Invoice disputes can interrupt cash flow and take time and effort to resolve. They also can damage relationships, if not handled properly. Here are some tips for managing your invoices and related disputes to reduce the impact they have on your business.
The best way to solve payment disputes is to avoid them. Start with a written contract that clearly states the payment terms and conditions of the transaction, as well as the penalties for late or missing payments. Make sure the invoice is clear with no mistakes and that it matches the information on the signed agreement or purchase order. It’s a good idea to use a template to ensure you include all the necessary information. It needs to contain:
- Your business information
- Your contact information
- Client details and contact information
- An invoice number
- Your tax ID number
- Date of invoice
- Payment due dates
- Description of the item or service
- Dates and hours of the work
- Pay rate
- Late fees
- Incentives for early payment
Send your invoice promptly and follow up with a phone call to ensure the customer received it. You also should be available to answer any questions. Keep meticulous records in case there are disputes later.
Finance, we have a problem
Often, the first indication of a billing dispute is a late payment. When this happens, it’s important to act quickly. The longer the dispute lasts, the longer you will need to wait for payment and the less likely you are to recover debt.
First, you need to determine the cause for the dispute. Was there a problem with the product or service, or its delivery? Was there a mistake in the invoice? Did the company not receive it? Did you accidently double bill them? Is the customer having cash flow problems?
When trying to resolve the dispute, talk directly with the person responsible for paying the invoice. Always be professional and courteous. Never get angry or threaten. Listen to the client and try to come up with a solution. Work with the client if they need more time. If the business relationship is worth saving, decide whether arguing your point is worth hurting that relationship. Be willing to compromise.
It’s also important to keep a paper trail. These records will be useful if you begin debt recovery proceedings.
The silver lining of dispute resolution
Invoice disputes are inevitable for most businesses, and they’re never fun. But there is a plus side. If handled promptly and satisfactorily, a dispute can actually strengthen your relationship with the customer. It also provides an opportunity for you to find and fix problems in your contracts, procedures, and invoices.
Despite best efforts to avoid them, invoicing disputes will happen. But if dealt with promptly and professionally, you may be able to resolve them quickly, and minimize their impact on your business.