It’s rare to find any business, small or large, that hasn’t at some point encountered customers who delay or altogether refuse to pay for services received. Some businesses choose to let such debts go and write them off as losses. But if your business will suffer a great deal in the event a customer attempts to avoid paying you what is due, then you have no choice to fight for what is rightfully yours.
Most small businesses who try to get what they are owed from a client tend to pursue the course of legal action. But pursuing legal action can take a lot of time and can also be expensive even if you have public liability insurance. Fortunately, there are alternatives to legal action you can pursue.
Alternatives to court proceedings include negotiation, mediation and arbitration – all three are generally referred to as Alternative Dispute Resolution (ADR)
This can be described as a basic means of settling differences. It involves a back-and-forth communication between all the parties involved in the disagreement. And the end goal of the proceedings is to find a lasting solution that will satisfy all the parties involved.
Negotiation will allow you to participate directly in the dispute resolution. It is quick, inexpensive and effective, and if properly ratified, a negotiated agreement can become an enforceable contract.
This can be described as a voluntary process in which a mediator will serve as an impartial party that will help facilitate reconciliation through communication between the parties. The mediator will at the end help all parties involved come to a mutually acceptable agreement. Generally, people opt for mediation if and after negotiation fails. The real benefits of the process lies in its privacy and confidentiality, as well as how it helps to avoid the uncertainty of duration, cost and stress of a trial.
In an arbitration, only one side will prevail. The process can be described as a submission of a disputed matter before an impartial party (the arbitrator) for decision. It’s quicker and less expensive than going to court and the award given by the arbitrator can be enforced in a court.
Checklist for resolving small business payment dispute
The checklist below will help minimise cost and time spent while attempting to settle a payment dispute to your satisfaction.
- Review the details of the initial contract agreement to verify you aren’t at fault.
- Get a clear understanding of how the other party breached the agreement to pay.
- Collate evidence such as the signed agreement, correspondence, and anything else that’s pertinent
- Attempt negotiating an amicable resolution
- Assess the ability of the other party to pay the owed sum.
- Seek legal advice especially if the dispute is a complicated one, and assess whether you have a strong case
- Clarify costs of taking legal action to determine if it’s worth it in the long run
- Go forward with the claim or abandon it. Whichever you choose, be sure to inform the other party
- Track legal costs and progress as case proceeds.
- Be prepared to compromise and accept any reasonable offer made by other party in order to avoid more time and money spent on court action which may not go your way at the end.