Ahead of arrears: Ways utility suppliers can act before debt builds

The challenge

For utility suppliers, debt often becomes visible only after a customer has already missed payments, ignored bills or fallen into arrears. By that point, the balance may be harder to recover, the customer may be more difficult to engage, and the supplier may face higher servicing, collections and regulatory risk.

This is a growing market issue. Ofgem’s debt and arrears indicators show that average arrears for domestic customers without a repayment arrangement reached £1,876 for electricity and £1,623 for gas in Q1 2026, while Energy UK has warned that total household energy debt and arrears could rise further without earlier intervention. The commercial challenge is to identify risk before it becomes formal debt.

The solution

Data Heads combines household, property, mover and behavioural data with predictive modelling to identify customers who may be moving towards payment difficulty before arrears crystallise. Instead of waiting for missed payments to trigger collections activity, suppliers can use pre-debt indicators to prioritise proactive, proportionate support.

This approach gives credit, collections, vulnerability and customer care teams an earlier decisioning layer. It helps suppliers distinguish customers who may need support from those who are simply disengaged, enabling better segmentation, more appropriate contact strategies and a clearer pathway into repayment, support or affordability treatment.

Commercial impact

• Identify customers showing early signs of affordability pressure before arrears build.
• Reduce avoidable bad debt by triggering earlier, more tailored engagement.
• Improve repayment plan conversion by prioritising customers most likely to engage.
• Support fairer customer treatment by aligning interventions with risk, vulnerability and affordability signals.

In a representative supplier model, even a small reduction in customers progressing from early warning status into formal arrears can create a meaningful financial benefit. By intervening earlier, suppliers can reduce collections cost, improve cash recovery, protect customer relationships and limit the operational impact of unmanaged debt.

How it works

Data Heads builds pre-debt propensity models using signals such as household composition, property type, move status, tenure, contactability, engagement behaviour and relevant external indicators. These models can be used to create prioritised treatment groups for outbound contact, digital journeys, affordability checks, repayment plan prompts and vulnerability support pathways.

Why it matters

Pre-debt is the point where suppliers still have the greatest opportunity to change the outcome. Acting before balances escalate can improve recovery, reduce harm, support compliance expectations and create a more sustainable approach to customer affordability management.

Contact us today

If you want to understand where pre-debt risk is building in your customer base, Data Heads can help you identify the households most likely to need earlier support and quantify the value of intervening before arrears escalate.