Overcoming 5 common reasons for disputed invoices.
13th September 2019.
Your relationship with your client was going wonderfully and they were always friendly, but then you sent them the invoice.
Suddenly they have all sorts of problems.
Unfortunately there will be times when customers start coming up with all sorts of issues as soon as it comes time to pay.
You’ve charged too much, they weren’t happy with a service, or they claim there was a problem with the delivery and goods were wrong, faulty or late.
How can you respond tactfully, obtain payment and maintain the relationship when disputes arise?
Many are tempted to sweep disputes under the carpet, cave to the customer or pass the buck, just to avoid an argument and keep them happy.
But you really shouldn’t ignore the dispute or the late payment. The longer a dispute is left, the harder it will be to resolve. It’s best to quickly address the issue and bring it to a conclusion.
Avoid disputes in the first place
With invoice disputes being time-consuming, distracting and damaging to the cash flow of your business, it would be best to avoid disputes in the first place.
- Where possible, break the invoice up into a number of invoices during a contract. It might be easier for the accountants to put everything into one big invoice at the end of the contract but if you do that then any dispute holds up payment of everything. By breaking up the invoice into multiple invoices, you can identify disputes earlier. You can also limit what payments are withheld because of a dispute. Rather than have an invoice for ten items being held because of a dispute on one, the customer can pay 9 invoices and only legitimately withold payment one the one disputed item. If you stage invoices throughout the contract then they will have to raise disputes much earlier if they are unhappy and will likely limit them to more legitimate claims as they will still want you to fulfill the balance of the contract.
- Make sure your invoice is simple and clear. Is the invoice addressed to the right person and are the terms clearly stated? Are all the contact details there? Does it give your customer all the information they need? Does it clearly explain the products or services being invoiced. Is the invoice broken down sufficiently to enable the client to check it? So many invoices are disputed because the client do not understand them.
- Stick to the quote! When you start adding things that are not on the original quote, that is a sure fire way to raise a dispute. So if unexpected costs or additions do arise, make sure these have been explained to the customer and a revised/additional quote has been agreed to match to the invoiced items. And if that is not possible, put the additional items on a supplementary invoice to avoid the whole amount being withheld.
- Call your client before you invoice, to warn them the invoice is on the way. This is a chance to check the address and other details and also flag any potential disputes. You can also call just after sending the invoice. say you are just checking it is received but again it is an opportunity to spot any disputes without waiting till the end of the payment terms. You can check that the client understands the invoice and that they find it clear and accurate.
- Before sending the invoice check you’ve got the right prices and details. If your invoice is payable in 30 days, your customer is not going to tell you straight away that it is wrong. Only when it is late and you chase the payment will they likely raise the dispute over an error. You then have to issue a credit note and re-invoice correctly and the payment dates get pushed out even further. Get those details right first time to avoid the dispute and the delayed payment – Check it and then Check it again!
- Put in your terms and conditions that disputes must be raised within a week say of receiving the invoice. Put the onus on your client to raise disputes quickly. This will help separate legitimate disputes from spurious delay tactics. It will also give you the chance to rectify early legitimate disputes and maintain good relations with the client. some genuinely aggrieved clients would rather move to a new supplier than address grievances.
Resolving disputes
Even when you follow the above, you are still likely to face disputes.
By dealing with them promptly you will be able to separate true disputes from attempts by the client to find reasons to delay payment.
By identifying the dispute nice and early you can quickly solve it and restore the relationship and make sure remove the obstacle to payment.
5 of the most common disputes and how to deal with them.
1. Unhappy with the goods or services.
If a customer is claiming that they are unhappy with the goods or services you have provided, it’s important to get down to specifics. Often the purchase ledger clerk will be passing on a compliant from someone else and be very sketchy on details so it is important to narrow down the exact nature of the complaint. Did the goods or services simply differ from what the client had in mind as the ideal?Did the customer’s needs change after the order? Or is their actually something wrong and was what you provided incorrect, faulty, damaged, unfit for purpose or fail to match the order?
If it is a case of them just being unhappy, what can you do?
What evidence can the client supply to support their claim and, if justified what opportunity do you have to rectify it?
If you have fulfilled the agreement/order but the problem is the clients expectations and they just are unsatisfied, then probably it is not your issue and you have the right to be paid for the goods or services.
You might offer to make some revisions beyond the contract or you could make clear if they want something beyond the original order then there is an additional charge. If you are going to make revisions without extra charge then make sure it is clear it is limited as some clients will continue to push endlessly for revision after revision after revision.
However, beware that if the first time you have heard of the dissatisfaction is when you have asked to be paid, then it may well just be a delaying tactic.
When dealing with the dispute, try to remain calm and not take it personally. Focus on the facts and where possible try and get the issues written down in black and white as it helps strip out emotion.
If your customer is unwilling to discuss it rationally or give you the chance to rectify the problems then you may need to involve a third party to help resolve the issue.
2. Faulty goods
If the client is claiming that goods that were delivered were genuinely faulty, then they might be justified in disputing the invoice and refusing to pay.
The first thing to do is establish the fault is real and ask for proof.
If the goods are faulty are they willing to return them?
Will they let you replace them?
What evidence can they provide of the fault?
