Invoice disputes are something that all businesses have to deal with at some or another. Perhaps a client had a problem with the service provided, missed a payment deadline, or made a simple mistake. No matter the cause, handling invoice disputes should be done in a timely and professional manner. 

When it comes to public sector clients, the situation can become even more complex. Therefore, it’s crucial to have a clear strategy at the ready. By managing these disputes proactively, you’ll be better equipped to protect cash flow and maintain positive client relationships.

In this blog post, we’ll look at the best ways to handle invoice disputes with public sector clients and explain when a late payment compensation claim can be made. 

With these 5 tips, you’ll be prepared for your next public sector invoice dispute so you can focus on your core business.

5 Tips for Handling Invoice Disputes

Let’s get right to it with these key strategies for handling public sector invoice disputes with confidence and professionalism.

1. Understand your client’s payment process

First and foremost, you should have a clear understanding of your client’s typical payment processes and timelines. This goes for all clients, both public and private. 

However, unlike private sector organisations, government agencies, like the NHS, and local authorities often operate under strict procurement policies and budgetary constraints. On top of this, internal bureaucracy and approval workflows can take longer than in private companies. This can lead to delayed invoices, which then become disputes.

If you’ve received a late payment from the public sector (outside the 30-day window), your business may be entitled to late payment compensation.

Check your eligibility now →

2. Prepare for the dispute

The best way to handle invoice disputes is to approach them proactively. Before engaging with a public sector client, take the time to thoroughly review the contract terms and conditions. That way, there are no surprises. Ensure that all documentation, including timesheets, delivery notes, and any other supporting evidence, is in perfect order.

You’ll also want to establish clear communication channels and figure out a point of contact within the public sector organisation you’re dealing with. Knowing who’s responsible for addressing invoice queries and disputes will be essential for the resolution process.

3. Responding to an invoice dispute

When an invoice dispute arises, prompt action is essential. This demonstrates your professionalism and willingness to find a solution to the issue.  

Firstly, request all relevant information from them so you have full scope.

Secondly, compile your own comprehensive documentation related to the project. This should be straightforward if you’ve followed step 2. Use a fine-toothed comb to meticulously review all details to pinpoint the root cause of the issue.

Thirdly, maintain clear and consistent communication with the client throughout the resolution process. As always, communication is key.

Finally, if the dispute remains unresolved through your point of contact, you may need to consider escalating the issue. This could involve reaching out to the finance department or procurement team. It may even involve making a late payment compensation claim. More on this later.

4. Avoid future disputes

In an ideal world, we wouldn’t have to deal with invoice disputes at all. But sometimes the silver lining of an invoice dispute is the opportunity to prevent them from happening again in the future.

Here are some top tips for avoiding invoice disputes

  • Draw up clear contracts: define project details, deadlines, payment terms, and dispute timelines to minimise misunderstandings with public sector clients.
  • Communicate clearly and consistently: Establish regular updates, flag potential issues early, and explain unexpected costs beforehand to avoid invoice surprises.
  • Double-check invoices: Check everything from recipient info to line items, consider breaking down large projects into smaller invoices, and explain your invoice structure for transparency.
  • Keep meticulous records: Maintain a paper trail of all project details, communication, agreements, and changes to avoid disputes and demonstrate your work.
  • Address disputes swiftly: Listen to client concerns, investigate discrepancies promptly, and resolve issues quickly to maintain a positive working relationship.

💡 Bonus reading: How To Avoid An Invoice Dispute

5. Maintain the relationship

Even in the midst of an invoice dispute, it’s important to preserve the overall client relationship. This involves adopting a solutions-oriented approach and working collaboratively to find a mutually agreeable resolution. Whether that’s a payment plan, a negotiated settlement, or a compromise on the disputed amount, maintaining a positive relationship with your client should always be a priority.

As we previously mentioned, disputes can also be a catalyst for improved invoicing and dispute-handling processes by learning from the experience. Whoever may be at fault, maintaining a professional and constructive demeanour demonstrates your commitment to the partnership and keeps it moving forward.

When Does It Become a Late Payment Compensation Claim?

A late payment compensation claim provides businesses with financial recourse when there is a delay in payment. This is stated in the Late Payment of Commercial Debts (Interest) Act 1998.

Under the Act, a business can claim compensation for every invoice that is paid late and outside the agreed payment terms. This is provided that the invoice is undisputed and the public sector body pays outside of the allotted 30-day period.

💡 Read our comprehensive overview of the UK legislation surrounding late payment compensation.

A Final Word on Handling Invoice Disputes with Public Sector Clients

If handled incorrectly, invoice disputes can cause cash flow issues, a loss of clients, and misuse of valuable resources, all negatively impacting your business.

By following these 5 tips on handling invoice disputes with public sector clients, you can be better prepared for the situation. Of course, since the process can be complex and vary depending on specific circumstances, consulting with a professional can make things easier. is one of the UK’s leading specialists, helping you to seek the compensation you deserve without the hassle. 

🔍 Discover the benefits of working with late payment compensation experts →

Have you received late payments from the public sector? See if you’re eligible for compensation below.

Check your eligibility now →

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