Q&A: What Are Some Best Practices for Handling Invoice Disputes?

The editors of the AR Insider asked three certified AR practitioners and IOFM’s subject area expert, John Salek, VP Order to Cash at Genpact, the following question:

What methods or processes do businesses practice when handling invoice disputes? Is it a one step process that Accounts Receivable handles? Are sales reps or the billing department involved?

Here are their responses:

Julie Roberts, ARM, Manager, Revenue Accounting, Ingram Barge Company

“Here at Ingram, the Billing group handles all invoice disputes in the beginning. The group has access to all the systems so they can track and determine what is wrong with the invoice. If they cannot solve the problem, then the following steps are taken in this order:

  1. Customer Service will be brought into the loop, as well as the transportation dispatchers.
  2. If it can still not be resolved, it will escalate to the salesperson.
  3. If it is determined that it is billed correctly and the customer still doesn’t pay, it then moves over to our Credit department for collection.

We have found this works very well and we have very few unresolved items at any given time.”

Nancy Cotter, ARM, Accounts Receivable Operations Manager, Weight Watchers International, Inc.

“At Weight Watchers, it is a collaborative effort. We follow these steps:

  1. Initially, AR will research the issue, since AR has access to multiple systems/programs.
  2. If AR is able to identify the issues and there is a legitimate problem with the invoice, adjustments will be made.
  3. If the adjustment is above a set monetary value, the adjustment must be approved by the sales rep and sales manager. This provides instant visibility and accountability to the sales team.
  4. If, after researching, AR is unable to validate the dispute, the sales rep will be contacted for further clarification/verification.
  5. If necessary, the sales rep will reach out to the customer to retrieve additional information.
  6. If the sales team confirms the dispute is erroneous, they will reach out to the customer and explain the reasons.

By working collaboratively, we are able to provide the customer with information and collect payment.”

Sean Daly, ARM, Accounting Manager, Top of the World Headwear

“At Top of the World, the process works like this:

  1. We have a vendor compliance e-mail that invoice disputes are funneled through.
  2. From there, the responsible department picks up the dispute, researches the issue, and tells accounting whether to accept or deny the dispute.
  3. If the decision is made to appeal the dispute, the same department provides documentation to accounting.
  4. Sales reps are made aware of the disputes with their customers and usually leave the it to the team to respond.

We track disputes by customer to make sure our customers are not in the habit of disputing invoices. All credit memos are given a specific code that identifies the type of dispute so that weekly reports can be processed to identify internal issues that need to be addressed. The issues are discussed in a short meeting each week.”

John Salek, VP Order to Cash, Genpact, IOFM AR Expert Advisor

“Dispute resolution is cross-functional and should be resolved according to two principles:

  1. A dispute or deduction is a customer satisfaction issue as well as an AR issue
  2. A dispute should be researched by the department in the company best positioned to resolve it.

For example:

  1. If a customer disputes the sales tax rate they were charged, who better to resolve it than a sales tax expert?
  2. If it is a price dispute, who has the access to contracts, pricing files, and understanding to determine if the price is correct or wrong?
  3. In many cases, the answer is outside the Credit & Collections team. If so, those disputes should be routed to the best-positioned department to resolve it.

This requires a process defining the end-to-end process, routing and tracking the dispute until cleared from the AR ledger, and senior management commitment. It may seem like a big deal, but to efficiently and effectively resolve a large volume of disputes quickly and properly, it requires a significant effort (much of which can be automated) in process, technology, and company culture.”