The Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, has released a guide to help small business navigate the challenge of paying or collecting a debt.

“Outstanding debts can be overwhelming for a small business – whether you are owed money by a customer or you owe money to a supplier,” Mr Billson said.

“We have seen a 50 per cent increase in calls from small businesses worried a supplier might be insolvent or their own business might be heading that way.

The Ombudsman’s Better Help Guide - Small Business Debt outlines how the office of the Small Business and Family Enterprise Ombudsman can help small businesses deal with debts.

“In many cases the amount of debt is not in dispute, just the means and timing of paying it,” Mr Billson said.

“Businesses usually want to keep doing business with each other but struggle to find a workable pathway to resolve debt disputes. This is where we can help.

“We do not provide legal advice or debt collection services, but our dedicated team can provide information and resources to assist a small business to make informed decisions about how to recover or pay a debt.”

If help is needed to sort and deal with debt or cashflow issues, or to navigate the maze of grants or government assistance available, the Small Business Debt Helpline operated by Financial Counselling Australia has a team of qualified financial counsellors who can answer calls directly or assist via a web chat function. The helpline provides free, independent and non-judgemental advice by calling 1800 413 828.

Mr Billson said debt can be particularly stressful 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,” he said.

“Nearly half of outstanding small business loans are secured by residential property.

“Cash flow is the oxygen of enterprise, yet surveys show cash reserves for 60 per cent of small businesses are low or zero, which means they often have no buffer, and this can become worse when they don’t receive a payment they were expecting.”

Mr Billson said a first step for businesses that owe money may be to pay any part they can and offer to enter a payment plan for the remainder owed.

“It demonstrates your good faith and can be a starting point for discussion,” he said. “This proactive approach may reduce the risk of legal action and unnecessary interest charges.”

The Ombudsman said, similarly, those who were owed money needed to find a workable resolution and to understand realistic options to get paid.

“They’re most likely waiting for the money so they can then pay one of their own bills to their suppliers or the Tax Office,” he said.

“When a business does not pay their bills it can cascade through the supply chain, causing economic harm to others.

“A good business pays its taxes, proper employee entitlements and its small business suppliers in a timely way.”

The Ombudsman’s free guide is available at: asbfeo.gov.au/debt

Media contact: 0448 467 178 / media@asbfeo.gov.au

Case studies

*Names have been changed

Sally runs a small civil construction business but one of her customers, another small business, had not paid their $20,000 bill for 180 days. 

The delay, well beyond the usual payment terms of 30 days, was having significant flow-on consequences for Mary as it left her without sufficient cash flow to pay her suppliers.

After repeated attempts to contact the company that owed her money and even offering a payment plan because she wanted to keep the other business as an ongoing customer, Mary called the ASBFEO assistance team. A case manager helped Mary to be paid the full amount she was owed.

Tania, who runs an events business, was owed $10,000 by another business who had stopped paying her and had cut off any communication. She called ASBFEO and we provided advice which got the two businesses talking again and they were able to work out a payment plan and preserve their commercial arrangement.

John runs his own TV repair business and contacted ASBFEO when another business he had been working with for five years, suddenly stopped paying him. We helped negotiate a payment plan so both businesses could stay in business.