Improve Customer Service and Cash Flow
Invoice disputes are a common reason for the late payment of accounts receivable (AR) invoices. Sometimes, one disputed sales invoice can delay payment of the entire account. So, having a procedure to deal with disputed AR invoices is essential to improve customer service and help with a business’s cash flow.
Of course, mistakes will happen, and there will be misunderstandings. But handling invoice disputes fast and efficiently will minimize the delay in payment. Here are some tips to help you avoid and deal with delayed AR payments caused by disputed invoices.
Send Invoices Promptly
Sending invoices on time will not reduce invoice disputes. However, it will bring any issues with sales invoices to light earlier, and it will help ensure that you get paid on time. So, it is best to submit invoices as soon as a delivery is made. Delaying the production of invoices to the end of the month could mean that disputes are not even raised until past the invoice’s due date.
Ensure Accuracy and Clarity of Invoices
Ensure that sales invoices are easy to read and that product descriptions are understandable. Shortened descriptions might be understood within your business, but a customer may not understand them. It is also advisable to quote the purchase order number if one was provided on a sales invoice. It is best to address AR invoices to the accounts payable department to speed up processing. Including the name of the ordering department or individual will also ensure the invoice is directed to the correct person for approval.
Avoid Combing Multiple Orders on a Single Invoice
Combing several orders or deliveries on a single invoice will save time and postage. However, consolidating orders in this way may also lead to the entire invoice being disputed if a single item is queried. In addition, consolidated invoices could also delay payment for the item shipped first. Therefore, it is generally best to send one invoice for every delivery or order. Sending invoices in this way will cause more paperwork. Still, it will also make it easier to tie an invoice to any supporting documentation in the event of a dispute.
Send Customer Statements
“We haven’t received that invoice” is not always an excuse to delay payment. Documents can get lost in the post, and sometimes invoices go astray inside companies, too. So, sending periodic statements to customers will ensure that the respective accounts reconcile and any missing invoices are highlighted. In addition, some companies pay vendors’ statements rather than invoices. So, if an account does not tally with their records, the entire month’s payment may be delayed until the dispute is resolved.
Keep on Top of Collections
A robust collection procedure will, of course, get invoices paid faster and help the company’s cash flow. However, chasing overdue invoices will also help you identify disputed invoices or accounts faster, too. A customer may have discussed a dispute with their account manager, for example, but the account manager may not have yet raised the issue with the accounts receivable or customer services department. It could also be that the customer has failed to contact the vendor about the disputed item. The swift chasing of outstanding invoices will uncover why an invoice hasn’t been paid and prompt the appropriate action to resolve any issues sooner rather than later.
Related Article: How to Collect Overdue Sales Invoices Without Losing Your Customer
Refer Disputes to Relevant Department
The first person to discover that an invoice is in dispute is likely to be an accounting or collections team member. If the issue is accounting-related, the AR team will probably be able to resolve the problem. However, if the dispute is product-related, the matter will need to be referred to another department. So, it is crucial that AR staff gets to the root cause of the dispute, documents the problem, and passes it to the relevant team for resolution. There must also be good two-way interdepartmental communication to ensure that the collections team is notified as soon as the dispute has been resolved.
Distinguish One Invoice from the Entire Account
There is no reason why a single disputed invoice should prevent the payment of the rest of the account. So, AR staff must clarify to customers that the remainder of the customer’s sales account should be brought up to date. Any disputed invoices will be dealt with as a separate issue. Indeed, if a customer account is sufficiently overdue to demand further action, one disputed invoice should not prevent the appropriate collection steps from being taken.
Solve the Underlying Issues
The resolution to a disputed invoice can often be relatively straightforward. A shipment may have been missing some items, for example, or a product may have been damaged in transit. Issuing a credit note or shipping a replacement product will solve these immediate issues. Still, it won’t prevent the same problems from occurring again. So, it would be best not to view disputed invoices merely as an accounts receivable issue. Instead, the reasons behind the dispute should be logged and investigated to prevent any repeats of the same problem.
The Bottom Line
Disputed sales invoices need to be dealt with promptly to avoid payment delays. The underlying reasons for the dispute also need to be investigated to prevent the same thing from happening again. An invoice dispute is not only a finance department issue; it may also have implications for the production, quality control, and customer services departments. The immediate priority might be to get the account paid as soon as possible. But the longer-term objective should be to reduce the incidences of disputed sales invoices.
About Universal Funding
Universal Funding is a nationwide invoice factoring solutions leader, supporting growth-focused businesses with scalable factoring solutions. With its invoice factoring, payroll funding, and purchase order financing services, Universal Funding provides clients with the working capital needed to grow and support their businesses without taking on new debt. Ranked as one of the nation’s top invoice factoring companies, Universal Funding provides cash flow financing for businesses all across the United States.