The Federation of Small Businesses published a report (Tied Up 2016) recently exploring the cost of disputes to UK small businesses.
The Federation of Small Businesses published a report (Tied Up 2016) recently exploring the cost of disputes to UK small businesses. In the report the FSB recognises the important role of mediation in reducing the impact of disputes.
The report finds that disputes cost smaller firms in England and Wales a staggering £11.6 billion each year. The report found that there were at least 3.4 million commercial disputes involving small businesses in England and Wales between 2010 – 2015, and 70% of small businesses had at least 1 commercial dispute between 2010-2015, with the average disputed amount equalling £18,000.00.
72% of commercial disputes for smaller businesses relate to late or non-payment of fees – this amounts to 2.4 million smaller businesses experiencing such a dispute. The report also found that the most commonly reported source of a dispute was the customer or client (57%). Suppliers were the second most common source at 21%. Interestingly, disputes with competitors or internal disputes accounted for just 2% each.
Why does all of the above matter? Smaller businesses don’t often have the capacity or resources to deal with disputes. The impact can be devastating and might include key commercial relationships being lost, cash flow difficulties, or insolvency.
How can you best deal with customer disputes?
The best way to avoid a dispute with a customer is to agree exactly what it is the customer wants from you in advance, to then provide detailed information on how you will meet those needs, and to then deliver that service.
- Agree customer expectations
- Provide detailed instructions on how you will deliver on those expectations
- A clear and concise contract, signed by the customer.
- Provide your service in keeping with 1-3 above
As anyone in business will know though, you can never 100% remove all possibility of a customer dispute. People are people, information can be misinterpreted, and emotions can’t be written down in a contact. Disputes will happen despite your best efforts, but if you follow the above advice you should see your business benefit from more satisfied customers and less angry emails, telephone calls, or social media reviews.
What Else Can Be Done?
Let’s be clear, if a customer submits a complaint or brings a dispute against your company, the absolute worst thing you can do is to ignore it. It is unlikely to go away and the customer will not only be unhappy with the initial service, but will also have a valid complaint about the way in which the original complaint has been handled. All of a sudden you will be dealing with two issues rather than one.
What you should do is engage with the customer, discover the cause of their dissatisfaction, compare it with points 1-4 above, and provide a reasoned response, in writing wherever possible. The customer might not agree with your conclusion, but you have given them the opportunity to explain their position, and explained yours in turn.
Of course, a customer might continue with their dispute. Depending on your sector this might involve a complaint to a governing body – an Ombudsman for example. If this happens, and you have followed our advice above, you should have a good audit trail to support your case.
If there is no governing body, or if the customer chooses to ignore this route, you might find yourself receiving a letter of claim from a solicitor, perhaps alleging professional negligence. At this point it is essential that you don’t ignore the dispute. If you do, you could find yourself in court with no legal advice, or receiving a County Court Judgment against you/your company. Seek legal advice straightaway!
Free Mediation Clause
At Mediatelegal we offer businesses a free clause. This can be inserted into your company’s customer contract, and requires the customer to agree to attend mediation before they can commence court proceedings against you.
Returning to the above scenario where you have received a solicitor’s letter; you can respond by notifying the solicitor of this clause and advising that you want to use mediation to try to resolve the dispute without going to court.
What Is Mediation & Why Should You Use It?
Mediation is a form of Alternative Dispute Resolution (ADR). It is an informal way to resolve disputes quickly, confidentially, and inexpensively. As the FSB report states, “many businesses see it as offering a value-for-money way of resolving disputes’.
Unlike court, mediation won’t see a verdict imposed on you by a judge, instead you and the customer are encouraged to communicate and work together to find an agreeable solution to the dispute. The mediator uses his/her skills to help you both with this process. For more information on the mediation process visit our website.
According to the CEDR 2016 Mediation Audit, 86% of disputes are resolved by mediation either on the day of the mediation or shortly afterwards.
A further benefit of using mediation to resolve disputes is that it can restore relationships which were previously damaged. Because both sides work together to discuss the dispute and also the solution, they are both being heard by one another and working together.
A recent report by the World Bank (Doing Business 2017) found that in the UK it takes 437 days from starting a case in court to enforcing a judgment at the conclusion. That’s a long time for a company to have to deal with a legal dispute – it will be expensive, time consuming, and very stressful. The report also found that legal fees will likely amount to almost 44% of the value of the dispute.
Let’s have a quick look at an example:
Earlier we told you that the average dispute value for small businesses in the UK was £18,000.00. Using the World Bank data, not only would it cost roughly £7920.00 in legal fees per party, but it would also take up to 437 days for a legal dispute to be taken through the courts.
To resolve the dispute using mediation would take up to 1 day. The mediation fee would be just £500.00 per party.
Hopefully this article has made interesting reading for you; maybe it’s even been useful for your business? If it has, please share it with your contacts – i would hope they will appreciate it.
If you would like more information regarding mediation or would like to discuss using our free mediation clause please feel free to get in touch either via our website at www.mediatelegal.co.uk.
Joseph Mulrooney is a panel member of Mediatelegal.
Mediatelegal is a panel of expert mediators, accredited to deal with civil disputes, commercial disputes, and workplace disputes. Established in 2016, and based in Liverpool, we offer a national service but aim to make Merseyside a leading region in the use of mediation.