Last updated on Apr 12, 2024

What are the common causes of invoice disputes and how do you resolve them in OTC?

Invoice disputes are one of the most common and costly challenges in order to cash (OTC) processes. They can delay payments, damage customer relationships, and increase operational costs. In this article, you will learn about the common causes of invoice disputes and how you can resolve them effectively in OTC.

1 Cause 1: Pricing errors

One of the most frequent causes of invoice disputes is pricing errors. This can happen when there is a mismatch between the agreed price and the invoiced price, or when there are errors in discounts, taxes, or currency conversions. To prevent pricing errors, you need to ensure that you have accurate and updated pricing data, that you communicate clearly with your customers about any changes or special offers, and that you use reliable software tools to calculate and verify the invoice amount.

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Mohammed Yasir

Engagement Manager | Expertise-O2C, Order & Transition Management | Achieved 𝟱𝗫 reduced UAC in 4 months | Delivered 𝟰𝟬% efficiency boost & 𝟗𝟗% accuracy with RPA | Led team size of 260| Market Served-NAM, EMEA, APJ
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Common causes of pricing errors during the invoicing process include: 1.Incorrect Sales Order or Contract Creation: 2.Incorrect Tax Calculation at Invoice Creation: 3.Split Errors During Invoice Consolidation: 4.Master Data Issues Leading to Invoice Splitting: 5.Currency Conversion Rate Discrepancies: If you or your team faces such issues, please connect to your internal SME first so that initially things can be checked internally first and if not, SME should check with client SME to get the correct resolution. At times new team member are not sure and eventually they do the transaction and this may lead to error which will led down your accuracy % rate down.

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2 Cause 2: Delivery issues

Another common cause of invoice disputes is delivery issues. This can happen when there is a discrepancy between the ordered quantity and the delivered quantity, or when there are delays, damages, or losses in transit. To prevent delivery issues, you need to ensure that you have accurate and updated inventory data, that you coordinate well with your logistics partners, and that you track and confirm the delivery status with your customers.

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3 Cause 3: Quality problems

A third common cause of invoice disputes is quality problems. This can happen when the delivered products or services do not meet the customer's expectations or specifications, or when there are defects, errors, or non-conformities. To prevent quality problems, you need to ensure that you have high standards and controls for your production or service delivery, that you follow the customer's requirements and feedback, and that you provide warranties, guarantees, or remedies for any issues.

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4 Cause 4: Documentation errors

A fourth common cause of invoice disputes is documentation errors. This can happen when there is a lack of or inconsistency in the supporting documents for the invoice, such as purchase orders, contracts, delivery notes, or receipts. To prevent documentation errors, you need to ensure that you have complete and accurate records of the order and delivery process, that you follow the customer's invoicing format and preferences, and that you attach or send all the relevant documents with the invoice.

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5 Cause 5: Customer dissatisfaction

A fifth common cause of invoice disputes is customer dissatisfaction. This can happen when the customer is unhappy with the overall experience or outcome of the transaction, or when there are misunderstandings, conflicts, or complaints. To prevent customer dissatisfaction, you need to ensure that you have clear and frequent communication with your customer, that you understand and meet their needs and expectations, and that you handle any issues or concerns promptly and professionally.

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6 How to resolve invoice disputes

If you encounter an invoice dispute, it's important to act quickly and effectively to resolve it and secure your payment. You should acknowledge the dispute and empathize with the customer, then investigate the cause and validity of the claim. Negotiate a solution with the customer that both parties agree on and document in writing. Execute the solution and follow up to ensure the issue is resolved and the customer is satisfied. Finally, analyze the dispute to identify lessons learned and areas for improvement, so that you can prevent similar disputes in the future.

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Andriy Sichka

creditologist
(edited)
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Disputes may cause as much as 50% (and sometimes even more) of company's overdue outstanding. Unfortunately in the most part of cases company's personnel become aware of the dispute existence only after the customer's payment delay. So credit or collections specialist sees overdue payment, contacts a customer only to know that invoice is disputed. Then corrective actions commence and as long as they continue invoice remains in arrears increasing expenses and eating into company's profit. This unpleasant situation could be avoided by following simple rule: "Resolve Disputes Before Due Date" There is no lack of methods to achieve this. Examples include: - regular account statements - periodic reconciliation - et cetera ad infinitum

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What are the common causes of invoice disputes and how do you resolve them in OTC?

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1 Cause 1: Pricing errors

2 Cause 2: Delivery issues

3 Cause 3: Quality problems

4 Cause 4: Documentation errors

5 Cause 5: Customer dissatisfaction

6 How to resolve invoice disputes

Order to Cash

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