In its report of the annual summary of assistance provided to small and family businesses, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has shared that there were 6254 requests for assistance in 2023-24, up by 10 per cent from the previous year.
Requests for help from distressed business owners who either fear that another business that owes them money has become insolvent or are worried about their ability to meet their financial commitments comprise the bulk of these requests and have been marked with a 50 per cent jump from the previous year.
Ombudsman Bruce Billson said disputes relating to getting paid were an early warning sign of a cashflow problem and can have a ripple effect that threatens the viability of other businesses.
“Cashflow is the oxygen of enterprise, but difficult conditions mean when one party is late in paying, it can cascade through the supply chain,” Billson said. “Payment disputes are by far the greatest area of concern for small and family businesses and now account for 42 per cent of assistance cases, up from 36 per cent last year.“
Cash reserve challenges
Billson noted that, as a result, many small businesses are drawing on their cash reserves to keep their business afloat, even though one in four have no cash reserves and 18 per cent of those with cash reserves have less than a month’s cash at hand.
“For small- and family-business owners, their identities are interwoven into their business and the stakes are so much higher than just a job. Many have invested a lifetime – and put their life’s savings and family home on the line –- to build up their business. Nearly half of outstanding small business debts are secured by residential property,” Billson explained.
Struggles with digital platform providers
The Ombudsman added that small businesses have also sought help in dealing with big tech digital platform providers. and disputes involving a digital service accounted for over one in four new cases.
“The number of cases we’ve seen involving a small business having problems with a digital platform has more than doubled since July 2022,” he said. “Digital platforms have fundamentally changed the way small businesses connect and sell to their customers. Yet, when there is a problem – such as having your account shut down after being hacked – solving it can be a nightmare. In too many cases, when there is a problem, the digital platform providers require a time and resource-poor small business to navigate the most elaborate maze of dead-ends and blockages.”
Billson added, “We are calling for digital platform providers to implement clear, appropriate and standardised procedures for small business dispute resolution with clear escalation points and a real person to talk to.”
Other resolution requests
Meanwhile, 20 per cent of requests for assistance relate to contract disputes, while nine per cent involve a franchise disagreement, typically relating to contract renewals, breach of franchise agreement, or early termination. Some cases, such as those involving insurance, telecommunications, banking and finance, and workplace issues such as health and safety, are referred to other relevant dispute resolution agencies in line with ASBFEO’s legislation that says it is not to duplicate the functions of other government agencies.
Small and family businesses with a dispute can find more information and guidance on the ASBFEO website –- asbfeo.gov.au – which also includes resources, checklists, tools, additional information about the Tax Concierge Service and the Quarterly Report.
