uk-government-to-cap-energy-bills-for-businesses-bloomberg.html "UK government to cap energy bills for businesses – Bloomberg") thrive**

Keeping your business free from debt isn’t always easy, but by making some smart decisions, you can at least make sure your [energy bills](https://www.financedigest.com/britain-considers-energy-bill-subsidy-for-industrial-firms.html "Britain considers energy bill subsidy for industrial firms") are more than manageable.


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