Dispute Resolution

Resolving small business disputes

Olivia Pearce — Tue, 03 Sep 2024 02:07:26 +0000

Resolving small business disputes Olivia Pearce Tue, 09/03/2024 - 12:07

03 September 2024

Australian Small Business and Family Enterprise Ombudsman Bruce Billson interview with Raf Epstein.

ABC Radio Melbourne

Subject: Concern about small businesses being paid, resolving disputes, sleepwalking into a big corporate economy

Raf Epstein

Bruce Billson, former MP, is now the Small Business and Family Enterprise Ombudsman. Good morning.

Bruce Billson

Raf, fab to be with you and your listeners, and thanks for your interest in small and family businesses.

Raf Epstein

Some of the numbers in your press release are pretty disturbing. I take it these are numbers from the people who've come to you. What is it like for small business right now?

Bruce Billson

Really challenging. We know even the last full year where tax information is available, 46% weren't making a profit. And that's concerning. But for the million and a half self-employed people, those that do that as their full-time livelihood effort, three-quarters are taking home less than average weekly wages.

So, it's a challenging time. The slowness of growth, the inflation, the change in consumer spending is really hitting some businesses very hard. Others have a business model that's attractive for the times, they're doing okay, but increases in input costs and inability to pass those on is really squeezing margins. And then the issue that you mentioned, worries about getting paid for work they've actually done.

Raf Epstein

So, the money that Bruce's business should pay Raf’s business, because I did work for you, how much is that gotten worse? And just give me some idea of what their problems like?

Bruce Billson

It’s huge. 40% of the cases that come to us looking for help are that ‘Bruce hasn't paid Raf’ example that you alluded to. What we're also seeing is a real doubling of people inquiring about their worries, their stress, that someone that they've done work for might be teetering on insolvency and they might miss out getting paid for work they've already done.

And let's think about that. If you and I were putting the electrical system in Tarneit at a new subdivision, we're worried about being paid. We've laid out for substations, the conduit, the cabling, and so we've got outgoings already. So not being paid is just not about us being paid for our time and our effort, and hopefully a little bit of profit. We've already laid out a lot of money. And then our challenge then can cascade onto someone we owe money to, and you can find that becomes a really significant concern, and that's what's popping up in the inquiries that we're receiving.

Raf Epstein

As Ombudsman, I should mention, actually, it's the Small Business and Family Enterprise Ombudsman, so that gives you some sense of who Bruce works for effectively. As Ombudsman, Bruce, do you sort of bash heads together and make sure that Raf does pay Bruce or Bruce does pay Raf. Is that what you do?

Bruce Billson

We aim to. Where it's Raf just wanting to make sure Bruce pays right now, we're not debt collectors. That's not our role. But where there's scope for us to bring the parties together, where communication may have stopped, we get involved.

Raf Epstein

So, you do mediation?

Bruce Billson

Yeah, we do. We have alternative dispute resolution mechanisms. But we also try to tool-up the parties to that transaction with some skills and some tactics that they can deploy. A lot of people that go into business, Raf, the idea of chasing debts probably isn't their number one priority. And not everyone's good at it. So, we actually provide some better practice guidance to say, maybe go about it this way. This will start the conversation. That will get all the documentation that you need in place. And if that doesn't bring about a change and a satisfactory resolution, come to us and we'll get alongside the parties. We're impartial.

We just want to get the matter resolved but get business back to business. And in so many cases where these niggles and grievances arise, the businesses need to keep doing business with each other. So, there's no point having a winner takes all sort of scorched earth approach. We want to get a resolution, make sure the parties are happy with the outcome, or as happy as they can be, get them back to business, and hopefully have those business relationships still intact.

Raf Epstein

On 774 Bruce Billson's the Small Business Ombudsman, it's 10 to nine. I'll read this text from Roger, who's in Eltham. Raf, why do you constantly characterise small business as simply cafes, coffee sellers or construction? Small business is a diverse engine. Professional services, consulting, design, transport, logistics, primary production, training, communications, not just family incorporated and not just bloody coffee. That's from Roger.

Bruce Billson

Roger’s on the money there, Raf. It is a diverse space, but it's also what's showing at multi-speed economy for different people because of the different type of business that they're in. Some that are providing digital solutions for other businesses, they're very popular right now because finding efficiencies within the business, using technology to deal better with the business of running the business so more time and the businessperson’s bandwidth can go into delighting customers and growing and nurturing their enterprise.

Raf Epstein

And Bruce without getting too political, if the economy shrinks, which is I think what we're going to get tomorrow, it's not growing as much as it was, still growing, but barely. Does that necessarily mean that those training, communications, logistics, cafes, small business, do they necessarily find it harder if the economy is barely grown. Does one follow the other?

Bruce Billson

Yes, that does happen, but the consequences can be different. There's quite a lot of research that says the economic trauma, if I could use that phrase, tends to strengthen those that are already strong, because they've got the depth of resources, the skill set. It makes newer and smaller businesses more vulnerable. And the other thing that we've seen, and this just isn't in the last window of time, this is over the last decade and a half, Raf, we've actually been sleepwalking into a big corporate economy.

We're seeing the big end of town growing. We recently celebrated Micro, Small and Medium-sized Enterprises Day, and of course, we were really acknowledging and celebrating the two in every five private sector jobs that small business makes possible. But it used to be one in two. We celebrated the one-third of GDP that small businesses make possible, but it used to be 41%. So, we're seeing a contraction there. And what comes with that is those economic opportunities and livelihoods land differently.

