Has your business been one of many impacted by Covid-19 in 2020? The impact of the pandemic has been no doubt devastating, causing forced closures for some and uncertainty for others. While many of these businesses are planning to reopen when permitted, the sad reality is that not all of them will. The flow-through impacts of business closures will mean that in the next 6 to 12 months, even businesses that haven’t been directly impacted will start to feel the pinch. Businesses operating on credit terms are likely to have an increase in overdue debts and if so, will be forced to take action to recover these.
Most everyone can agree that litigating to recover debts or mediating contractual breaches is an unpleasant experience for all involved. For the business who is owed money, even if successful, they will still generally suffer a shortfall after paying their lawyers (not to mention all the time and stress spent as well). While many may rely on a Costs Order to recover some of the financial loss, unfortunately most lawyers charge higher than the court scale anyway. Not to mention, not all costs are allowed by the court, either. The wait times to get a judgement can also be excruciatingly long, delaying the time frame before any money is seen. The debtor is unlikely to make any part-payments while litigation is on foot, and of course, lawyers will require evidence gathering and meetings with their clients - which takes their valuable time away from focusing on their business.
It may seem bleak, but there is a ray of hope. With a relatively small investment of time and money, businesses can maximise their chances of getting out of these difficult situations without the need to reach litigation. Based on my professional experience of mediating many commercial disputes, here are the top things a business can do to settle disputes without litigation.
Are you prepared to communicate clearly and openly?
One of the immediate impacts of Covid-19 has been in the area of commercial leases. Mediators with the Victorian Small Business Commissioner have mediated numerous rent relief disputes, a number of which reached mediation simply because one party buried their head in the sand and avoided the conversation. Perhaps a tenant stopped paying rent, or paid what they saw as a fair percentage, without speaking to the landlord. Perhaps the Landlord simply ignored the tenant’s request for relief without response.
The mere avoidance of the conversation is likely to raise hostility in the other party. Hostility is the enemy of collaboration. Even when the parties are brought to mediation, this hostility means that the parties are less likely to share information or reach a settlement.
Of course, it’s natural to want to hide from the situation, particularly if it’s within your character to avoid conflict. It’s never going to be a fun conversation. Remember though; the longer it festers, the less fun it will be.
Are you prepared to listen to their concerns?
It’s clear that Covid-19 is impacting everyone. Parties enter into negotiations with strong concerns and even fear for the survival of their business. But, to focus only on your own concerns without gaining an understanding of the other party’s position will only do you a disservice. Invite the other party to share the impact on their business - what do they need out of an outcome to make them satisfied? Offering to listen to them before you launch into the troubles you face is a key step in building trust and a more collaborative working relationship.
Have you prepared a strategy before entering the negotiation?
Going into a negotiation, it’s essential to consider a few key points before you begin. Have you got the right decision-maker in the room? Who else should be involved? What persuasive evidence can you bring to support your position? What will happen if you don’t reach an agreement?
These are only some of the important questions that need to be asked to prepare you for negotiating optimal outcomes. Taking a systematic and comprehensive approach to negotiation planning will deliver you the best results, so take the time to consider all possible outcomes and what you’re prepared to do in any given scenario.
Do you have mediation support on hand?
Some of us are natural-born problem solvers, and when an issue arises, we feel the need to shoulder the burden on our own regardless of whether we’re equipped to do so. If you had a broken dishwasher, you may attempt to fix it yourself - however, the chances are it would take you longer to fix than if you simply called a professional plumber. You also take the risk of causing more harm and possibly leaving your dishwasher even more broken than before. Similarly, if you have an important negotiation on the cards, a skilled negotiator can assist you in the process to ensure that you can deliver the best possible outcomes. While you are no doubt an expert in your business, the training and background required to put forward a solid negotiation strategy (with the best chance of success) is a different skill set altogether.
For many involved in unpaid debt situations here in Victoria, feeling that they are in the right will mean they are happy to let things progress to litigation, as they are confident in their ability to win. However, the cost and long term impact of allowing conflicts to get so out of hand are underestimated. This is avoided easily and quickly with the assistance of a professional mediator, who can cut short the arduous process of negotiating and going around in circles. With my extensive experience working as a Mediator with the Victorian Small Business Commissioner, I have a wealth of knowledge and familiarity with these situations and can guide small business owners through the toughest of scenarios.
Book a FREE discovery call with me to learn more about my services, and how I can assist you in achieving your optimal solution.