“It is clear that small businesses within Victoria are under pressure and facing a challenging operating environment,” wrote Commissioner Lynda McAlary-Smith. Photo: VSBC.
Victorian Small Business Commissioner Lynda McAlary-Smith has reported the heightened levels of stress, monetary pressures and uncertainty about the future have not fallen away following the COVID-19 pandemic.
The Victorian Small Business Commission (VSBC) is an independent statutory authority tasked with preventing and resolving disputes faced by small businesses, retail tenants and their landlords. It was an Australian first when established in 2003 and has had its scope grow over the years, with the last update to its legislation occurring in 2017.
In its latest annual report, the VSBC has for the first time shared some of the key issues unsurfaced through its monitoring activities and engagement with stakeholders.
Among these matters, Commissioner McAlary-Smith wrote that enquiries and dispute resolution under the Retail Leases Act 2003 continue to drive a significant amount of work.
“My expert dispute resolution officers and independent panel mediators reflect to me that they are dealing with parties exhibiting higher levels of distress and aggression and/or animosity towards each other than we have historically seen over the VSBC’s 21 years,” she noted in the report’s foreword.
“We have also seen an increase in applications for mediations under the Farm Debt Mediation Act 2011 and financers seeking exemption certificates under the same legislation to enable them to take enforcement action against farmers in arrears.”
Another core concern flagged by the Commissioner was the reduction in resources available to the VSBC in 2023-24, which “required several organisational changes to be made”.
The VSBC’s drop in funding, coupled with continuing high levels of demand has apparently “exacerbated the service impact of those organisational changes”. Commissioner McAlary-Smith claimed she was in ongoing discussions with the Victorian Government on its fiscal needs.
Despite the gloom, she was “pleased to report” the strongest results yet from Victorian Government departments and agencies with respect to their Payment Times Reporting obligations – noting the 10 business day payment terms that were introduced in 2021.
“Paying small businesses in a timely way makes a real difference to our small business operators,” she wrote.
This improvement comes in a report that found almost half (40 per cent) of dispute resolution applications to the VSBC were related to unpaid money.
Applications steadied to pre-pandemic levels in the last financial year. Source: VSBC.
In the 2023-24 financial year, the VSBC claims it finalised the last of the outstanding matters under the state’s Commercial Tenancy Relief Scheme, which was introduced to help address the financial pressure experienced by commercial tenants as a result of the COVID-19 pandemic.
However its report called attention to the ongoing pandemic-related debts and arrangements that are showing up in disputes under other jurisdictions (Retail Leases Act 2003, Small Business Commission Act 2017, and Farm Debt Mediation Act 2011).
Commissioner McAlary-Smith said it was a reminder for big businesses to pay small enterprises on time.
“Small businesses are impacted by late payments in a big way and they’re often in a power imbalance with larger clients, which is when we assist,” she said. “Many business owners are waiting on outstanding payments for their goods and services … and in turn are stressed about paying their own bills.
“They don’t go into business to provide a free credit line to others.”
Another notable finding was that 64 applications were made for exemption certificates – a legal requirement before creditors can seek to recover a farm debt – almost triple the 24 applications received by the VSBC last financial year.
“We assist farmers to confidentially sit down with creditors and negotiate a way forward,” said the Commissioner. “I strongly encourage farmers experiencing financial stress to get in touch with us.”
While there was more than double (38) the previous year’s applications (18) for mediations between farmers and creditors, 94 per cent of them did result in an agreement.
“Farming communities are facing challenging times – from weather events through to increasing costs reducing margins,” said Commissioner McAlary-Smith. “I hear it when visiting local communities and I see it in the cases that come across my desk.
“Creditors and farmers have been successful in working out practical solutions through good faith mediations held by the VSBC.”
The VSCB can be reached on 1800 878 964, while the Rural Financial Counselling Service can be contacted on 1300 771 741.
