What is a Disputed Invoice
A disputed invoice is essentially when a customer raises concerns about the accuracy of the invoice. It may be that the customer does not agree with the content of the invoice. The customer's concerns may be related to areas of product or service quality or some error in the invoice's content. As an example, the customer may not be satisfied with the products delivered or services performed. There could also be some misstatement or error in the invoice content which includes, price, quantity, tax expense, invoice date, due date or any other area of the invoice.
Invoice Dispute Resolution Process From the Customer Perspective
Following are the effective steps to raise and resolve a disputed invoice:
Identification of the Misstatement, Concern or Dispute
When the buyer receives the delivery or shipment from the supplier, the buyer should actively review it. Any concerns about the shipment should be raised. For instance, there may be any of the following quality or documentation problems:
- The product or service price may not align with the price agreed with the agreement or purchase order.
- The quantity billed in the invoice may not be the same as the quantity which has been dispatched in the shipment.
- There may be an error or misstatement concerning the invoice date.
- The due date may not be correct on the invoice.
- The invoice date may not be correct. This is concerning as it will lead to a cut-off error in the financial statement or accounting record.
- The customer may not be satisfied with the final product or services.
- The customer may have changed their mind.
This list is not exhaustive. There may be a variety of other disputes or concerns.
It is important to note that there should be sufficient and appropriate documentation that should back the customer's dispute. For instance, a dispute about shipment quantity may be backed by a delivery note. Another example is, if there is a dispute about product price, this will need to be backed by an agreement or contract, and so on.
Communicate the Dispute to the Seller or Supplier
The second step is to clearly communicate your findings and concerns with the supplier. This communication can be via different modes. For instance, it could be via a phone call, email, letter, verbal, or in-person. In this situation, it is recommended to document the correspondence which occurs between the parties. A sorted record should be collected so that any issues can be sorted out, subsequently, if needed.
Initiate Negotiations
Both the seller and buyer needs to understand the basis of the concerns while also being able to reconcile disputed facts with the source documents. Negotiations should adhere to the terms and conditions that have been agreed upon. In other words, there is a strong need to ensure that things are executed in accordance with the agreement. If, in the event that negotiations are not finalized, the matter should then be escalated to more senior managers and decision-makers.
Another effective technique to resolve deputes, is to include independent mediation during the negotiation process. For instance, the dispute can be identified and related source documents examined by an independent third party. This will enable the parties to resolve any issues to reach a just and sensible decision.
Look for Legal Options, Which Should Be the Last Resort
If the dispute remains unresolved, and both parties are adamant about where they stand, legal advice should be sought. However, seeking legal advice to resolve the dispute should be the last option. This is because this seemingly confrontational move may lead to future impaired working relations with the seller.
The most advantageous part about using legal options, is that there will be a structured framework to resolve the dispute. This will be designed to ensure fairness and justice throughout the entire conflict resolution process.
Now we will further discuss the invoice resolution process from the seller's perspective.
How to Deal with Disputed Invoices From the Seller's Perspective
Following are the steps on how to deal with a disputed invoice, from the seller's perspective:
Understand the Nature of the Dispute
Firstly, there will need to be an understanding of the issue at hand. This will involve putting yourself in the position of the customer and in the customer’s mind, to check the accuracy of their claim. There will be a need for an analysis of the content of the dispute. This can be done by going through the content of the customer’s grievance. For instance, take the example of when the quantity of goods delivered to the customer has been short by 10 units. In this situation, when the customer registers this dispute, based on these facts, the supplier will need to review the dispatches and confirm the quantity ordered, in order to come to a resolution.
Review Supporting Documents To Understand the Dispute
You, as a supplier will need to go through the documents which support the dispute. For instance, in the event that the dispute is about product quantity in the invoice, then the quantity in the purchase order, invoice, and dispatch note should be reconciled.
It is imperative that the quantity in all of these documents be exactly the same. Should there be any difference in the invoice and source documents, then this should be reconciled with the content of the dispute, raised by the buyer.
Communicate Your Understanding to the Customer
Based on your understanding of the supporting documents, there is a need to conclude and communicate to the buyer, your thoughts about the dispute. If, after examination of the facts, you agree with the customer's dispute or claim, then there will be a need to inform the customer and take corrective action. For instance, if the customer has received less goods than requested, and you, as a seller have confirmed this to be the case, then a shortfall of the quantity of products can be dispatched to the customer. This will help to resolve the dispute. On the other hand, if your understanding does not align with the customer's dispute, then this should be communicated to them and perhaps further negotiation may be required.
Negotiate and Reach a Win-Win Situation
For professionalism purposes, after a detailed examination of the customer’s dispute, communicate your finding to the customer along with supportive evidence. It is also ideal to send explanatory notes which support your finding as to why you think that there was no misstatement or error in the invoice or billing. To keep the same amicable business relationship with the customer, it is best to still remain open and understand the customer's perspective. In the end, the best outcome occurs when the negotiation leads to a win-win situation or mutual agreement about the dispute, for all parties involved.
Learn From Your Experience / Mistake
There may be times where, after going through the documentation and processes, you find that a mistake has been made on your end. This mistake may have been in regards to the execution and processing of the sales order or billing. In this situation, you will need to understand the source of the error or control weakness that led to the dispute. By having a thorough audit, the controls may need to be reviewed and strengthened on a timely basis, to avoid any further potential mishaps.
Conclusion
In summary, a disputed invoice occurs when the customer raises concerns about the accuracy of the invoice content, or with issues about the quality of the shipment. In this scenario, the customer might have issues about product price, quantity, taxation, due date, or any other area of the invoice.
To help a timely resolution, the customer is encouraged to register the dispute as soon as possible. On the supplier’s side, the dispute needs to be resolved efficiently and this is done by reviewing and analyzing the relevant supportive documents.
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