A Costly Mistake — Why Traditional Dispute Management is Bad for Business

George Green

Disputes damage the AR process. They cost employees time, impact financial performance and impair customer experiences.

It’s no wonder that 55% of AR professionals say managing disputes is their hardest task.

In a 2021 Atradius study, it was found that 47% of all B2B sales in the US were affected by late payments — and disputes were identified as a key contributing factor. Today, there remains a problem with how businesses manage this area of accounts receivable.

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In 2021, late payments affected 47% of all B2B sales in the US.

So, what does effective dispute management look like? Clearly, one part of it involves resolving problems quickly so the payment can be completed. But this can only be achieved if the customer experience element is fulfilled, as unhappy customers are unlikely to pay on time. The rub? It’s extremely difficult to strike the right balance.

A PROBLEMATIC PROCESS

Traditional dispute management is time-consuming and costly. Both in terms of it not being effective enough to mitigate late payments, and also a drain on company resources.

Let’s examine the steps involved and their inherent challenges.

STEP 1: Receiving the dispute cases

Action: Dispute tickets are sent to the AR analyst by the accounts department or customer.

Challenge: This step is reliant on your team or customer manually sending the disputes. People can forget — or do this late — which can cause delays.

 

STEP 2: Logging and tagging

Action: The analyst records the disputes in the company’s tracking system and tags each case or ticket according to their importance, depending on the dispute reason code.

Challenge: This is a manual process, completed without customer involvement. Customers lack visibility and may therefore raise issues later on, which extends the time to resolution.

 

STEP 3: Aggregating data

Action: For each disputed invoice, all relevant information must be gathered for review (such as order number, bill of lading or tax receipt) and any appropriate stakeholders must be notified.

Challenge: Phew! That’s a lot of work. This information lives in different systems such as ERP, accounting and CRM. Collating and sharing it with stakeholders takes time and effort.

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Dispute data aggregation can be a frustrating experience...

 

STEP 4: Requesting additional information

Action: Where there are missing documents, the analyst contacts the customer to request additional information that’s needed to resolve the dispute.

Challenge: Documents are often missing due to the manual nature of the process and the lack of customer involvement. Contacting customers via email or phone adds time to the process — and can frustrate them.

 

STEP 5: Resolving the dispute

Action: Once they have all the required documents, the analyst researches the validity of the filed dispute so that they can determine the best course of action. This may be a refund, collection or a write-off.

Challenge: This takes longer than it should. Identifying the root cause of a dispute is difficult. There’s no easy way to compare cases alongside one another to identify commonalities and action items in bulk.

DID YOU KNOW6% of all US invoices were written
off as uncollectable in 2021!
Atradius, Payment Practices Barometer USMCA 2021

 

STEP 6: Requesting further information

Action: If the dispute is found to be invalid, the analyst will contact the customer. They inform them of the dispute’s invalidity or seek additional clarification or even a withdrawal of the dispute.

Challenge: And we’re back to the customer, who has had very little insight into the process. They may be surprised that their dispute has been identified as invalid.

 

STEP 7: Seeking approval

Action: If the analyst deems the dispute invalid, they’ll proceed to get approval from stakeholders.

Challenge: The analyst may need to re-explain the dispute which adds extra time to the process, irking the customer and delaying the payment further.

 

STEP 8: Issuing a credit or debit memo

Action: Once the validity of the dispute has been approved, the customer will be notified that they will be issued a credit or debit memo. At the same time, analysts will contact the accounts department to have the invoice status updated in the company’s ERP.

Challenge: Again, reaching out to the customer takes time. Manually contacting the accounts department to update the invoice status is inefficient and increases the likelihood of data entry errors.

AN ONGOING ISSUE

Customers have very little visibility into what actions are taken in the process. This increases the likelihood of them not accepting the decisions that are made and subsequently prolongs the time to resolution.

Information is stored within disparate systems which means the AR analyst is working tirelessly to source data required to manage the dispute. And customers and stakeholders are reliant on updates from the AR professional which is inefficient. The process also doesn’t provide an opportunity for parties to work collaboratively, which limits the chance of there being a mutually satisfactory outcome. This is bad for business.

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A SMARTER APPROACH

With YayPay Advanced Disputes, companies can optimize their dispute management strategy with customizable resolution and escalation workflows. This reduces manual work, satisfies customers and rapidly transforms open disputes into cash collected.

The technology offers three key capabilities:

  • Centralized cloud-based system for holistic data management and access: With a smart AR platform, teams can centralize all invoice-related documentation — from their ERP, accounting and CRM systems — to gain instant insight into an issue. AR staff can quickly retrieve required documents from a single, shared access point to accelerate dispute research. This means no more passing data back and forth.

    It also enables all relevant parties to be involved in the process throughout, so the onus is no longer on the AR analyst to constantly communicate information. The platform offers a dedicated dispute workspace, allowing the analyst to view all open disputes in a single window and action items in bulk. And when the customer record needs updating, they can do this without contacting accounts and the update is automatically synced to the ERP.

  • Automated escalation workflows to accelerate approvals: Teams can automate approval workflows, setting escalation triggers depending on business service level agreements (SLAs). These can be tailored in multiple ways, for example, how many days a dispute remains open until it’s flagged directly to management. This removes the need for manual intervention and ensures all disputes are addressed in a timely manner.

  • An online portal that provides customers with a direct channel of communication to the AR team: Customers can use the platform to upload and reference documentation, provide a reason when they make a payment dispute and also see the actions that have been taken in the resolution process. This keeps them informed every step of the way and gives them the ability to contact the AR team directly when required.

    For the vendor, this capability allows their team to communicate more effectively with customers, detailing the rationale and data behind decisions. While customers may not always agree with the outcome, it illustrates the vendor’s commitment to transparency and increases trust.

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