Small businesses unaware of dispute resolution methods

Small businesses aren’t fully aware of the services available to them to resolve a dispute, according to a new government survey.

The Small Business Dispute Resolution report, commissioned by the Department of Innovation, Industry, Science and Research, reveals patchy small businesses knowledge of business-to-business dispute mechanisms.

A total of 2007 Australian businesses were surveyed, with one in five reporting a dispute with another business in the past five years.

According to the survey, businesses younger than five years old are the least likely to have considered third party intervention at all, with only 5% of them having involved a third party or taken legal action.

These businesses were also the least likely to have avoided dispute escalation due to the potential cost of such an action.

According to the survey, the out-of-pocket costs range from $0 to $160,000, although 50% of respondents indicated their expenses were under $2000.

But the survey reveals many small businesses aren’t aware of low-cost options available to them if and when a dispute does warrant further action.

The survey shows only 19% of small businesses utilise government support services – in the form of hotlines or websites – yet 57% of these businesses are satisfied with the quality of information or guidance provided.

Minister for Small Business Nick Sherry says for many small businesses, a dispute may drain significant resources and impact on everyday operations.

“They may miss out on having their matters settled to their satisfaction simply because they don’t know how to access alternative methods of dispute resolution,” Sherry says.

“Many of these services are free or available at a relatively low cost – and the survey shows it’s definitely worthwhile for small businesses to use them.”

According to the survey, only 6.5% of respondents who experienced a dispute took legal or third party action. The main parties approached were lawyers, industry associations and/or debt collectors.

According to the survey, small businesses that use alternative avenues of dispute resolution, such as arbitration, mediation or conciliation, are more satisfied than those that go to court or seek legal advice.

Of the 15% of all businesses that had serious or potentially serious disputes, less than half were aware of the roles played by mediators and arbitrators, and only a third were aware of role played by conciliators.

The report defines these roles as the following:

• Arbitrator: An independent ruling outside the court system.
• Mediator: An independent facilitator who helps you reach resolution but does not provide advice.
• Conciliator: An independent facilitator who helps you reach your resolution and can provide advice, but not a ruling.