What is a Disputed Invoice? – How to Resolve Them
Money issues are not the type of news you love to wake up to as a business owner. And they become more complex when customers are involved—any wrong moves could ruin your company.
Disputed invoices are one of the most common issues that small businesses face. Regardless of how watertight your billing process is, customers are likely to debate invoices at different points. But, the way you handle the situation will make or mar your brand and client relationship.
Use this guide to understand different causes of disputed invoices, how to limit these occurrences in your business, and the best methods for resolving them.
Here’s What We’ll Cover:
What are the Common Causes of Invoice Disputes?
When customers think there’s a mistake in their billing information or they shouldn’t be liable for paying specific amounts, they might reject an invoice. In other words, a disputed invoice results from discrepancies in a client’s bill.
Invoice disputes happen for different reasons, including accounting errors, pricing errors, or when your customers do not have the money to pay for services rendered.
1. Customer Dissatisfaction
Businesses need to create client feedback channels for resolving any complaints before it’s time for an invoice.
If the quality of the product or service delivery doesn’t match the fee, the customer may contest the invoice. Also, when the product falls below a client’s expectations or is delivered late, they might change their minds about paying the quoted amount.
2. Invoice Processing Errors
The difference between “1” and “100” are a few zeros, yet these two variables couldn’t be further apart. If you quote the wrong figure during invoice processing and your customer catches it, they will dispute the bill to call your attention to the error. Always double-check all invoice details before sending them to your clients.
3. Pricing Disagreements
Before getting started with a request, go over the pricing with your customer. This way, everyone would be on the same page. If you’ve already shared your business packages and rate sheet, review the client’s order one more time before delivering on their requests.
Also, your rate sheet should clearly state the project’s scope, pricing and plans, and the total fee.
4. Payment Constraints
If your customer is cash-strapped, they might dispute your invoice to extend the payment period. This is an underhanded practice, and many companies impose a late payment fee in such cases.
Small business owners can avoid this dishonest act by asking customers to pay a commitment fee before providing a service.
How to Handle Invoice Disputes in Your Business
- Go through the agreements
- Come up with a mutually beneficial solution
- Seek legal advice
Go Through the Agreements.
When an invoice dispute issue comes up, the first place to look is the signed contract. If you don't have a contract, check any terms and conditions guiding the sales process.
In the contract or terms and conditions of the transaction, you should have relevant information like the payment terms, schedule and payment duration. A comprehensive agreement will also spell out formal invoice dispute methods, including the time limit for invoice complaints (in many countries, this is three weeks/21 calendar days) and a cure period for settling unpaid invoices, typically a 30-day processing time.
These pieces of information will help you investigate the issue and map out your next steps.
Come up with a mutually beneficial solution.
Many times, it is possible to resolve the dispute in-house without taking legal action. So, before you escalate the case, have a conversation with the client. You might just come up with a solution that works for everyone.
For example, if the customer is dissatisfied with the product or service quality, you can offer them a discount or a replacement package. If you quoted the wrong fee, apologize to the client, make the required changes and send the correct invoice.
Seek Legal Advice.
Several clauses in invoice dispute laws come to play in complex payment disputes.
If you cannot resolve the issue amicably, then you should speak with your lawyers as soon as possible. An attorney would interpret different legal provisions in the business contract plus additional evidence and let you know the invoice dispute contractual procedures that apply.
Settle Your Disputed Invoices with Ease
An Invoice dispute can be unsettling. However, no matter how messy it seems, do not ignore the issue—a payment dispute won't disappear if you fail to address it on time.
More importantly, always have a formal contract or agreement for all business transactions. These legal documents provide strong backing for swift invoice dispute resolutions.
More Small Business Invoicing Resources