Q. I have customers who have small queries on large invoices and are withholding payment of the entire amount. What should I do? A. To query a part of an invoice and refuse to pay anything until the question is answered satisfactorily is a well-practised device to delay payment. The usual practice is to select some issue that is difficult or time-consuming to provide detailed justification, such as recharged expenses. A legitimate request is to list all telephone calls, their duration and from who to whom. Or list the itinerary of all the journeys made for which mileage allowance is charged. Another favourite is to say that the goods inwards records do not agree with the invoiced quantities and to request confirmatory evidence that the amounts billed were actually delivered and received. Thankfully there are several positive things that you can do if faced with this. 1) The first approach is to ask the customer to pay the part of the invoice that is not in dispute. If they refuse on the basis that they cannot authorise the invoice for payment in part, then proceed to action two. 2) Having confirmed the amount that is not in dispute, credit the original invoice and re-submit two substitute invoices. One for the amount not in dispute and the second for the queried sum. You can then ask the customer to pay the undisputed balance immediately. 3) Determine how much of the disputed amount you can resolve easily and do so as a matter of priority. You may even divide the resubmitted invoice for the disputed amount so that one invoice contains the balance you expect to resolve easily and quickly. 4) Once you have reduced the problematic balance by steps 1 & 2, review the outstanding invoices and evaluate the order in which you address the queries. Factor into the analysis the difficulty of answering genuine disputes, the likelihood of the customer accepting your explanation or whether they’re playing games with you to manage their cash flow. When you respond, ensure that you set reasonable deadlines for the customer to respond to your explanation either by demonstrating acceptance by making payment immediately (do not accept the now approved invoice being reintroduced into the payment system as a new bill) or by providing in writing a detailed response explaining why they continue to dispute specific elements. If second order queries are valid, you can again divide the invoice and ask for payment of the balance no longer disputed. 1) Ensure that all future invoices to customers who tend to dispute are billed in small amounts and not as single monthly invoices for all your sales. 2) Remember large companies that use disputes and their administrative complexity to slow payment will tend to pay quickly if you issue a statutory demand. The problems this creates may be greater than the importance of the amount being withheld. But resorting to this coercive process tends to bring your commercial relationship to an end. Anthony Holmes is an international corporate turnaround specialist and transitional leadership expert. He has led the revival of seven companies over 15 years and his 30-year international business career spans strategic consultancy, investment banking and senior corporate management in a diverse range of industries. Holmes is also penning two business books: Managing Through Turbulent Times (publication 30 March 2009 – Harriman House) and A Time to Lead, A Time to Manage.
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