Customer dispute management is an essential part of a company's sales process. Indeed, disputes are the consequences of all the existing dysfunctions in the company and have an impact on cash flow, profitability. and customer satisfaction. They concern each stage of the "Order to Cash" process.

What is a dispute?

In the terminology of credit management, the dispute follows a customer dissatisfaction which is, a priori justified. The customer does not validate payment of the invoice because he has a good reason to do so. This notion is different that litigation, which means a firm disagreement between the seller and the buyer, or unpaid debt; not justified, which can lead to legal action.

The main sources of disputes

  • Quality issues production and/or service delivery.
  • Differences between the contract or order and what was delivered by the seller.
  • Administrative problems: absence of purchase order, wording errors, absence of documents and supporting documents, etc.
  • Logistical and delivery problems.
  • Billing errors: wrong price, early billing or billing addressed to the wrong entity, etc.
The causes of disputes are multiple and depend on each business. They represent many opportunities for improving the organization and quality processes.

Disputes are mainly sources of late payment, the invoices concerned by disputes are not being paid by dissatisfied customers. Let's remember that to be recoverable, a debt must be:

  • Liquid (which can be valued in cash).
  • Due (the due date has been reached).
  • Certain (which cannot be disputed).
A dispute makes the debt which concerns it uncertain, which prevents any effective recovery action. In the event of legal action, the court will first determine the certainty of the debt. If this is not established, the seller will not be able to win his case.

Furthermore, disputes negatively influence customer satisfaction, especially if they are not resolved quickly. In the event of a significant recurrence, they can lead to serious damage and the loss of the customer.
The Disputes are therefore sources of problems for companies: cash flow tensions due to induced payment delays, increase in Working Capital Requirement, impact on profitability, loss of credibility and customer satisfaction, loss of time spent to resolve them, etc., but can be the starting point to identify internal dysfunctions and improve the products and services sold.

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    Disputes management in My DSO Manager

    My DSO Manager integrates a collaborative and efficient process for identifying and handling disputes which, by nature, concern several departments within the company. The invoices concerned are qualified with a dispute code (for example price dispute) and a comment detailing the problem. This information is sent to a resolution manager (the sales representative for example) who handles the dispute and responds to the collector

    Disputed debts are then managed using the disputes report which makes it possible to contact the internal actors responsible for their resolution. An organization's performance in resolving disputes quickly and addressing their causes reflects its quality. The software makes all of this possible. See more with online demo.

Disputes and Credit Management

The identification and treatment of disputes are closely related to management of customer receivables and cash collection. The problem they generate must be integrated into the collection process, whose objective is to obtain payment of bills on their due date.

Thus, the first collection action is done before the due date of the invoice in order to ensure that there is no dispute preventing the payment of the invoice.

If there is dispute, this preventive recovery action allows to detect it as soon as possible and to resolve it as quickly as possible in order to get paid the bill. This helps to speed up the collection process and the payment may be done on the due date despite the dispute, which has been resolved in the meantime.

Disputes management process

A process of disputes management must be established in the company to determine the roles and responsibilities of each department involved and ensure proper consideration of the disputes by the organization.

Nothing is worse than leaving aside disputes or treat them "when we have time." Studies have shown the impact of litigation on customer satisfaction:
  • If untreated or poorly treated, the effect is very negative.
  • If rapid and effective resolution, customer satisfaction is ultimately greater than it would have been if there had been no dispute!
Indeed, when a dispute is quickly resolved, the seller shows to the buyer his consideration he has for him and gets a commercial advantage ... and bills paid.

Dispute management process

Key factors of success are:

  • Transversality: sharing and understanding of the process by the various departments involved.
  • Determination of service that is accountable to management on the volume and length of litigation. It is this service which will boost stakeholders to accelerate the resolution of disputes. In large companies, it is relevant that this mission belongs to Credit Management / Collection department.
  • Fluidity of exchanges and actions between those responsible for the collection, administration, sales and trade.
The Effective implementation of this process can only be done with a suitable tool, allowing the identification of disputes and good communication between the actors concerned, while providing visibility on pending disputes and performance: average resolution time by type of dispute, by activity; commercial matters, the most recurring disputes, etc. It is imperative to associate with the "good methods" the tool(s) that allow them to be implemented often on high volumes of customers, invoices, and disputes.
Digital credit management softwares make it possible to streamline communication between actors (customer, collector, sales, customer care, etc.), to manage performance in disputes resolution, to quantify the recurrence of disputes by typology in order to fix root causes in disputes. These tools change the game as they provide with visibility, allow to manage efficiently big volume of cases and make sure the buiness processes are well applied because the good tool is there to do it!
A collaborative collection and dispute management software won't resolve disputes by itself. However, it is an essential tool for users to be able to do so!

Dispute types

There are different types of disputes for which treatment may be different because of their nature.

For example, a dispute related to a billing error (bad wording, error on the price ... etc..) can be solved by the sales administration when a technical dispute will be considered by the sales manager or the technician.

It is therefore necessary to categorize disputes to improve their treatment. For example:

  • Quality dispute: includes disputes concerning the quality of products and / or services performed.
  • Price dispute: price differential between the charged and the one negotiated by the client.
  • Administrative dispute: problems of missing or poorly written documents (invoices, purchase orders, packing list ... etc..).
  • Event date dispute: for example an invoice issued so that the material was not sent to the client.
  • Missing goods dispute: differences between what was billed and actually delivered.
  • Double billing dispute: a delivery is billed twice by mistake.
  • etc.
The types of disputes are inherent to each activity and each company, even if some are very frequent such as price disputes or administrative disputes.
For each type of dispute, a maximum period for a resolution can be set. For example, a price dispute, simple to control and treat must be resolved within eight days when a quality issue may be more complicated to resolve and take more time.

Collect disputed invoices

The process of Accounts Receivable collection is stopped during the treatment period of the dispute. That does not mean the collector does nothing! He or she has to chase up the resolver to get the issue fixed. Collection process will resume when the dispute is resolved with a new due date equal to the date of resolution of the dispute.

The first action is a collection action level 1 with the aim of obtaining a promise to pay immediately.

Late payment penalties and disputes

It is common sense to assert that late payment penalties do not apply to payment delays due a dispute proved. However, they are applied when the dispute mentioned by the customer was not justified as in this case the invoice becomes recoverable again.
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