Invoice Disputes and How to Solve Them Like a Professional
January 09, 2023
If you’re a business owner, chances are you’ll be facing invoice disputes from time to time. The more customers you have, the higher the odds of disputes happening.
But what exactly is an invoice dispute, and how can it affect your company?
This article will give you all the answers you need and show you how to resolve an invoice dispute easily. We’ll also show you how to make invoices with an online generator, so you can minimize the chances of any errors coming from your end.
So, without further ado, let’s jump straight into the action!
What is an Invoice Dispute?
An invoice dispute occurs when one of your clients has a problem with either your invoice, the work performed, or the goods provided. There may be instances where a client might refuse to pay your invoice, in which case it’s called a disputed invoice.
Your clients or customers might dispute an invoice for numerous reasons, whether because they don’t have enough funds to pay or perhaps you’re late with the delivery. In any case, these situations are common and can happen to any successful business.
How an Invoice Dispute Can Affect Your Business
No matter how long you’ve been in business, you’re bound to have an invoice dispute at some point or another. Here are some ways this situation can affect your business:
- Negative cash flow. Late payments are one of the biggest effects a disputed invoice can have on a business. When they happen, they can disturb the entire cash flow of your company.
- Lower profits. Besides the disturbed cash flow, invoice disputes also have a huge impact on your profits. If the client is not happy with your services or goods, they can decide not to pay you, in which case you’ll earn no money for your hard work.
- Stained reputation. Profit is not the only thing you can lose because of an invoice dispute. If you enter an invoice dispute with multiple clients, chances are high that you’ll stain your company’s reputation. Fewer people will want to work with you in the future, and on top of that, clients can go so far as to take things to court.
4 Common Reasons for an Invoice Dispute
Now that you know what an invoice dispute is and how it can affect your business, let’s see how it may come about in the first place!
#1. Dissatisfaction With Work
One of the most common reasons why some clients refuse to pay is dissatisfaction with the work of the company they hired. Now, they might be dissatisfied if you were late with the delivery, or even worse, if you delivered faulty goods.
In cases where the client is dissatisfied, there isn’t much you can do about resolving the invoice dispute except to offer an apology along with a discount or credit. Furthermore, you can ask them to honestly tell you what you can do to improve your service.
#2. Errors in the Invoicing Process
Small errors in the invoicing process can easily cause a dispute. For example, you might encounter clients who will refuse to pay you if you forget to write down an invoice number, quote the wrong figure, or specify a different contact address.
There are also instances where the client will refuse to pay if the invoice is delivered late. That’s why you should always try to send your invoice on time, or even in advance if you’re working on a larger project.
Whatever the case might be, your best bet would be to have a reliable invoicing system in place. For this, you can use an online invoice generator, which will provide you with free templates for making flawless invoices in no time.
#3. Pricing Disagreements
The key part of an invoice is the section with the payment terms. Here, you need to be as detailed as possible when creating your invoices, as you’ll want your client to know exactly how much they owe you.
If you enter a different amount on your invoice than the one you agreed on with your client before the work starts, they might refuse to pay. That’s why it’s so important to go over the payment details with your client prior to the start of the project.
To make sure you don’t have any pricing disagreements, make sure to list every item and service that you’re selling in detail on your invoice. This way, your client will know how much they are paying and what they’re paying for.
#4. Lack of Budget for the Payment
You might encounter cases where the client doesn’t have enough budget to pay you, so they dispute your invoice to extend the payment period. This is especially true for small businesses, as they will often experience cash flow issues.
Because of this, many companies charge a late payment fee. This way, your client will get charged a bit more if they’re late, and they’ll be aware of that as soon as you start working with them.
You can also avoid this by asking your clients to pay a commitment fee before you provide them with your services or goods.
How to Deal With Invoice Disputes
By now, you’re probably wondering how to actually deal with invoice disputes. Keep reading and find out in the section below!
#1. Hear Out Your Client
The first thing you want to do is talk to your client and investigate what seems to be the issue. Remember that you’re talking to your customer and that they’re always right, so don’t burn any bridges by being rude.
Start by hearing out your client’s complaint and asking the questions you need answered to resolve the dispute. If you find out that the problem is on your end, apologize and offer a solution.
