5 Tactics to Resolve an Invoice Dispute Like a Pro

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Your disputed invoices are costing you more money than you realize by wasting your time otherwise devoted to growing your business. So resolve them quickly with 5 tactics shared here.

Resolving invoice disputes is like dancing on thin ice. One wrong move and you can lose the payment forever.

Disputed invoices can make a big hole in your pockets. So, you should always try to stay away from invoice disputes for good financial health.

But don’t take our word for it.

Here’s the data that might help you to believe. Invoice disputes are the primary reason for 61% of late payments.

So, don’t you want to know how to resolve an invoice dispute? Continue reading this blog!

What is an Invoice Dispute?

An invoice dispute is an issue that arises when a customer disagrees with the invoice sent to him/her. In other words, a disputed invoice is an invoice with discrepancies between the statements in the invoice and the actual products/services delivered.

A customer disputes the invoice for a lot of reasons, and thus, it can happen to anyone, even to a successful business. And the best strategy to avoid invoice dispute management is by staying vigilant.

So, let’s know more about the most common reasons for invoice disputes in a small-scale organization.

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What are the Major Reasons for Invoice Disputes?

No matter how experienced a driver you are, you need to keep your eyes open while driving.

Similarly, while invoicing, no matter how long you have been in this line of work, you have to be watchful of a few causes of invoice disputes.

And to stay away from those causes, let’s shed some light on them.

Major reasons for invoice dispute

  1. Accounting mistakes

    When handling multiple purchase orders and sales receipts, it is quite common to mix up and make accounting errors, especially in recurring bills.

    Believe it or not, silly invoicing mistakes like calculation errors, wrong invoice dates, wrong purchase orders, or fat-finger errors are more common than you think for any accounting system.

  2. Disagreement in pricing

    If there is a discrepancy between the price in the quotation and the invoice, the resolution process of the invoice will not be smooth. These differences might be due to:

    • A change in rates
    • A change in the scope of the service, or
    • Any hidden charges not mentioned in the agreement

    If the customer is not notified about the same priorly, the invoice will likely be disputed.

  3. Dissatisfaction with quality

    Another primary reason for a payment dispute is dissatisfaction with quality. If a vendor does not deliver the promised quality, customers may hold the transaction and not agree to pay the accounts payable.

    If the product sold is faulty or the service provider does not deliver services up to the mark, customers would not be willing to pay the agreed amount, and this causes an invoice dispute.

  4. Late delivery

    Sometimes, the product or service the vendor provides is part of a larger manufacturing chain. Therefore, if the vendor delays the delivery, the entire manufacturing process gets affected.

    In such cases, the delivery has to be made within a closed time limit. After which it does not make any sense.

      For example, delivering a Christmas tree on the 1st of January is too late. The customer might not want it anymore, so why would they pay the invoice?

    And when these causes result in an invoice dispute, it can cause damages to many companies in various aspects.

  5. Miscommunication

    It can happen that your client claims that he never agreed to the estimate for the order. Or you may not be aware of the payment received.

    Thus, it is imperative to have proper contracts and communication channels in place. With these, you not just reduce such mistakes, but will also find if the claims of miscommunication made by your client are true or not.

  6. Client unable to make payment

    It isn’t always you. Sometimes the client may be unable to make a payment by the due date because of his financial constraints.

    Such instances aren’t rare. It happens very often and can affect the relationship with the client.

    Now let’s know how an invoice dispute affects your small-scale enterprise.

So, let’s know how to invoice dispute laws affect your small-scale enterprise.

How Does an Invoice Dispute Affect Your Small Business?

  • Late payment

    The first and foremost effect of a disputed invoice on the company is late payments. When invoice disputes happen, it delays the transaction until the issue is resolved. This disturbs the entire cash flow of the company.

  • Negative cash flow

    Accounts received are an asset, but even a huge figure in accounts does not mean anything when paying your employees and vendors. It makes credit management a tougher job than it should be.

    The negative cash flow affects the business’s overall performance and can even bring it to a halt.

  • Profit margin erosion

    The accounts receivable by customers is the biggest channel for revenue generation for small businesses and freelancers. If that pipeline gets clogged up, it takes a toll on the profit margin.

    The cut in the profit margin makes managing working capital hard.

  • Reputation defacement

    Last but not least, invoice dispute management dents your brand image, and the customer most probably would not like to work with you in the future. So, an invoice dispute may cost you a customer.

    Moreover, if the customer wants, they can sue the firm for the difference in the stated and quoted amount in the invoice.

Aren’t these scary?

These were only some of the blows that invoice disputes to your business. But, relax! It’s not the time to hit the panic button.

We are here with simple 5 methods to resolve invoice disputes for your business.

So, let’s get right in.

5 Methods to Troubleshoot an Invoice Dispute

When we say it is quite common to have an invoice dispute, most businesses have been through it at some point in time. And if tackled wisely with best practices, it can be resolved smoothly without having to face any consequences.

5 methods to troubleshoot an invoice dispute

Want to know how?

Follow the below 5 simple procedures to get your invoice out of the dispute.

  1. Inquire and investigate

    The first and foremost thing to be done whenever you face a disputed invoice is to inquire and investigate. You would want to talk to the customers and know their concerns and why they are disagreeing with processing the accounts payable.

