Disputes in Account Receivables: Process & Resolution

Accounts receivables collections team is responsible for handling many tasks, from managing all outstanding invoices, resolving customer payment problems and reducing the amount of accounts receivables. Oftentimes, a simple misstep in one of these processes can result in delinquent client engagement and lead to invoice disputes. 

An invoice dispute occurs when a client decides they shouldn't be responsible to pay an invoice, for whatever reason it may be. Disputes in account receivables can have a serious impact on a company's cash flow and severely affect its financial health. In some cases, up to 5% of invoices are written off due to invoice disputes. So the trick is, learning how to avoid invoice disputes while keeping your customer relationships intact. 

When Do Payment Disputes Occur?

Accounts receivables collections teams usually uncover disputes only after making contact with a client. Most collections processes have a collection specialist or another internal persona responsible for personally reaching out to the client’s account in case of overdue invoice - especially in cases in which the invoice is high or way overdue. 

The discussion of disputes typically starts at the point when a client is finally engaged, responsive and acknowledges the overdue invoice. If the client has a payment issue or has no intention to pay the invoice before it is resolved, the vendor and its collections team will need to  uncover the reason for non-payment, AKA dispute. 

Accounting for Disputed Invoices - the Major Challenges:

Accounts receivable dispute resolution and management is a major part of client - vendor relationship. While from a cash flow standpoint, the finance team must stand firm and push toward the quickest payment (as the companies gatekeeper), it is also important to keep in mind that most B2B vendors structure their business on a recurring customer base. Which means, keeping customers happy is top priority.

Many times, clients' disputes will revolve around the quality services rendered or goods delivered (or lack thereof). In these cases, it is imperative for the collections team to collaborate with all departments and work together to track down the origin of the dispute. Though this process can be difficult when there are 3-4 different departments involved in one order, it’s crucial to track records accurately and quickly to prove the dispute is correct.

Disputes can also occur as a result of an error. Let’s say your finance department fails to deliver a proper invoice, or comply with the client billing instructions. That fault is on you and the client has a right to claim a dispute. This is why adhering to the contract, purchase order, and billing the right entity at the right time can save many unnecessary negative client interactions. 

In the case of multiple disputes - a client might withhold payments altogether if there are many issues with the invoice. Even for invoices that aren't impacted by the dispute. After all, it’s not their cash flow that’s being impacted. 

How Does Automated Accounts Receivable Collections Resolve These Issues?

Automated accounts receivable management solutions are not only used for dunning these days. Next generation, smart solutions can also be used as collections CRM - platforms that can manage multiple collections tasks, including dispute management services. 

 
An automated collections solution will not only ping the client and ask for payment, but will save time, money, and risk of human error when investigating the issue that led to the dispute and/or recurring disputes. Automation is key to a structured and well-ordered dispute resolution solution. Once data is collected and transferred between the two parties, there is no room left for argument. 

In a nutshell, when adopting automated software for collections management, you can cut back on time and resources by rapidly identifying problems that originally lead to recurring disputes. A comprehensive collections management system like Gaviti can minimize losses with resolve dispute management, and thus, improve the cash flow. Contact us at Gaviti to book a free demo and see our automated accounts receivable management process today.

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