Getting paid is one of the biggest challenges a small business faces. When the smallest delay can turn positive cash flow negative, accounts departments have to chase late invoices as soon as they become late — and a dispute nobody mentioned earlier is often the reason for the delay.

It is perfectly within a customer’s rights to dispute an invoice. Invoices are not legally binding in themselves and, without supporting paperwork and other evidence, the recipient does not have to pay one they have an issue with. That is why many businesses use a purchase order as proof that an order was placed. It does mean, though, that resolution depends on communication.

Why an invoice gets disputed

  • Faulty or poor goods or service

  • Goods never arrived

  • No binding signed agreement

  • A lack of funds to pay, used as a stalling technique

  • A dispute over costs

There is no one-size-fits-all dispute procedure. The reason differs every time, so the negotiation has to be handled case by case.

Start with a phone call

A lot of the time a call resolves it. You need to know why the invoice has not been paid anyway — at which point they either pay because they had forgotten, or tell you what the problem is. Remain polite but firm throughout; these disputes flare up easily.

Replacements and compromise

If the goods were genuinely faulty, ask for them back and replace them. If they were substandard but usable, compromise on price. If work did not come out the way the customer envisioned, offer revisions and agree what that costs.

Cite your contractual agreement

Never begin work without a signed contract stating what you will do, your charges and the schedule. As long as you have upheld your end of it, you can cite it as evidence if a dispute arises.

Legal action

If you are satisfied there was no negligence or poor service on your part and no reason for the dispute, you can take the case to the small claims court. That is usually the right course where the customer claims they cannot pay: they agreed to, and there is no reason to release them from that commitment.

Key takeaway

Where only part of the invoice is contested, ask for immediate payment of the uncontested balance. A customer who refuses that is telling you something useful about their intent.