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All about disputed invoice

Updated on :  

08 min read.

Invoice disputes are common in businesses, but if dealt with proper management and a mutually agreeable attitude, it may help to build strong customer relationships.

What is a disputed invoice?

A disputed invoice is one in which the customer has some problem. A customer may have issues with the description of goods, rate, invoice value, payment terms, etc. This dispute should be resolved at the earliest, and a lot of it depends upon your relationship with the customer. In case of a genuine billing error, correction is easy. One can correct the error and resend the invoice or use debit or credit notes to resolve the dispute.

But, in case of any misunderstanding or disagreement with the customer, it may take time to resolve the issue.

Common causes of invoice disputes

Invoice disputes happen due to accounting errors, misunderstandings and disagreements with the customers. Some of the common causes of invoice disputes are:

  • Customer dissatisfaction: If the goods delivered are not up to the client’s expectations, they may change their minds about the agreed sale amount or lead to sales return. To reduce such disputes, a business may set up client feedback channels and resolve the issues before invoicing.
  • Accounting errors: Accounting errors may happen while invoicing. One may put a system in place to double-check the invoices before issuing them to the customer.
  • Pricing issues: This may happen due to customer dissatisfaction regarding the delivered product or misunderstanding regarding the agreed price. To avoid such disputes, a business must share its rate sheet clearly stating its costs, products and total fee in advance.
  • Payment constraints: Your customer can be cash strapped and may ask you to extend the payment period. In such a case, you may impose a late payment fee. One may also charge a commitment fee in advance before delivering goods or providing service.
  • Discount and offers: Invoice disputes may arise because of confusion about the company’s discount policy. So, one must ensure that there is no such confusion by communicating all the terms clearly to its customers.

All about Invoice Dispute Management

  • Go through the agreements: Whenever an invoice dispute comes up, the first thing to do is go through the signed contract. If there is no signed contract, you may refer to the terms and conditions of the sale. A formal contract usually contains dispute resolution methods, filing a complaint, cure period, etc. This information helps to take future steps.
  • Investigate: After going through the agreement, one must ask the required questions to the customers regarding the dispute. Genuine errors don’t lead to disputes. You may correct it and resolve the issue. But, the investigation may lead to the fact that the customer is wrong. In such a case, you can take the necessary steps to make the customer realise his mistake.
  • Propose a mutually beneficial decision: Most of the time, discussing with the customer may lead to a mutually agreeable decision that works for everyone. For example, if the product doesn’t meet the quality standards, you may discount or replace the goods.
  • Take legal advice: Enforcing legal rights comes into the picture when the customer fails to agree to the mutually beneficial decision or fails to make payment. One must read the contract thoroughly before initiating legal action. If the contract gives a cure period to the customer, you should give such an additional time period to your customer to correct the breach. Follow the contract provisions regarding which court to file a case, appointment of the mediator, etc. One may take assistance from the legal advisor before filing a lawsuit.

Tested ways to handle invoice disputes in your business

Invoice disputes are very common in any business. Below are some of the tested ways to handle invoice disputes:

  • Maintaining proper records: Maintaining proper records is essential as they serve as evidence in case of disputes.
  • Clear terms: The terms of sale and payment should be mentioned in each invoice. Also, sending reminders on the due date may ensure timely payments. Lack of clarity regarding payment terms may lead to disputes.
  • Quotation: Following the practice of sending quotations before actual sale leads to clarity in pricing terms between both parties. It helps to minimise the risk of disputed invoices.
  • Build trust: While discussing the dispute, both parties should remain calm as it helps avoid escalation of the matter. When at fault, one should accept and take corrective steps to build trust.
  • Using invoicing software: An invoicing software automatically calculates invoice values and sends them to the customer. Using invoicing software helps to minimise accounting errors. Thus, investing in good invoicing software is good for any business.

You can use ClearOne software for creating invoices. Some of the benefits of using ClearOne invoicing software are:

  • Create an impression on your customers or clients.
  • Generate invoices and documents on time, anytime and anywhere.
  • Get assurance on a safe and secure invoicing access 
  • Enjoy both mobile app and web platforms with the ability to sync and perform actions on both platforms.

In simple words, mentioning clear terms and conditions, meeting customer expectations, and regular follow up with clients regarding payments may help reduce the risk of disputed invoices.

Indian laws that deal with disputed invoices

Indian Contract Act deals with invoice disputes. But, if a valid contract is not in place, the contract law applies general principles to resolve the invoice dispute. For example, it may verify the Purchase Order along with the invoice. It may also look at additional evidence such as standard industry practices, historically transacted business, terms, etc.

The Micro, Small and Medium Enterprise Development Act, 2006 also contains provisions regarding delayed payments made to micro and small enterprises. The buyer is also required to provide suitable interest if he does not make payment for the goods purchased within 45 days of acceptance of goods or services received.