Energy costs typically rank among a business’s largest outlays. Almost all business’s consume energy as part of their processes, and depending on how much energy is used, the rise in energy price changes can have a significant impact on expenses. As a result, many businesses are now struggling to maintain a healthy cash flow and can find themselves on the back foot. So, what should a business do if they are struggling?
What help is out there for struggling businesses?
Thankfully, there is support for businesses that are struggling with their energy overheads. In September 2022, the UK government announced the ‘Energy Bill Relief Scheme.’ It meant that businesses would receive discounts on gas and electric bills. It is said to be amended in March 2024, with a new scheme meaning that businesses may pay at energy wholesale prices.
Aside from the government help, there’s lots that businesses can do themselves to try and cut back on energy price troubles.
Contact your supplier
Contacting your energy supplier should be a first point of contact. If you already have a backup of arrears and are struggling to get back on track, they may look to come to a payment agreement with you, or be lenient with your outstanding debts. Make sure you’re fully aware of what you currently pay and if your output actually matches the payments requested by the energy supplier. It’s not impossible that you have been overcharged.
Look for an alternative supplier
Depending on the type of contract you currently have, a business always has the opportunity to shop around and look at alternative suppliers. Comparing tariffs to other suppliers give you the opportunity to shop around and see if there are better rates out there. Be aware of what kind of rate you are being quoted and whether it’s a fixed or variable rate. Depending on what happens within the energy crisis, getting tied into a long-term deal may mean that you pay more, over a longer period of time. Whereas variable rate, means you run the risk of facing energy price hikes.
Upgrades and efficiency grants
If business’s have the right kind of infrastructure, looking at introducing a green efficiency could help save in the long run. Having more control over your own energy means that a business won’t have to rely on external supply prices. The UK government have also looked at granting money to businesses which are willing to introduce a more energy-efficient heating system.
What happens if you can’t afford your bill?
It’s scary times for businesses with such expensive energy price tariffs, it means that businesses can be living from month to month and don’t have any opportunity to grow or survive. Energy companies have every right to chase down businesses and non-payments could result in county court judgements being filed against businesses. In a worst-case scenario, a business could end up seeing their energy disconnected.
Formal payment plans
Aside from coming to an agreement with the energy company for your tariff. There are formal repayment plans that both businesses and sole traders can put into place, with not just energy suppliers, but also all of their creditors.
- Company Voluntary Arrangement (CVA) – This is a process which allows a company to repay their unsecured debts in instalments. It must be agreed to by all of the creditors involved and typically lasts around five years.
- Individual Voluntary Arrangement (IVA) – This works very much in the same way as a CVA, except it is in for individuals and sole traders.
With the energy prices where they are at, it is a challenging time for businesses. There are solutions out there and help is being provided, but with no possible end it sight for when the energy prices may come down, sometimes it may be a better option to simply close the business down in an orderly fashion and don’t throw good money at bad debt.