How To Understand Your Business Utility Bills In 3 Easy Steps

Are you stepping into the challenging role of trying to organise your business’s finances? Maybe you’re an entrepreneur who is starting up their own business, but this part has always had you stumped? Have no fear. In this article, you will learn how to really understand your utility bills, what the different aspects are, and how you and your business can save money.

Make It A Priority

The cost of running a business is high, especially in these post-covid times and in a bustling metropolis city with some of the world’s highest business rents. The sky-high cost of running a business causes many owners and startups to start looking to save money. One of the easiest places to save money is on your business utility bills.

Getting the best deal for your business electricity prices, your business water prices, or even your business gas prices should be a priority for you because any savings you make here can be passed onto your customers, leading to a better customer and business relationship for the both of you.

Demystifying The Jargon

Utility bills come with a lot of jargon attached. We’re going to take a ride through the three pieces of jargon that will help you to understand your bills.

Units and Unit Rate

The unit is the measurement of what you use. It may be measured in kWh (kilowatt-hour) for electricity or litres if you are on a water meter. Where it gets complicated is that you rarely ever pay for exactly what you use, rather an estimate of your usage.

To get a more accurate reading, always submit your meter readings regularly to avoid overpaying or underpaying and getting a nasty shock!

Standing Charge

The standing charge is perhaps the most obvious on your bill. This is the charge that is added to your bill every day so that you can continue to use your energy supply.

The standing charge is usually put on a bill to cover things like operational costs, wholesale fluctuations, transportation and distribution costs, and equipment costs that your supply company incurs so that you can heave a regular and reliable supply of energy or water.

Value Added Tax (VAT)

VAT, or Value Added Tax, is the tax that business owners and companies pay on their energy bills. You will usually see your bills “not including VAT” or with “including VAT at £X”. It’s interesting to note here that you will only pay 5% VAT (rather than the normal 20% VAT) if you are a low user of electricity or if there is a domestic property attached to or on your business premises, for example. If you fall into this category, it’s worth having a chat with your energy supplier to determine if you are entitled to any exemptions or reductions in your bill amount.

Some charities and NPF (Not for profit) organisations may be exempt from VAT or pay a heavily subsidised amount.