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Understand, manage and resolve your dispute

Problems arise every day between small businesses, their customers, suppliers and employees. Most of these are dealt with quickly and efficiently through common sense. However, sometimes these problems escalate into a dispute which requires further understanding and assistance to help resolve it.

In general, there are five steps to dispute resolution:

1. understanding the dispute

2. talking to the other party

3. formally writing to the other party

4. seeking assistance from a third party

5. taking the matter to court.

Phase 1 - Understanding my dispute

If you think that something is unfair or not right it is important to understand what the problem is and how it affects your relationship with the other party.
A good understanding of your dispute will help you to make informed decisions about the best way to try to resolve the dispute.

How did the dispute arise?

A good place to start is to ask yourself, how did the dispute arise? It can be helpful to write a list of the events leading up to the dispute and to highlight what you think were the key points.

Check your facts

  • If you have a written contract, the first thing you should do is read it carefully. Contracts specify the rights and responsibilities of each party and detail obligations which you must meet. Additionally, there may be a dispute resolution clause in the contract that needs to be followed.
  • If you have an oral agreement or part oral/part written agreement, while risky, these are just as valid as a written contract if there is proof of what was agreed. You may have supporting paperwork that forms part of the contract. For example, emails that confirm what was agreed, a list of specifications, a quote with relevant details about materials, timeframes, any notes about your discussions, etc.

Identify the issues

Write down the issues that make up the dispute and strain your business relationship with the other party. Identify the most important issues you need to resolve and put them in order of priority. It is also important to think about what the other party might identify as their key issues.

Are there misunderstandings?

Many disputes arise because of misunderstandings. Consider if it is possible that there are some facts, background or current circumstances that you don’t know about that may have led to the issues arising. A conversation with the other party may clarify the issues and lead to a resolution.

What are your priorities?

Work out what is most important to you – Is it getting paid? Getting more work in the future? Or, finishing the job and moving on? Is there a primary issue that, if resolved, will also resolve a number of other concerns?

Identify potential outcomes

Consider what you know about the dispute and identify potential outcomes. Think about what you want to achieve and what you can realistically expect to achieve in the particular situation. Consider how this will impact on cash flow, time and resources, productivity, future business, and personal relationships.

Reality check

Talk to someone outside the dispute, such as a trusted adviser. Do they agree with your position?
Give time to consider what the other party may think of the situation, what their issues may be, what they may want to achieve, and if they will think your outcome is reasonable.
Check your emotions – are you angry or disappointed? Could this be clouding your perspective?
Download the checklist:

Phase 2 - Discuss the problem

Now that you understand your dispute it is time to talk about it with the other party. If the issue is minor, a telephone conversation may be all that is needed, but for more complex matters an in-person meeting can be more successful.


It is important to prepare for your meeting. Completing the steps in Phase 1 – Understanding my dispute will assist you to identify and understand your dispute, such as how it started, what the key issues are and to consider the perspective of the other party.
In your meeting stay calm, be professional and be prepared to negotiate and compromise. Be sure to make clear written notes about your discussions and any outcomes which were agreed.
Be aware that problems are often caused by misunderstanding. Knowing what events led to the issues arising and discussing this with the other party may help to identify if there was a misunderstanding.

Have an open mind

It is important when you meet with the other party that you enter with an open mind and are prepared to negotiate and compromise.

Keep a record

Make clear, written notes about any discussions you have with the other party and the outcome of those discussions. If possible, prepare an agreed record of what was discussed at the end of the meeting. These notes may form part of your evidence if the dispute is not resolved and must be escalated.

Phase 3 - Put it in writing

If talking over the issue didn’t work, writing a polite business-like letter is the next step. Putting your concerns in writing provides the other party a chance to fix the situation before further action is taken and also gives you a document which can be used as evidence if the situation needs to be escalated.
If your dispute is complex or writing isn’t your strong point it may be a good idea to get some help writing this letter.
Tips for writing a letter of concern:
  • Who – Address your letter to the person who is responsible for supervising the person or area you are having trouble with, or write to the head of the business or organisation.
  • Branding – If you have a business letterhead, business logo or brand, add this at the top of your letter. It will make it look more professional.
  • Content – Set out your concerns as clearly and briefly as possible. Provide any relevant background information, identify options to resolve the dispute and provide your contact details. Make it clear that you are looking to resolve the situation professionally and quickly. Avoid laying blame for the situation.
  • Language – Be polite and business-like. Avoid using abusive, aggressive or overly emotional language.
  • Attachments – Attach copies of any relevant paperwork to your letter. For example, a copy of your contract, an email, a list of specifications, a quote, an invoice or any other document that supports your letter of concern.
  • Copy – make a copy of your letter and keep it.
Need more help? Download an example letter.
If you have tried unsuccessfully to get an invoice paid, a letter of demand might be your next option. A letter of demand is usually sent if you still have not received your payment after first and second reminder letters.

Phase 4 - Get a third party involved

Alternative dispute resolution (ADR) is an alternative to going to court to resolve your dispute. ADR is generally quicker and less costly than court and gives you more control over the outcome. Common types of ADR include facilitation, mediation, conciliation and arbitration.
The language used in dispute resolution can be confusing. The National Alternative Dispute Resolution Advisory Council (NADRAC) has a glossary that helps to explain common terms used in dispute resolution in Australia.
There are a lot of dispute resolution services available to help resolve business disputes. Dispute Support is an online dispute resolution information and referral tool. It will help you to find the most appropriate low cost service to help you to resolve your business dispute.

Phase 5 - Take it to court

Taking the matter to court should be the last resort. Court is expensive, time consuming and the outcome is out of your control.

If you require further assistance, the Australian Small Business and Family Enterprise Ombudsman Information Line can provide information and assistance, including helping you to identify the most appropriate service to resolve your dispute. You can contact the Information Line on 1300 650 460.