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75% Self-employed or SBOs earn less than average wages, half never turn a profit

Disputes about being paid, trouble with a digital service provider, contract battles and franchise disagreements are the top four issues where small business have sought the help of the Australian Small Business and Family Enterprise Ombudsman over the past six months.

The Ombudsman, Bruce Billson, said two out of every five requests for help from a small business related to a payment dispute while almost one-quarter of cases involved digital platform providers.

Among the issues that required active case management some 15% related to contract disputes while 9% involved a franchise disagreement, according to the latest snapshot of assistance cases.

Since being established in 2016, the Ombudsman has helped more than 40,000 small and family businesses with no cost or low-cost solutions to disputes. Court-based remedies are rarely suitable for these kinds of disputes due to the significant costs, delays, risks and difficulties accessing affordable justice.

“It has been a tough year for small and family businesses coping with cost of living pressures not just on themselves but their customers,” Mr Billson said.

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“We can’t guarantee that 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.

“When a small business finds itself in a dispute or having trouble it has tried to but can’t resolve, we are often able to help navigate a pathway to a solution.”

Mr Billson said being paid on time was critical to the viability of most small 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. Sadly, too often that first party that is slow to pay its suppliers is a big business or a government department,” he said.

“Power imbalances make it difficult for a small business to pursue timely payment for their services. In one case a government department was three months late in paying their bills, despite multiple reminders from the small business. In another case, a sub-contractor in the construction industry came to us after he had not been paid for many months and became homeless.

“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.

“When a small business is not paid, it puts extreme pressure on all aspects of their lives. These pressures are amplified with higher interest rates and businesses facing challenges are drawing on their cash buffers to keep their business afloat. And let’s never forget that the business owner will pay themselves last after paying their bills and staff, so slow payment can needlessly amplify the risks of business ownership.

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“Research by my office shows 43% of small businesses do not make a profit while 75% of self-employed small business owners working full time earn less than average full-time adult weekly earnings”

Mr Billson said contract disputes ranged from cases where a small business was unaware of auto-renewals for goods and services to terminating agreements.

“In one case a family-owned cinema in a coastal town came to us about a long-running dispute they had with a beverage supplier that had escalated to the point where they had broken fridges and could not meet the terms of their contract to sell a set quantity of drinks, which in turn was causing financial hardship” he said.

“Our case manager directly contacted the head office of the beverage company and helped not only to resolve the contract dispute but assisted both parties to improve their processes. The cinema has decided to keep that beverage supplier for a new contract supported by better mutual understanding.

“This is a great result. Most small businesses in a contract dispute do not want to end the business relationship. They want to keep doing business but they often struggle to fix problems when they arise.

“We can give small businesses the skills – and sometimes case management – to resolve the dispute without ending the business relationship.”

Mr Billson said there has also been a sharp rise in the number of disputes involving digital platform providers.

“Digital platforms have fundamentally changed the way in which small and micro 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,” he said.

“Often there is no real person you can speak to, and the automated systems prevent you being able to escalate the issue. One of the absurdities is after being locked out of your account, you need to access your account to make a complaint. It’s the ultimate run around.

“Some people have built their entire businesses on social media and digital platforms and having someone else access and control their account is devastating for their business and their reputation. They watch the financial and emotional damage occur in real time with no ability to stop it.

“Hundreds of small business have sought our help in dealing with their digital provider to unlock their accounts so they can get back to doing business.”

In the franchise sector, cases have involved managing disputes about the sale of a business, fees and charges associated with the franchise, helping parties to amicably terminate agreements and organising Alternative Dispute Resolution when other efforts had failed.

Mr Billson said many other disputes involving small business such as those about insurance, telecommunications, banking and finance, cyber security and workplace issues such as health and safety, were referred to other relevant dispute resolution agencies because the Ombudsman’s legislation prevents the office from duplicating the functions of other Commonwealth, State or Territory agencies.

“We happily provide a type of triage service to receive the dispute and then assess whether we are best equipped to help or whether the small business will be best served by sending their case, with their permission, to the most appropriate federal or state agency,” Mr Billson said.

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