People that live outside the capital cities or don't have a big mine in their neighbourhood, they rely on these small and family businesses who give so much economic opportunity, but they're also great contributors in the local community. And when you start sort of taking maybe a cylinder out of the engine room of the economy, it has implications right throughout the community and the economy and the opportunities that people can look forward to into the future, and that's why I get out of bed every day for them.

Raf Epstein

Thanks for joining us today.

Bruce Billson

It's good to be with your Raf, take care.

Raf Epstein

Bruce Billson is the Small Business and Family Enterprise Ombudsman.

Understanding the skills to handle business barneys

Olivia Pearce — Sun, 01 Sep 2024 23:19:36 +0000

Understanding the skills to handle business barneys Olivia Pearce Mon, 09/02/2024 - 09:19

02 September 2024

Opinion piece by the Ombudsman Bruce Billson.

Originally published in the Canberra Times.

Mary runs a small civil construction business but one of her customers, another small business, had not paid their $20,000 bill for 180 days.

The delay, well beyond the usual payment terms of 30 days, was having significant flow-on consequences for Mary as it left her without sufficient cash to pay her suppliers.

After repeated attempts to contact the company that owed her money and even offering a payment plan because she wanted to keep the other business as an ongoing customer, Mary called the assistance team at my agency, the Australian Small Business and Family Enterprise Ombudsman.

Our case manager got involved and Mary was paid the full amount she was owed.

Mary was lucky but sometimes the result is not as good, and the business might never be paid what they are owed.

Over the past year, small and family business owners have become increasingly worried about being paid as they face challenging business conditions which has seen a record number of corporate insolvencies.

Requests to my agency from distressed business owners who are fearful another business who owes them money has become insolvent or who are worried about their own ability to meet their financial commitments has jumped by 50 per cent.

Payment disputes are by far the greatest area of concern for small businesses and now account for more than two out of five of our assistance cases.

The construction industry had the highest number of payment disputes, while those in the hospitality sector tripled over the past 12 months.

Payment disputes are an early warning sign of a cash flow problem and can have a ripple effect that threatens the viability of other businesses.

Cash flow is the oxygen of enterprise, but difficult conditions mean when one party is late in paying, it can cascade through the supply chain.

Vicky, who runs an events business, was owed $10,000 by another business who had stopped paying her and had cut off any communication. She called us and we provided advice which got the two businesses talking again. They were able to work out a payment plan and preserve their commercial arrangement.

Similarly, Anthony, who runs a TV repair business, contacted us when another business he had been working with for five years, suddenly stopped paying him. We helped negotiate a payment plan so both businesses could stay afloat.

Many businesses are drawing on their cash buffers to keep their business afloat. Recent surveys have found nearly one-in-four small businesses have no cash reserves and 18 per cent have less than a month's cash at hand to fulfil their obligations.

The business owner will usually pay themselves last after paying their bills and staff, so slow payment can needlessly amplify the risks of business ownership.

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 savings and family home on the line - to build up their business. Nearly half of outstanding small business debts are secured by residential property.

Matthew nearly lost his home when he took out a loan, secured by the property, to pay other debts for his business with a lender who was not a member of the Australian Financial Complaints Authority. After defaulting on the loan, he contacted us and we discovered he had already paid more in loan repayments than the total loan. The lender agreed to waive the remaining debt and remove the security over the home. Before taking out any new loans, Matthew said he'd do the quick online check to ensure a lender is an AFCA member.

Many entrepreneurs seek to build their business online. This has opened a world of possibilities to win customers. Julie uses a well-known social media digital platform to run her small consulting business, but she was hacked and locked out of her account.

The hackers used Julie's credit card that was linked to the account to fraudulently ring up hundreds of dollars of charges.

Julie was left stranded because the digital platform told her she needed to log in to her account to report that she was locked out of her account.

Julie is one of hundreds of small business owners who have faced this problem over the past year and, after contacting us, we were able to get her account reinstated and the fraudulent charges on her credit card refunded.

The number of small businesses having problems with a digital platform has more than doubled since July 2022 and now accounts for one-in-four of our cases.

Since being created eight years ago, 91��Ƭ�� has handled almost 47,000 cases, most of which involve disputes small businesses have with other businesses or Australian government agencies.

We strive to help small businesses get back to business as fast as possible. Pleasingly, nearly two-thirds of the cases that come to us are helped quickly by our call centre or assistance team providing useful information and guidance.

Some cases take longer and the 91��Ƭ�� assistance team provide intense one-to-one assistance with no cost or low-cost solutions. This has included arranging alternative dispute resolution, such as mediation.

About 20 per cent of requests for assistance relate to contract disputes, while 9 per cent involve a franchise disagreement.

This often relates to contract renewals, breach of franchise agreement or early termination.

We can give small businesses the skills - and sometimes case management - to resolve a dispute without ending the business relationship.

In many cases they want to keep doing business but need to find a way through the dispute.

We can't guarantee every small business will succeed but it is our mission to provide all the help we can for those who want to start, grow or transform a business, and that no business fails because the owners didn't know about something that might have helped.

Small and family businesses can find more information and how to get help on the 91��Ƭ�� website - asbfeo.gov.au - where they can also subscribe to our monthly newsletter.

*The names of business owners have been changed.