    Once you receive communications and know the reason, investigate the money issues. Investigate internally and find out the error in the invoice.

    Now, the error you find must be either of the two types:

    • The error you made
    • The customer is mistaken

    If the error is from your side, convey the customer and make sure you edit the invoice and remove the error immediately.

    And if it is the latter, it leads to the next step.

  2. Assist the customer with resolving their mistake

    Errors are natural, and they happen. Therefore, when you find the customer’s mistake is the reason for the dispute, you would not want to corner them straight away.

    Remember that mistakes can happen to anyone. So be gentle when letting them know their mistake. Then, guide them to resolve the error and process the accounts payable.

    This approach not only gets you paid but elevates customer satisfaction too.

  3. Find a middle ground

    Imagine an invoice is under dispute. The customer does not agree to pay the amount, and the business owner needs the cash flow in. So, what would he or she do?

    Mind that you have both the customer relationships and the business to protect. This calls for finding a middle ground and presenting more information.

    You have to calculate a certain number and think about how much this customer means to your business. How much you can compromise for this deal?

    Now, think from the customer’s point of view. This can only be done when you have listened to the customer thoroughly. This will bring you to a solution that benefits both parties.

    Moreover, it’s good that you have come up with a brilliant solution, but don’t push it on the customer. Instead, offer the solution more as an option. This cooperation and flexibility might help you improve customer loyalty.

  4. Escalate the issue

    There are times when you can not come up with a solution that both parties agree to. In such cases, you need to take the hard step and risk losing the customer. If you think the disputed invoice needs more attention, don’t hesitate to escalate the issue.

    Remind the customer about the payment and non-payment terms and notify them about your legal rights.

    You might want to involve the third-party collection services for further proceedings for chasing payments.

  5. Take it to the court

    If still, you are not able to resolve the disputed invoice, it’s time to dial your lawyer. Although you can file a lawsuit without hiring a lawyer, it is not recommended.

    The lawyer will charge you his/her legal documents’ fees but make sure that all the legal advice and steps are strictly followed so that your case is not rejected based on a technicality.

    Before using the customer, ensure you thoroughly review the contract and check for the supporting documents.
    Make an email communication to the customer and notify them that they have passed the due date (X) days ago. And allow them the payment duration limit mentioned in the contract to fix the mistake.

    While filing the lawsuit, get the billing process model right so that you don’t end up paying more than the accounts receivable.

How to Dodge an Invoice Dispute?

  • Keep in touch with the client

    Staying in constant touch with the clients over phone calls helps clients with any issue regarding the invoice. Thus, you can resolve the issue before clients dispute an invoice.

  • Sign a contract

    Handshakes do not work anymore. Instead, send a quotation and sign a contract stating all the details, such as:

    • Quality expectations
    • Delivery time
    • Quoted price
    • Payment methods
    • Currency
    • Agreed due date

    The contract also should mention the provisions if invoicing disputes arise. This will make you eligible to take legal action.

  • Maintain supporting documents

    Maintaining supporting documents helps you avoid billing discrepancies. Refer to purchase order numbers, quotations, credit notes, and other supporting documentation to create and send invoices with accuracy and precision.

  • Use invoicing software

    Switch to electronic invoicing with software like InvoiceOwl. It is the easiest way to avoid invoice discrepancies or disputes. InvoiceOwl eliminates the room for silly mistakes such as:

    • Calculation mistakes
    • Wrong invoice date
    • Discrepancies in the line item description
    • Sending invoices to the wrong billing address

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Frequently Asked Questions
  1. How long does a customer have to dispute an invoice?

    It highly depends on the parties involved. The period for which the customer has to present the invoice that is in dispute depends on the agreement made at the start of the collaboration.

  2. What is a disputed invoice?

    A disputed invoice is an invoice that a customer refuses to process and make a payment because of any reason.

  3. How do I resolve a disputed invoice?

    When you find any discrepancies in invoices, here are the steps to follow to dispute invoices.

    • Check your purchase order
    • Match it with the quotation
    • Send the invoice dispute letter
    • Request correction
    • Provide content information

  4. Do I have to pay a disputed invoice?

    It depends on the nature of the discrepancy. If it is an honest mistake such as a calculation error, or a misplaced decimal in the disputed amount, which can be corrected immediately, you need to pay the undisputed amount.
    But, if the dispute is over the quality or delivery of the service/product, you might get a concession or a no-pay offer.

  5. What is the difference between disputed invoices and unpaid invoices?

    A disputed invoice is due to faulty invoices or dissatisfactory relations between the vendor and the customer. Whereas unpaid invoices are the invoices yet to be paid by the customer. The tactics for handling unpaid invoices and disputed invoices are entirely different.


As a business owner, you should never neglect disputed invoices. And with the methods we have shared with you, tackling them will be much easier.

But to reduce such disputes, we highly recommend you go digital your entire invoice creation process.

Author Bio
Jeel Patel
Jeel Patel

Jeel Patel is the founder of InvoiceOwl, a top-rated estimating and invoicing software that simplifies the invoicing and estimating processes for contractor businesses. Jeel holds a degree in Business Administration and Management from the University of Toronto, which has provided him with a strong foundation in business principles and practices. With understanding of the challenges faced by contractors, he conducted extensive research and developed a tool to streamline the invoicing and estimating processes for contractors. Read More

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