5 ways to deal with a disputed invoice
1. Ask questions and investigate
It’s tempting to get defensive when a customer disputes an invoice. But before you do so, remember it’s your customer. You need customers to run a successful business, and you don’t want to burn bridges. Start by hearing the customer’s complaint. Ask as many qualifying questions as you need answered to look into the dispute internally.
It is not unusual for an invoice dispute to start with an innocent, unintentional error. Errors happen. Decimal points get misplaced, the wrong product ships, the list goes on. When it happens to you, correct the invoice, apologize, and make it right: a quick and simple resolution.
But genuine errors don’t typically lead to drawn out disputes. Your investigation may uncover that your customer is wrong. Now what? Again, don’t jump to defensiveness, but see if you can amicably reach a resolution.
2. Help the customer understand they’re mistaken
If the customer is in the wrong, don’t start accusing. Help the misguided customer understand why they’re wrong. A noncombative strategy includes a question-first approach. Ask the customer if they still have the quote or other supporting documentation. Ask them to review the quote, and compare it to the invoice. Guide your customer through their own actions so hopefully the customer can uncover their own mistake.
If a customer can admit their own error, great. But what if there’s an error on both sides? Or, what if there’s no obvious error and the dispute is questioned from both sides? That’s when you look for middle ground.
3. Propose a mutually beneficial resolution
Genuine misunderstandings are a business reality. You thought the customer agreed to X, but the customer thought they agreed to Y. You deliver the invoice for X, and the customer starts a dispute.
Again, don’t get defensive. There’s a relationship to protect. But don’t concede to every customer demand. You have a business to protect. Look for some middle ground. Propose the following question to yourself: What is mutually beneficial to both parties?
Mull over potential answers to that question. Run those answers by some colleagues. Think about it from the customer’s perspective, and then refine your proposal. Once you’ve landed on a proposal that benefits both sides, propose it to the customer. Don’t present it as take it or leave it, but as an option. You might even improve your relationship with responsiveness and flexibility. But the customer might push back. Listen to them and work toward a compromise that works for both parties.
Compromise is great when it works. But compromise takes cooperation from both sides. If you have a customer who won’t budge, you may have to start taking a harder stance
Escalating is the first of the five steps that includes you taking the position that the customer is wrong, and you aren’t willing to back away from that conclusion. “The customer is always right” has never been a true statement when it comes to getting paid. But escalating doesn’t mean shutting the customer down completely and jumping to your legal rights. It means considering what can be done to appease the customer without adjusting the invoice in dispute.
Escalating may mean getting creative, or literally advancing the dispute through your internal hierarchy. On the creative side, you could offer the customer a future benefit in exchange for the customer dropping the current dispute and paying the invoice. On the literal side, you may need to bring the issue up through your chain of command.
The key to effectively escalating is communicating the escalation to your customer. It shows that you are taking the dispute seriously. You aren’t conceding to the customer’s point of view, but you are including all potential stakeholders in the decision-making process. Even if you can’t reach a meeting of the minds with your customer, escalation shows that you will exhaust all available resources to reach a resolution. Failed attempts to escalate are still meaningful to your customers.
5. Enforce your legal rights
Unfortunately, some disputed invoices require you to enforce your legal rights. When you reach an impasse and your customer refuses to pay, it’s time to get third parties involved.
When you make the decision to take legal action, start with the contract. Follow any required procedures in the invoice dispute or general dispute section. If your customer is afforded a “cure period,” which is just a term for correcting a breach of contract, give the customer a chance to cure. Make sure you read this provision closely because it most likely requires you to give written notice to the customer that they’ve done something wrong (for example, failed to pay an invoice by its due date). If the cure period comes and goes (perhaps after 30 days), continue to follow the contractual procedure for enforcing legal rights. Contracts often include provisions regarding which courts you can file suit in and whether mediation is required before filing a suit. You need to follow each step carefully or you risk being in breach of the contract or having your claim thrown out of court on a technicality.
It’s possible to file a lawsuit without the assistance of an attorney, but it isn’t recommended. An attorney will help you review the relevant contract provisions, and make sure you haven’t missed any of the contractual requirements. If there are no contracts in place or there are potentially conflicting contracts (such as the customer’s purchase terms and conditions and your invoice terms and conditions), an attorney will help you navigate the situation.
If you opt for an attorney, make sure you understand the billing model before engaging. You don’t want to file a lawsuit only to pay more in legal fees than you recover.