7 common invoice disputes and how to resolve them

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    Credit control & accounts receivables

    7 common invoice disputes and how to resolve them

    No one likes dealing with an invoice dispute but they, unfortunately, happen all too often in the business world, significantly delaying payments.

    A client disputing invoices can lead to a lot of wasted time and money. In this blog post, we will discuss seven common reasons for a disputed invoice and how to resolve them, including the finer points of invoice dispute law.

    By understanding the root causes of invoice disputes, you can take steps to prevent them from happening in the first place and reduce your time waiting for payments. 

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    What is a disputed invoice?

    A disputed invoice is an invoice that a customer or client does not agree with and therefore refuses to pay. In some cases, the customer may dispute the entire invoice, while in other cases, they may only take issue with certain charges.

    There are many reasons why a customer might dispute an invoice. Perhaps they believe that the pricing is too high, that they received inferior goods or services, or that they were never even provided with the goods or services in the first place.

    Whatever the reason, if you find yourself dealing with a disputed invoice, it's important to take action quickly and efficiently to resolve the issue.

    Here are seven of the most common invoice disputes and how to deal with them:

    1. Unsatisfactory work

    One of the most common invoice disputes is when a customer is unhappy with the work that was provided.

    If you receive feedback from a client that indicates they are dissatisfied with your work, try to resolve the issue as quickly as possible.

    It's important to take the time to listen to their concerns and see if there is anything you can do to improve the situation.

    Your first step should be to find out why they believe the work is unsatisfactory, and ask for evidence.

    If you can see their point, offer to make the necessary changes or amendments free of charge. If you don't think the work is actually unsatisfactory, try to negotiate a compromise.

    This could involve offering a partial refund or giving them a discount on future work, or potentially making revisions to the work in question.

    Remember, the goal is to keep the client happy, so consider the impact on customer experience and the importance of customer experience to your business.

    However, in cases where you have delivered a service that has not resulted in the desired outcome, you should refer to your contract.

    In the contract, you should have a section that outlines what happens in the event of a dispute. This will help to protect you and ensure that you are not taken advantage of.

    Normally, this will outline that you are only responsible for delivering the work as specified in the contract, not the further outcomes the client expects to achieve.

    It is also recommended to include a clause in your payment terms on how disputes are resolved, to act as a guideline for your staff when this occurs.


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    2. Faulty goods

    Faulty goods are one of the easier disputes to resolve as you can simply offer to repair or replace the goods. If this is not possible, then you should refund the customer in full.

    On the flip side, the customer will have to provide you with evidence of the fault, such as photographs or a report from an independent expert.

    If you are unable to resolve the dispute, then you can take the matter to court and the presence of this kind of evidence will be vital.

    A good way of heading off this kind of dispute is to schedule a follow on call as soon as goods are delivered to check that everything was received and they are happy with their purchase.

    Having the customer confirm that they are happy with the product in writing can also help to avoid disputes later on.

    3. Late delivery

    The contract signed with your customer should cover the possibility of late delivery penalties and how these are to be applied.

    If you are going to be late in delivering the goods, then it is important to communicate this fact to the customer as soon as possible and give them an expected delivery date.

    If you are at fault for the late delivery or have missed a promised date, then you may want to offer a discount or credit to the customer to improve their experience.

    However, if the fault lies with a 3rd party delivery company, then it is important to get this in writing so that you can show your customer that you have done everything possible to avoid the delay.

    4. Never agreed / Wasn’t aware of payment

    Having a clear contract in place before any work commences is vital to avoid issues like this arising.

    If the client claims they never agreed to the payment, then you need to be able to point to the relevant clause in the contract that they signed.

    If there is no contract, or the relevant clause is not clear, then you may have a more difficult time claiming payment.

    In this case, you can potentially rely on a paper trail stating what was agreed and who with whom. Normally there is an email train or set of text messages that can be used as evidence to show what was agreed.

    It's worth remembering that this could just be a miscommunication on their end, and will be resolved internally, so try and remain calm and professional throughout the process.

    As always when dealing with invoice payments, it is essential to remain professional when following up on overdue invoices.


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    5. Unable to make payment

    There are a range of reasons why a customer might be unable to make payment on an invoice.

    They may be experiencing cash flow issues, which is common for smaller businesses. In this case, it's best to try and come to an agreement on a payment plan.

    This way, you can still get paid and they don't have to worry about being hit with late payment fees or interest.

    While it almost always makes good business sense to help customers as much as possible, you shouldn't let them take advantage of you.

    If a customer is constantly making excuses or trying to push back payment, it's time to have a serious conversation about the issue.

    If a customer claims to be unable to make payments on a regular basis, consider adjusting the customer’s credit limit so you don't put your business at financial risk when extending credit to them.

    You could also implement partial payments upfront to cover some (or all) of your costs and late fees to discourage further payment delays if necessary.

    6. Pricing disagreements

    Going over the pricing before starting a job and then keeping your customer constantly up to date with your billable hours as the job progresses can help avoid any pricing disputes when it comes time to invoice them.

    If a customer does dispute your prices, try to come to a compromise that works for both parties. This could involve breaking down the cost of materials, labor, and overhead so the customer can see where their money is going.

    However, if you have taken every effort to avoid a pricing dispute then you should take a firm stance on payment.

    This is especially true if the customer has already agreed to your prices and then tries to haggle after the job is completed.

    7. Invoice processing errors

    One of the most common reasons for a dispute seen in every industry is when there is an error on the invoice. Particularly if your business is using manual invoicing processes, this is prone to human errors and mistakes can be made at any scale of accounts receivables team.

    If this happens, go through the invoice line by line with the client so they can pinpoint the mistake, or see that everything is accurate. There is every chance that the client is simply misunderstanding the charges.

    The best way to nip this kind of issue in the bud is to put in place a rigorous error-checking process for every outgoing invoice.

    This could be as simple as another team member checking the accuracy of invoices before they're sent out, implementing an invoice checklist, or using software to automate checks. If you are dealing with high invoice volumes consider an automated invoicing tool that can create invoices for you, like ChargeBee

    Seeking legal advice

    If you are unable to amicably resolve the invoice dispute with your client, you may have to take legal action.

    This is usually a last resort, but if the debt is large enough or you feel that the client is deliberately trying to avoid paying, it could be your only option.

    Before taking any legal action, it's important to seek professional advice from a lawyer specializing in invoice dispute law.

    They will be able to advise you on the best course of action and help you navigate the legal process.


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    Avoiding disputes

    With most of the common invoice disputes listed above, preparation and communication are key to avoiding them.

    By being proactive and taking the time to understand your client's needs and expectations, you can avoid many of the issues that lead to a client disputing invoices.

    If an invoice dispute does arise, stay calm and try to resolve it amicably. If you're unable to do so, seek professional advice from a lawyer specializing in invoice dispute law.

    With the right preparation and communication, you can avoid many invoice disputes and both keep your customers happy and ensure a consistent cash flow with minimised late payments for your own business.

    Automated accounts receivables systems like Chaser are reducing human errors and helping businesses save over 15 hours per week on manual tasks. Save time and get your invoices paid faster with a 14 day free trial of Chaser’s receivables automation software.


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