How are disputes impacting your business?
Research shows that on average:
- 15% of deductions and disputes are not valid
- Dispute management eats up 30% of the total order to cash effort
- Up to 5% of deductions and disputes are unresolved and written off
This can have a significant impact on your cash flow and your cost of operations if you don’t have a clear process and automated systems in place.
Invoices may be brought into dispute when a customer feels the amount due or payment terms are incorrect. The dispute happens at the time of invoicing, prior to any payment being made.
What are common disputes?
Common disputes are:
- Pricing: there is a difference in pricing between the payment that is charged and the one that was agreed upon by both the parties
- Quality: the quality of the product or service billed on an invoice is in question, or product is damaged in shipping
- Administrative: missing or incorrect documents
- Payment terms: aside from pricing, there may be other terms such as payment due dates or a partial payment plan, that are in dispute
- Missing or unaccounted goods: when a customer is billed for goods that have not been received or accounted for
- Double Billing: a delivery is billed twice by mistake
- Returns or change orders: latest invoice doesn’t reflect a change in order or account for product returns
When an invoice or purchase order is in dispute, it puts the payment at risk. This impacts the business’ ability to forecast cash flow. When disputes are not resolved quickly, it also costs the business in time, money and resources (AR team, legal or procurement team members) to sort through the discussion and come to terms with the customer.
How do I resolve disputes?
Typical steps in the dispute resolution process are:
- Receipt and log: The AR team receives dispute tickets from the customer and logs it into their tracking system
- Prioritize: the dispute is ranked in the order of importance based on the dispute reason code
- Research: account and stakeholder information must be pulled (ie. proof of delivery, order invoice, bill of lading, etc.) to determine the details around the dispute and the parties necessary to its resolution. Any missing documents and then noted and tracked down.
- Recommendation: after reviewing all materials, the AR team assesses the validity of the dispute and recommends the outcome, for example, issuing a refund, suggesting amount to be collected or amount to be written off.
- Approvals: If internal approvals are required for the recommended resolution, the AR analyst pushes this through the process
- Customer follow-up: The AR team works with the customer to ensure the resolution recommendation is mutually acceptable
- Dispute close out process: the dispute is then recorded in the AR system, with updated data regarding any payments, refunds or other terms relative to the dispute. This information needs to be synced with the ERP and billing systems.
Unless your team has a centralized, smart AR platform, then they run into the following challenges:
- Cost-intensive: hunting down additional information and write-offs cause revenue leakage
- Time-consuming: Analysts spend up to 30% of their time manually hunting down and reconciling data
- Siloed-operations: often information comes from multiple departments and systems, and this limited visibility and access adds to the complexity of gathering all the necessary data.
- Intensive manual labor: without a smart AR platform, and with the limited functionality of legacy ERPs, AR teams are logging into multiple portals, chasing down customers for missing documents, and reconciling data manually
Resolving disputes with customers without damaging the business relations, and encouraging future sales opportunities, can be a balancing act. The best way to successfully ensure the quick and informed resolution of disputes while maintaining customer satisfaction is to have a clear and standardized dispute management process based on best practices and leveraging smart technology. A smart AR platform will provide your teams with a centralized portal through which they can access customer account data, invoices, payments, and other documents needed to quickly and fairly come to a mutually satisfactory resolution.