CREDIT MANAGEMENT
How To Eliminate
Invoice Disputes
By Wasilwa Miriongi
I
f your organization operates and
extend credit terms to customers
you’ll inevitably end up with plenty of
reasons why customers can’t or won’t pay
you on time. This article is designed to
help you eliminate the reasons why your
customers won’t pay you on time and has
suggestions and strategies for resolving
invoice disputes.
It’s your job as a credit and collection
professional to ensure that your company
is paid in a timely manner for the quality
products or services you provide. You
extend business credit terms as a benefit
to your customers, and you deserve to be
paid when you fulfill your obligation, by
shipping the product or completing the
service.
How do you get started?
The key action to resolving invoice
disputes is to identify the dispute very
early in the collections process. On many
occasions companies send out invoices,
and they wait until the invoice is long past
due before they start calling to find out
why they haven’t been paid.
There are basically two fundamental
reasons why a customer hasn’t paid you
on time. It’s either your fault that you did
something preventing them from paying
you, or it’s something that they’ve done
(or didn’t do) that is beyond your control.
In the majority of cases, the blame is solely
on your company, and there are things you
can do to avoid invoice disputes from
ever happening. There are strategies that
you can use to effectively resolve invoice
disputes in the rare case that you’ve done
everything right, and the customer is at
fault.
Consequences Of Invoice
Disputes
Late payments and invoice disputes that
may have caused the delayed payment can
have a significant negative impact on a
company. Invoice Disputes delay payment.
It is a known fact that the longer an
invoice goes unpaid - the less likely that
it’ll ever be paid - or at least paid in full.
Allowing an invoice to age to just 90 days
means that you’ll be lucky to collect just
74% of the balance due; and forget about
It’s your job as a credit and collection profes-
sional to ensure that your company is paid
in a timely manner for the quality products
or services you provide. You extend business
credit terms as a benefit to your customers,
and you deserve to be paid when you fulfill
your obligation, by shipping the product or
completing the service.
86 MAL34/20 ISSUE
trying to collect on invoices older than 12
months - only 10% of these will be paid.
Late payments due to invoice disputes
can have a significant impact on your cash
flow. While debtors stay on your balance
sheet as an asset, it does you no good
whatsoever when you have no cash in the
bank to pay your employees, your vendors
and to oil your basic operations.
Managing working capital is a foreign
concept for too many companies -
especially smaller companies that lack
the knowledge and the resources to do
it right. The consequences can amount
to significant erosion in profit margins
due to costs of financing working capital
through a financial institution when
cash is unavailable to manage day-to-day
business operations and expenses.
Invoice Dispute Hurdles
There is a science to sending proper invoices
in order to avoid disputes altogether.
If you check off all the boxes before the
invoice is sent, it is likely that the invoice
will never be in dispute. However, most
businesses aren’t checking off all these
boxes. In fact, most businesses don’t even
realize that these invoice dispute hurdles
exist. Avoiding these could be difference
between receiving payment and not.
Missing Purchase Orders
This is certainly a problem that could
have been prevented. Depending on
your accounting system, you may be
able to configure the system to require a
purchase order when entering an invoice
for a particular customer. However, many