According to a new report by the Federation of Small Business (FSB), nearly
The report, which was released on Thursday showed that small businesses are owed an average sum of £18,000 and can pay up to £17,000 dealing with chasing debts.
Most small businesses owners will encounter a dispute at some point in their entrepreneurial lifespan, with problems ranging from minor short-term cashflow problems all the way to more serious issues such as insolvency.
Currently, 43% of small business deal with disputes either informally (privately) or semi-formally using professionals such as accountants and solicitors, 19% of small businesses take their recent disputes to court and 17% are left with unresolved disputes.
Between 2010 and 2015, £62bn of late payments were tied up through disputes. National Chair of the FSB, Mike Cherry said: "Disputes are inevitable in business, but many small firms don’t have the time or resources to deal with them effectively. The dispute resolution process faced by small businesses in England and Wales is costly and complicated. Billions of pounds are flowing out of small business pockets as they try to claw back unpaid debts.”
The FSB see the appointment of a small business commissioner as a vital part in improving the system and resolving disputes faster. The role of small business commissioner, however, is not due to start until autumn next year.
“The small business commissioner should become a hub for prevention and early intervention, dispute advice, and for helping small businesses identify and use alternative dispute resolution,” says Cherry.
As part of the government measures to crack down on late payments, large businesses and limited liability partnerships will be required to publish details on how quickly they pay their suppliers twice a year from April 2017.
Minister for small business, consumer protection and corporate social responsibility, Margot James, stated: “By shining a light on how large businesses pay their smaller suppliers, we want to empower small businesses and drive a real change in payment culture.”
The FSB report also offers the government some recommendations for dealing with disputes such as a reviewed and strengthened alternative disputes resolution (ADR), overhauled civil courts fees system and the introduction of a specialist commercial track to make going to court cheaper and fairer for small businesses.