In case it’s the client’s fault, then you should go through all the documents that you have with them, including any agreements, contracts, invoices, etc. The best section to read is the terms and conditions of the project you’re working on, which should provide you with all the necessary payment schedules, durations, and terms.
#2. Assist Your Customer
Have you found out that the reason for the dispute is your customer’s mistake? If so, you should try to remain as grounded as possible because it’s tempting to get defensive. It’s also tempting to start accusing your customer, but instead, you should:
- Ask if they still have the supporting documentation.
- Ask them to review the documents and compare them to your invoice.
- Guide them through their own actions so they can figure out what they did wrong.
Being down to earth in these situations goes a long way in resolving the invoice dispute, so try to remain calm, be patient, and don’t get defensive.
But what if there’s an error on both ends? What if neither you nor your client can find the error, but you’re both questioning the invoice dispute? If this happens, it’s time to try and reach a middle ground.
#3. Try to Reach a Middle Ground
Let’s face it, if you’re a small business owner or an independent contractor, genuine mistakes in invoicing and payments are a big part of your work. That’s why you should always try to remain positive and reach a middle ground with your clients when such situations occur.
The first thing you want to do is ask yourself and your client what you can do that’s mutually beneficial to both parties. Run over potential answers with your client, talk to your friends and colleagues about it, and think about it from your client’s perspective.
Once you've come up with a mutually beneficial solution, propose it to your customer. It’s important to remember not to present it as an ultimatum but as an option, which they can accept if they’re okay with it.
It takes two to compromise, so listen to your client and try to work around their desires. But, if they aren’t willing to reach a middle ground, you might have to step things up a notch.
#4. Escalate the Issue if Needed
The saying "the customer is always right” might not always be true. In such cases, escalating might be the only option, especially if the other party isn’t willing to compromise.
Now, this doesn’t mean that you should take things to court right away and completely shut down your customer. Instead, it means seeing what can be done to resolve the dispute without adjusting your invoice.
To do this, you can offer your customer a future benefit, like a 2/10 net credit on their next order from you.
The best way to escalate is to talk to your customer. It will show them that you’re taking the situation seriously and that you’re considering their point of view. At its core, effective escalation means exhausting all available resources to reach a resolution with your customer.
#5. Seek Legal Advice
Last but not least, in some cases, invoice disputes will require you to seek legal advice and potentially take things to court. When you want to reach a middle ground, and the other party isn’t willing to cooperate and pay within the defined date, feel free to involve third parties.
When you decide to take legal action, you need to hire an attorney to write you a Letter of Demand. The demand letter specifies how much the client owes you and what the final payment date is.
If the letter of demand is not enough to make your client take your action seriously, then you can discuss the option of filing a lawsuit through the attorney.
Keep in mind however, that legal fees can be pretty heft so you should try calculating whether it’s even worth filing a lawsuit in the first place.
The Best Way to Make Errorless Invoices
One proactive step that you can take to lower the chances of facing invoice disputes is using an online invoice generator. With it, you won’t have to create invoices from scratch, which means you’ll have fewer opportunities to make a mistake such as a typo.
An online invoice generator is super easy to use and isn’t time-consuming, especially when compared to software like Word or Excel. Here’s how it works:
- Fill in the empty fields in the template
- Preview your document
- Download your invoice in PDF form
Once you complete these steps, you’ll be able to print your invoice or forward it to your client via email.
Whether you’re a small business owner, independent contractor, or perhaps even a freelancer, you’re bound to face an invoice dispute at some point during your career. Hopefully, this article has prepared you for when the time comes.
No matter what happens, you must remember to stay calm and look for a middle ground, but if things look critical, don’t be afraid to take the case to court.
- An invoice dispute occurs when one of your clients has a problem either with your invoice, work performed, or the goods provided.
- When you face an invoice dispute, your cash flow might be disturbed, you’ll see lower profits, and your reputation could get stained.
- Common reasons for an invoice dispute are dissatisfaction with the delivered work, invoicing errors, pricing disagreements, client’s lack of budget for the payment.
- To deal with an invoice dispute, you must hear out your client, assist them, reach a middle ground, and finally escalate and seek legal advice if needed.
- To avoid invoice disputes, you should use a generator to create flawless invoices.