What though, if the client used the goods anyway, despite the claim that they were wrong or faulty? The client may argue that time restraints left them no choice but to use the products. Grey areas always exist. If some of the ‘faulty’ goods were used, then the implication is that they were sufficiently good enough to be used and should be paid for –at least in part. Ask for details and evidence of the condition, and if it’s genuine it could be worthwhile offering a discount as a gesture of goodwill.
If they can’t provide evidence, then its becomes a commercial decision over the value of their goodwill.
Again, if the first you’ve heard of the problem comes when it’s time to pay,be wary of the motives.
3. Late delivery
Goods and services will on occasion be delivered late. Processing problems, bad weather, staffing & supplier issues and other emergencies can and will come up.
Therefore you should put conditions up front in your terms and contracts on what happens in the event of late delivery.
Also keeping open lines of communication with the customer when delivery is going to be late can smooth many disputes.
Importantly, unless there is an up-front agreement that includes a specific penalty clause for late delivery, then you are within your rights to insist that payment is made in full.
If the late delivery is down to your error or you are keen to maintain then you might want to negotiate a settlement or discount beyond your terms to keep both parties happy.
4. We didn’t agree to that
When a customer claims they were unaware of certain charges or that the cost wasn’t properly agreed up front then a lack of paperwork can leave you with a difficult position.
Try to always get a clear quotation or contract setting out clearly charges before you do any work. Where changes are requested, get that documented with the additional costs.
Even if you think it is someone you have a great relationship with, do not rely on verbal agreements. Think of written contracts as being a way to protect the relationship.
If you do that you can always direct disputes back to the contract or quote.
If you do not have a contract, look for any other evidence you could use to show the customer was aware of the costs.
It may be that you just need to involve more people on both sides to prove your claim was agreed up front.
Make sure you are speaking to the person in charge can usually help resolve the dispute.
5. Can’t pay
CPA recommends that before offering goods and services on credit on a client you check their credit worthiness up front. CPA provides credit reports to its members to enable them to see your clients credit rating and then you can set recommended credit limits in line with the customers ability to pay. If they need more from then they will need to pay on delivery or speed up their payments. Don’t allow the lure of extra sales to over extend yourself to someone who won’t be able to pay.
Too often we are approached by businesses asking us to collect huge debts from businesses who simply do not have the ability to pay and should never have been extended so much credit.
However even when you have been careful and credit checked your customer, your client’s situation could have changed since the original agreement was made and by the time the invoice is due to be paid, they are having a cash flow problem that leaves them unable to pay.
Often it can be because a client of theirs has likewise not paid on time. Late payment is a disease and it spreads fast. You client has suddenly found themselves unable to pay your invoice.
However, remember that once an order is placed, a contract signed and/or terms and conditioned agreed to, then the customer is legally obliged to pay you.
Not being able to pay is not a real dispute. you’ve done nothing wrong, its their issue. Once payment is late, you have a legal right to pursue payment and also add statutory compensation, interest and recovery costs.
The best practice is to keep the lines of communication open. Don’t be afraid to ask for specifics on their cashflow and ask on their plans to address the cashflow issues.
If you feel they are being genuine then you might want to agree a payment plan. Don’t leave things open, agree dates for installments or for a review of the payment plan. Don’t be too generous, you deserve to be paid. But being flexible can pay dividends to the relationship in future.
Alternatively, it could be that you sense your debtor is simply avoiding paying your account and the claim they can’t pay is not genuine. If so immediate action is required to pursue the debt. You can escalate the matter by passing it to a debt collector like CPA.
Do you sell on credit?
With pressures on the cash flow it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.
Those customers will look for the easiest option to boost their cash-flow. Don’t let it be you.
You can’t just assume your customers can and will pay you eventually, no matter how big their name is.
It is essential to have credit management systems in place to monitor and check your customers credit worthiness.
It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.
About CPA
The Credit Protection Association can help!
Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply on credit, help us help you identify the risks.
Why use a third party collector?
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Over the years we have collected billions in overdue invoices for our customers.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
CPA is passionate about late payment
The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.
We are extremely passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.
If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.
As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.
Under little used legislation, you are entitled to compensation for those late payments.
Now you can boost your own cash-flow.
CPA can help unearth the those hidden treasures.
We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.
Yes, CPA can help you boost your business cash-flow.
Don’t let your bankers control you, contact CPA today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you realise you could be sitting on a fortune?
Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.
If you sold B2B on credit then there may be a hidden source of capital you can call on.
If you fancy an bit of extra cash in your business, rather than jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.
Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.
We can help you uncover the pile of gold, you didn’t even know you were sitting on.
If you trade with other businesses and were often paid late then you could be entitled to significant compensation.
Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.
Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.
You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.
That compensation could provide the cash boost your business needed.
But don’t delay, that compensation evaporates if not claimed within six years of the late payment.
How can CPA help?
CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.
We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.
Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.
CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.
The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit. You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.
We do the work, you receive the cash.
If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.
We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.
We are helping business owners who are looking to boost the returns from their business before they retire. We are helping businesses who have lost major clients after years of loyal service to get properly compensated for systematic late payment. We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.
Those former clients who regularly paid you late can finally be made to pay.
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections