Commercial Collections: Is the Customer Always Right? How to Handle Invoice Disputes

Many organizations practice the motto "the customer is always right" -- but is the customer always right?

This is a topic that we could all stand to talk about more often. The customer isn't always right and allowing them to hold the payment(s) will create a bigger issue. Yes, it's important the customer is heard and their dispute is researched. However, the phrase "I don't agree with the charges," is the number one delay tactic that prevents the collector from doing their job.

Questions to ask yourself: Did the customer wait for you to call them? Or did they proactively notify you? Did the customer contact you prior to the bill being due? Did they make mention to their sales representative in text, e-mail, and/or phone that they didn't agree with the charges or invoice? or did they wait for the invoice to come past due and receive your call to notify you that a problem existed?

It's important that the customer is coached, to contact you right away if they have a dispute. This is something I always teach: "It's imperative Mr. Customer that you notify us right away if you see something incorrect on your bill; this will allow us adequate time prior to the bill being due to research and get a credit issued to your account." Did the customer receive damaged goods? Did they receive something from the supplier or the manufacturer directly? Did they sign for the product that it was received in good order but discovered it was damaged after signing? Better yet, did the customer sign that they received everything, but then file a dispute for shortage in the product when you came to collect the invoice?

• If the product came straight from the manufacturer, there may be limited time to file a damage claim.
• It's very difficult to dispute something after they signed for it in good order.
• Does the customer have pictures of the shortage and/or damaged goods?
• It's important that the proper paperwork is included in order to dispute an invoice. Does the customer have all the necessary paperwork?
• Were they billed for a service that wasn't performed or ordered?
• If the charges didn't match what they were quoted for the product/service, do they have documentation for the quoted amount?
• Quotes are only as good as the information provided to obtain a quote.

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Recommendation. The collector needs to set the proper expectation during this call. "We would be happy to research the dispute for you. It's our company policy that disputes are filed prior to the invoice due date. We can go ahead and process the payment over the phone for the full amount due. Once the dispute is researched and approved, the credit will be applied against your account." "I can be sure that we will update you once that is approved, but generally speaking, that can take upwards of one to two billing cycles. That being said, in the future if you notice an incorrect charge please notify us right away. This way we can ensure it's corrected on your account before the invoice is due."

This recommendation is putting the onus on the customer to communicate. Unfortunately, we can't assume that we will get this amount credited. We don't want to set the expectation that regardless they don't owe the charges. We want to educate the customer that if they would have notified us prior to the amount falling past due, they wouldn't have to pay for the charges. Lastly, we are now setting proper expectations for if they have something come up in the future.

Alternative Options. I'm sure you are thinking, that's great Katie but the customers don't care. Or regardless, the customer is going to refuse to pay the charges. If this is a good customer, one that generally isn't late, and doesn't typically dispute the charges than I get it. Also, the customer should be current outside of this dispute. However, maybe to you it makes sense to let the customer short pay the disputed amount.

Conditions for this option:

• The customer should be paying all the other charges on the invoice and account in full.
• They must have provided all the paperwork and filed their dispute.
• They must understand that if the dispute is denied, they are responsible for payment in full.
• Set proper expectations for how long until they hear back on if the dispute is approved or denied.

Maybe there is a scenario or customer that it's worth letting them hold payment on the entire invoice. It could be because their process doesn't allow them to short pay an invoice. Maybe it's because this was a large incorrect billing. The charges are really other customers and someone incorrectly entered an account number, etc. Let's use this opportunity to educate the customer on the process regardless if we are going to give them a pass. This is an excellent time for the collector to build additional loyalty and rapport with the customer. However, if this happens again that our expectation is that they will notify us proactively.

Helpful Tip: Depending on the size of the amount they are disputing, I would run a credit check. Make sure that something bigger isn't going on behind the scenes and the chances that they using this as a stall tactic. Also, is this something they can get a credit on? In other words, if you know it's going to be denied and it's a large dispute, I wouldn't let the customer keep invoicing. Let's have the direct conversations and rip the bandaid now versus later.

Recommended exercise, look at your customers that haven't paid their invoices in full. How many of them have notified you of a problem with the charges? How many of them have filed their disputes properly? Make it a top priority that the customer must file the dispute at minimum or the collector should be collecting all monies owed in full. I would do this exercise a minimum of twice a year.

Don't be afraid to teach the customer isn't always right. You want to teach your customers that you have expectations. You expect them to proactively communicate if something was incorrectly charged or partially charged to them. They can't short pay the invoice without filing their dispute and supplying any/all required documentation. If we set these clear guidelines and expectations, the customer won't react poorly when they are enforced. Yes, we can give a customer a pass but that shouldn't be what happens every time.

How often are you reviewing your short paid invoices/accounts today? Does your collector know how a call of a customer with a short paid invoice should sound? Are the collectors proactively communicating the process to the customer and requiring them to file the disputes? Are you inspecting what you expect from your customers?

I hope you see purposeful decision-making throughout the steps mentioned above. If not, feel free to reach out to me via email at keich@theiainstitute.com. I would love to hear your thoughts. Even better, #ChimeIn on my personal LinkedIn page where this article will be shared and published for open comments.