How to Resolve Invoice Payment Disputes

As a business owner, managing your debtors and improving your cash flow are crucial to the success of your business.

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Therefore, you must take proactive steps to avoid customer payment disputes and prevent cash-flow issues. This article explains how to avoid or resolve invoice payment disputes.

 

Draft Effective Business Terms and Conditions

A customer enters a binding contract each time they buy from you. A written contract setting out the terms of that transaction provides clarity and can reduce the risk of invoice payment disputes arising. Here are four top tips for writing your business terms and conditions:

Tip Explanation
Be clear about what products or services you sell The more detail you provide about your goods or services, the more customers know what they are getting. This may help if a dispute arises and they try to avoid payment. 
Dictate how your client or customer can accept your business terms and conditions Once they accept, your customer will be bound by your terms and conditions. Standard acceptance methods include signing, ticking an acceptance box online, confirming in writing or paying a deposit. Choose the method that best suits your business and your customers.
Set out your payment terms and acceptable methods of payment Payment terms should indicate the timeframe in which you require the customer to make payment. You should also set out the consequences if the customer fails to pay on time, such as being charged interest on overdue amounts.
Include a dispute resolution clause In the unfortunate event that a dispute does arise, a dispute resolution clause can assist you in resolving the dispute faster and more cost-effectively. Dispute resolution clauses usually require an attempt at Alternative Dispute Resolution before escalating the matter further.

Your business terms and conditions are essential in managing your debtors. Therefore, you (or your lawyer) should draft these terms specifically for your business. They will form the foundation for any future debt recovery proceedings. It is far easier to point to terms and conditions in an agreement than to rely on a verbal agreement or informal email chain.

Avoid Delays and Always Follow Up

Issue invoices promptly while the transaction remains fresh in your customer’s mind. The invoice should contain sufficient detail about the goods or services you have provided to avoid confusion.

Once an invoice becomes due, be sure to follow up. You may only need to give customers a friendly reminder by email or phone.

Additionally, diarising when accounts become due or implementing an automatic notification system into your accounting software are great ways to keep on top of debtors.

Keep Communicating

Keeping the lines of communication open with a customer who owes you money is essential. If those lines of communication close, it is unlikely that you will receive payment without escalating the matter further. Some tips for keeping communication open:

  • resend a copy of your outstanding invoice;
  • remain calm as disputes tend to escalate quickly (sometimes unnecessarily) when emotions are left unchecked;
  • speak with the person responsible for paying your invoice;
  • confirm in writing the amount outstanding and when payment was due;
  • ask questions and listen. There may be a reason your invoice has not been paid; and
  • keep a paper trail. If you start debt recovery proceedings later, you can use this trail as evidence.

However, even after doing everything in your power to coerce payment, escalating your debt recovery to a lawyer may be your best option. In this case, issuing a letter of demand is the next step.

Key Takeaways

Resolving invoice payment disputes quickly can improve your business’s cash flow by ensuring you receive money owed in time to pay your debts. You can increase the odds of customers paying on time by having well-drafted terms and conditions, following up promptly and keeping communication open.

 

 

Meryem Aydogan
Law Graduate
legalvision.com.au

 

Mark Lisle

Mark Lisle

Mark is our managing partner and has been with the firm for over 36 years. He brings a wealth of experience in all areas of our business, including business advisory, taxation and self managed superannuation.

Mark’s ethos is that good advice stems from working closely with our clients and being prepared to go that extra step to assist them in meeting their goals and optimising their financial position.

Mark is a Fellow of Chartered Accountants Australia and New Zealand, an accredited SMSF Specialist and a registered SMSF auditor.

Outside of work, Mark enjoys trying to keep fit and spending time down at his “second home” in Port Fairy.

Josh Laing

Josh Laing

Joshua began working at Rundles in 1999 whilst still completing his Bachelor of Business (Accountancy) degree at RMIT. After graduating in 2001 he was admitted to the Institute of Chartered Accountants Australia and New Zealand in 2004. Joshua spent two years working in London before returning to Rundles in 2006.

Josh has a wealth of knowledge across a broad range of industries as well as in Self Managed Superannuation. Josh enjoys working with family groups and businesses to ensure they’re structured correctly to maximise asset protection, succession planning and management of tax.

Married with 2 children, Josh spends his weekends with his family and following the Tigers.

Brad Roach

Brad Roach

Brad has been a part of the Rundles Team since 1996 and became a Partner of the firm in 2014. During his time at Rundles, Brad has developed a strong relationship with his clients across a wide range of industries and is dedicated to assisting them to reach their personal and business goals.

Brad is passionate about seeing his clients succeed and utilises his extensive experience in public practice to provide a holistic service to his clients. He also has a wealth of experience in superannuation, particularly self managed superannuation funds.

In his spare time, Brad likes to play a round of golf with friends and enjoys watching his two sons play various sports.

Peter Davison

Peter Davison

Peter graduated from RMIT with a Bachelor of Business (Accountancy) with distinction in 1976. He joined Rundles upon graduating. Peter has been a member of the Institute of Chartered Accountants since 1979 and a Fellow since 1991. As an active yachtie of many years, Peter can often be found on the water. Otherwise, he and his wife spend time with their friends and extended family.

Sandy Gilbert

Sandy Gilbert

Sandy was admitted to the Institute of Chartered Accountants in 1973 and has been a Fellow since 1983. He gained extensive experience in auditing and accounting services over seven years at Pannell Kerr Forster before joining Rundles in 1973. Sandy is married with three children. A former amateur footballer of some note, Sandy is still an avid follower of the game and enjoys weekends at his country retreat.