What to do when a customer disputes an invoice

Nobody likes getting a complaint when you were expecting a payment. You’ve chased an overdue invoice, and instead of money, you get a dispute. Frustrating? Absolutely. But ignoring it — or just repeating demands for payment — won’t make it go away. Sticking your head in the sand like an ostrich only delays resolution and damages relationships.

Here’s a clear, step-by-step guide to addressing disputes, documenting them properly, and moving forward to get things resolved (and hopefully, paid).

Caveat: We’re payment experts, not solicitors. This isn’t legal advice — take independent legal advice before implementing any policy.

How to Handle It Calmly and Professionally

1) Acknowledge fast and pause the heat

• Reply within 24 hours if possible. Thank them, confirm you’ve logged the dispute, and give a target timeframe for a first response (e.g., 3–5 working days).
• Tone: calm, curious, and professional — zero defensiveness.
• Collections: pause reminder chasers on the disputed amount while you investigate (keep undisputed invoices on normal terms).

Template — Acknowledgement

Dear [Name],
Thanks for raising your concerns about invoice [#]. I’ve logged this as Dispute #[ID]. I’ll review the details and come back to you by [date] with findings and options to resolve. If you can share any supporting documents (PO, delivery notes, mark-ups), that will help us move quickly.
Kind regards, [You]

2) Get the dispute in writing and specific

Ask them to specify:

• Which items/lines are disputed and exact amounts
• Why: quality, quantity, scope, delivery date, price, admin/PO mismatch, etc.
• Evidence: photos, emails, annotated SoW, call notes, test reports

Tip: If they won’t write it down, you send a call note summary and ask them to confirm or correct it.

3) Open a simple dispute file

Create a file (or case in your CRM) named Dispute #[ID] – Customer – Invoice [#]. Store everything in it.

Dispute Log (copy/paste this table):

4) Triage quickly (what kind of dispute is it?)

• Admin/PO mismatch: often solvable same day (get correct PO, re-issue invoice).
• Price/terms: check quote, contract, emails. Was a discount promised? Any scope creep/change order?
• Quantity/quality: check delivery notes, sign-offs, photos, specs, test records.
• Timing/service level: compare to agreed milestones and comms (delays excused? Force majeure?).

5) Validate the basics (your side)

Run a tight checklist:

• Correct legal entity? Correct address and PO on invoice?
• Price matches quote/contract? VAT rate correct?
• Delivery/performance evidence: signed POD, timesheets, acceptance emails, go-live notes.
• Change controls: any scope or price variations approved in writing?
• Contract terms: dispute process, payment terms, interest/charges.

6) Gather evidence (both sides)

• Pull your documents; number them (E1, E2, …).
• Ask the customer for their documents; log and reference them (C1, C2, …).
• Keep a timeline: what happened, when, and who said what.

7) Issue a First Findings & Options note (by your promised date)

Keep it short; aim to solve, not “win”.

Template — First Findings & Options

Dear [Name],
Thanks for the details on Dispute #[ID].
Summary: You’ve raised [issue] affecting lines [x–y], total £[amount].
Our findings: We’ve reviewed [E1–E5] and your [C1–C3]. We agree/disagree that [point].
Options to resolve:

1. Credit £[x] for [reason], with immediate payment of the balance £[y] by [date].
2. Rework/replacement by [date], then payment on completion.
3. Split settlement: pay undisputed £[u] now; we arbitrate the £[v] remainder within [n] days.
   Please let me know which route you prefer by [date].
   Kind regards, [You]

8) Negotiate towards a written, dated, do-able deal

Good options:

• Undisputed now, disputed later: take cash in quickly on the clean portion.
• Credit/discount for speed: a small concession can unlock full payment.
• Rework with staged payments: align cash with fixes.
• Mediation/ADR: faster and cheaper than court if you’re stuck.

Tip: If they insist on paying everything later, suggest part-payment “without prejudice to rights” while you resolve specifics — keeps cash moving without conceding the dispute.

9) Confirm the settlement in writing (no ambiguity)

• Amount(s) and due date(s)
• Any credits/returns/rework and dates
• What each side waives once completed
• Which invoices are settled in full
• Consequences if dates are missed (reinstatement of full balance, interest per terms, escalation)

Template — Resolution Confirmation

Dear [Name],
Confirming our agreement for Dispute #[ID]:
• You will pay £[amount] for invoice [#] by [date].
• We will issue a credit note of £[x] (reason: [ ]).
• On receipt/credit, this invoice is settled in full and the dispute is closed.
If payment isn’t received by [date], our standard terms (including late payment interest/fees) resume and we may escalate.
Kind regards, [You]

10) Implement, close, and learn

• Issue any credit notes/revised invoice immediately.
• Chase per the new dates.
• Close the file with a short post-mortem: root cause, fix to prevent recurrence (contract clause, PO check, acceptance form, QA step).

Documentation do’s & don’ts

• Do centralise every doc, email, and call note in the dispute file.
• Do time-box each stage and communicate dates.
• Don’t mingle the dispute with unrelated sales/relationship chats.
• Don’t threaten litigation early; it hardens positions and slows cash.

When to escalate

• They won’t specify the dispute in writing.
• They miss agreed dates, go silent, or keep moving goalposts.
• Evidence is clear, but payment still isn’t forthcoming.

Escalation ladder (clean and ethical):

1. Final response letter (recap facts, attach schedule of evidence, give 7 days).
2. CPA Overdue Account Recovery to prompt payment to you while preserving goodwill — our members see over 80% of referred accounts resolved at this stage.
3. CPA Collections department for formal recovery on the small minority that remain unresolved. Litigation stays the last resort given time, cost and uncertainty.

Prevention checklist (build this into your onboarding)

• Signed scope/SoW with change control and acceptance criteria
• Clear price list/quote and what’s excluded
• PO required policy and invoice-to-PO matching before delivery
• Delivery/acceptance sign-off form (who, when, how)
• Dispute process clause (deadlines, evidence, ADR)
• Credit limits & monitoring: use CPA Creditcare reports and monitoring alerts to spot deteriorating customers early

How CPA helps you move faster

• Overdue Account Recovery (included in membership): Our service won’t settle disputed accounts, and it isn’t an alternative to addressing the dispute, but it can bring to the fore customer issues that had been holding up payment, where the customer had gone silent, thus enabling you to move towards settlement. When a dispute is raised, we will pause the service, and once it has been negotiated, service can be resumed for the new balance, and we will nudge your customer to pay you directly, preserving relationships while recovering cash.
• Creditcare reports & monitoring: trade with confidence, set smart limits, and get early warnings.
• Escalation to Collections (no-win, no-fee options available for suitable commercial cases). We won’t solve standard disputes – that normally needs to be addressed directly between you the supplier and your customer – but we can collect payments once disputes have been addressed.

If late payments are hurting cashflow, let’s fix the process and the problem: 020 8846 0000 (ask for Peter Uwins) or nsm@cpa.co.uk