Payment times biggest cause of disputes for small business

New research has found that small businesses in Australia are paying more than $130,000 to resolve a dispute through formal pathways; double the cost of a decade ago. This was revealed during the recent release of the research results on the Access to Justice Inquiry (Phase I).

Australian Small Business and Family Enterprise Ombudsman Kate Carnell said payment times and terms remain the biggest cause of disputes.

“We surveyed 1600 small businesses across Australia and found time and cost are the most significant factors when determining how far to pursue resolution of a dispute,” Ms Carnell said.

The research also showed 22 per cent of small businesses surveyed had been involved in a serious dispute in the last five years. Nine out of 10 were business-to-business disputes and one in 20 were business-to-government. Three out of five sought legal advice from a lawyer.

As the expected costs of further action most often outweigh the potential gain. Half of those surveyed considered the amount of time and effort required was unreasonable. One-third of disputes are not escalated through a formal process; instead, the small-business owner sought to resolve it by speaking with the other party and coming to an agreement.

“The cost of disputes to small businesses is far-reaching. There can be significant financial loss; existing business relationships become strained; it is a time-consuming process and reputations can be seriously damaged,” Ms Carnell said. “If the direct approach has failed, we recommend small businesses consult your state Small Business Commissioner or our office.”

The release of this report signals the beginning of Phase 2 of the Access to Justice Inquiry, which will look at the court systems, explore emerging ideas for streamlining processes and make recommendations to improve access to justice for small-business owners.

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