Late payments: a similar model

I.O.U
I.O.U

In some states in Australia, businesses can turn to an independent body to help settle disputes, including late payments, whether the dispute is with government or with another business. It provides mediation, advice and other dispute resolution services.

This helps avoid the need for lengthy court action, preserves business relationships, and lets both sides ‘get back to business’. State Governments subsidise the service, with parties contributing a small fee for mediation.

The Victoria Small Business Commissioner resolves disputes under the acts of five states, included under the Small Business Commissioner Act 2003. There are 18 staff in the team and more than 50 external mediators who can be called on, as well as an annual budget of A$3.3 million (approximately £1.5 million). The process is simple: you lodge an application for assistance and then we engage with you and the other party to try to negotiate a settlement.

Victorian Small Business Commissioner Geoff Browne elaborates: “My office was established under the Small Business Commissioner Act to enhance a competitive and fair operating environment for small businesses in Victoria. As an independent statutory role, my staff and I act as a neutral third party to assist businesses resolve their commercial disputes.

“If my staff cannot achieve this through telephone and email engagement, I appoint an experienced mediator to discuss the issues in dispute confidentially with the aim of reaching a pragmatic commercial resolution acceptable to both parties.”

Browne’s jurisdiction in investigations and dispute resolutions covers commercial dealings and unfair market practices and is not constrained by any legislated definition of a ‘small business’. The powers of the office are set to be extended and strengthened under the current Australian government.

“We are not a commercial debt collector, but we do deal with disputes where invoices haven’t been paid – whether due to a dispute about quality of goods or services, or simple late payment,” continues Brown. “But most commercial disputes between businesses are not just about late payment, and our services help keep small and medium businesses out of a costly and lengthy litigation process.”

During the last financial year Browne’s office handled 1,840 formal applications. Out of this number of disputes, 24 per cent were settled at the preliminary assistance stage, which is entirely free of cost, while over 80 per cent then reached a resolution once passed to mediation.

Brown explains how the process works. “If for example we receive a complaint about a business over late payment, I’ll write a letter to the CEO in question, asking him or her to engage with my office in a bid to resolve the dispute.

“If this party then unreasonably refuses to participate, I can publish their details in my annual report to the State parliament. We take a conservative approach in determining what an ‘unreasonable’ refusal is and provide every opportunity to the party to engage in our processes.”

Browne backs IPSE’s call and is a strong advocate of its recommendation for the UK government to use a similar model to the one established in Victoria. As he points out: “It has proven very effective over 12 years in keeping SMEs out of costly, time consuming and emotionally draining litigation. In our experience, late payment of bills is only a small proportion of the commercial disputes businesses face. All of these matters are amenable to quick, low cost dispute resolution through our services.”

In the next instalment of the Late Payments series, we take a look at the powers and responsibilities of a Small Business Commissioner…