Introduction

Did you know that one of the most common reasons why your company hasn’t been paid by your public sector client is an invoice dispute?

Invoice disputes disrupt your business operations and lead to cash flow issues. They can also damage your company’s reputation, impacting client relationships. As a result, avoiding disputes on invoices is paramount for businesses.

This guide shows businesses that provide goods or services to the public sector how to prevent disputes on invoices, ensuring timely payments and strong client relationships.

First up: What is a disputed invoice?

What Is an Invoice Dispute?

When a client disputes your invoice, this means they disagree with or have found a discrepancy in the invoice. This could be something as simple as a typo or something bigger, like an issue with the service provided.

Here are some common reasons for invoice disputes in the UK:

    • A mistake on the invoice. This could be a pricing error, charges for work or goods that the client didn’t receive, or issues with the number of hours you have billed.
    • Quality issues. For instance, the client may be unhappy with the quality of the goods or services you provided and unwilling to pay the full total.
    • Discrepancies regarding the terms and conditions. In this case, the client has a different understanding of the contract terms and conditions and is refusing to pay.
    • Misunderstandings. The client has different expectations about the deliverables or the scope of the project, leading to disputes.
    • Payment terms are unclear. If the contract doesn’t outline the payment terms clearly, clients may not understand when they must pay, leading to disputes and delays.

Any of these issues can lead to disputes on your invoices, which can result in late payments. 

Bonus content: How to Tell if a Payment is Late Under UK Regulations?

Now let’s look at five ways to avoid invoice disputes.

5 Ways to Prevent An Invoice Dispute

The best way to ensure timely payments from public sector clients is to avoid disputes on your invoices. But how? We’ve compiled a list of five ways to prevent invoice disputes so your business gets paid on time.

1. Draw up clear contracts

The first step in creating a smoother invoicing process is to ensure your contracts with public sector clients are detailed and comprehensive. Doing this will set clear expectations (for both sides) and reduce the chances of misunderstandings down the road.

In particular, make sure your contracts outline the following:

  • The scope of the work and expectations
  • Deliverables and deadlines
  • Pricing and payment terms and conditions 
  • Communication processes
  • Any other relevant protocols and processes 

Once you have signed the contract, keep it in an accessible place so you can refer back to it regularly. And, of course, get familiar with the terms and conditions so that your company keeps your end of the bargain.

Some businesses state in their terms and conditions that disputes must be raised within a week or ten days of receiving the invoice. This can encourage clients to check invoices promptly and avoid payment delays.

2. Lead by example with communication

Communication breakdowns are the root cause of most invoice disputes, so get ahead of it and establish regular and transparent communication from day one. Start as you mean to go on, and show your client how you would like communication to look throughout the project or contract.

For instance, provide regular progress updates to your client and inform them if there are any potential issues, delays, or changes in scope.

If there are any unexpected costs, be sure to explain these to the client before sending the invoice. The best way to do this is in writing before you complete the work. That way, your client will be clear on why they are being billed more than originally quoted.

You may also want to give your point of contact a call to let them know the invoice is on the way. This way, your clients will check the invoice sooner rather than waiting until payment day to notice a discrepancy.

Working with larger public sector clients can make communication tricky, but setting a good precedent can help. It also means that your client is aware of who their point of contact is in case of an issue or urgent matter.

3. Double-check invoices

Inaccurate or confusing invoices cannot only cause payment delays, but they also negatively affect your relationship with your client and damage trust. Therefore, it’s imperative that your business double-checks invoices to ensure they are correct and clear.

Use this checklist to help you ensure your invoices are correct and clear:

  • Is the invoice addressed to the right person?
  • Is the billing information correct?
  • Have you provided contact details?
  • Do all the costs correspond?
  • Have clearly itemised all the goods and/or services?
  • Have you added all relevant taxes or fees?
  • Did you break the invoice down in a way that the client can understand?

Always try to break your invoices down into smaller invoices throughout the project. This makes it easier for both parties to understand and spot discrepancies. It also means that if the client has a dispute on one item, you can still receive payment for the other invoices.

A good practice is to send your client a quick video or document explaining your invoice process and structure at the beginning of the project. For instance, you can add annotations to explain how you itemise elements and what certain charges or codes are. Doing this can establish transparency and build trust.

4. Keep accurate records

As a business, invoice disputes can happen no matter how careful you are. That’s why it’s important to keep all documentation and details about the project. These records will be essential when it comes to resolving invoice disputes and avoiding potential conflicts with clients.

Your records should include all communications, contracts, agreements, changes in project scope, relevant incidents, and late payments.

5. Resolve issues quickly

If your client disputes something on your invoice (and they’re correct), it’s essential to have an effective resolution process in place. The sooner you can get to the bottom of discrepancies and rectify them, the better your relationship with your client will be. So, be proactive when disputes arise and always listen carefully to client feedback to avoid making the same mistake in the future.

Next Steps

An invoice dispute can negatively impact your business, hindering cash flow and wasting valuable resources. As such, it’s critical that UK businesses take the measures laid out in this article to protect themselves and avoid disputes.

Disputed invoices are one of the main reasons for untimely payments. Therefore, it’s also crucial that your business understands the legislation that protects your business from late payments. 

If you have received late payments from the public sector, you may be eligible to make a late payment compensation claim. Our team of experts can support you in getting well-deserved compensation for each late payment you receive. That way, your business operations can continue to grow without the added pressure of untimely payments.

Try our free eligibility checker today to see how much you can claim back.

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