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6 Ways to Handle Disputed Invoices

Dealing with accounts receivable or invoices is stressful for businesses. Setting up a streamlined accounting process can be time-consuming and expensive. Dealing with customers who don’t pay on time—or at all—is also frustrating. But, what about customers who dispute invoices? These situations add yet another layer of stress.

The good news is that there are effective ways to handle disputed invoices and avoid them altogether.

Read on to learn the six best ways to handle disputed invoices.

6 Ways to Handle Disputed Invoices

Dealing with disputed invoices can be a huge time-suck for business owners and their accounting staff. Disputed invoices also pose a level of risk on the business as a whole, which puts everyone on edge.

Here are some ways to properly handle disputed invoices to preserve and maintain your customer relationships—and save your business.

1. Good Record Keeping. 

Staying organized and keeping email exchanges and correspondence as well as detailed records of time, materials, and other related billable costs will help in the event a customer disputes an invoice.

Let’s say that you receive a phone call or an email from a customer questioning the legitimacy of your invoice or threatening nonpayment. If you are organized, then you can quickly provide them with supporting documentation or other relevant evidence detailing the costs associated with the disputed amount.

2. Be Clear About Invoice Terms.

Many cases of disputed invoices arise due to a lack of clarity surrounding payment terms. One of the easiest ways to avoid this is to ensure that invoice terms are clearly stated on each and every invoice.

For example, using terms such as Net 30 or Net 60 on invoices make it clear as to when an invoice is due (whether that is 30 days or 60 days, for example). You can also send reminders on invoices that are approaching the 30 or 60-day mark to ensure timely payment.

3. Send Quotes, Estimates, and Proposals.

If you and a customer discuss the exchange or purchase of product(s) and/ or service(s), then be clear about the time and costs associated with the deliverables.

Providing details in a written notice is always a good practice. For example, sending detailed quotes, estimates, and/ or proposals that describe the scope of work or a summary of a customer order will help manage expectations upfront and make it clear as to what the customer is responsible for. This can help mitigate the risks of dealing with disputed invoices. Be sure that the customer signs the quote or proposal before beginning any work, ordering parts or shipping products.

4. Be Firm But Flexible

If you receive notice of a dispute, try to remain calm. Just because a customer disputes an invoice doesn’t necessarily mean that they are correct and that you should give in. However, avoid responding to your customer in a combative tone. Try to approach the situation carefully and with an open mind. You will be able to discover the issue and reach a solution easier.

Take the time to review the facts, details, and calculations. If you discover that the entire invoice is correct on your end, then be firm with your customer about your company’s policies and payment terms. Present supporting documentation behind the invoice and explain the costs. If you take the time to discuss and address the issue with the customer, then he or she is likely to relax and agree to pay the invoice.

On the other hand, if the error is on your end, then admit to making an error, send a corrected invoice—perhaps with a discount—or offer a discount off a future purchase or agreement.

Remember, the end goal should be to preserve a good relationship with your customer—not try to “win” over him or her.

5. Find a Workaround or a Solution.

Most customers who dispute invoices are often unhappy with the amount of the entire invoice or the work delivered for the cost. Regardless of how much pressure or stress this puts you under, it’s crucial for any small business to try to focus on finding a workaround or a solution that satisfies both parties. Not only does this show the customer that you and your small business value the relationship, but it also helps build trust.

As mentioned above, accepting fault or admitting to an error can certainly help improve the situation. Merely taking the time to talk through the matter in detail with a customer can drastically improve the situation.

6. Invest in a Financial Management System.

Finally, one of the tried and true ways to become organized is to invest in a financial management system. A financial management system can automatically calculate and send invoices on time. Using an automated system can also help reduce the number of disputed invoices, saving the business time, money, and frustration.

Dealing with disputed invoices is one of the biggest pain points of running or operating a small business. However, it’s important to remember that there are a number of tools available that can help avoid disputed invoices altogether—leaving both the customer and small business happy.

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Apruve enables large enterprises to automate long-tail credit and A/R so you can stop spending 80% of your time and resources on 20% of your revenue. We partner with each of our customers to solve their unique credit, payment, and accounts receivable challenges and build the right credit solutions for your markets, customers, and goals. 

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