It's not as bad as it seems - A guide to effective dispute resolution

The benefit of having over 15 years of experience in the credit management industry for a whole myriad of different sectors means JSP Credit Management can spot patterns, patterns which we can use to predict the future and make our work, and your work more efficient.

One of the things we feel sure about is, that the majority of invoices that are paid late are paid late because of the single most common reason we come across when investigating late-payers: The invoice has not been submitted according to the buyer’s requirements.

We have seen this consistently. However, it must be kept in mind that if we were to add a variable, such as company size (by revenue p/a, or employee count), then we would also notice that this is an issue that is more prevalent for larger organisations than it is for smaller ones, where larger organisations procurement processes can sometimes be very convoluted.

For smaller companies, it is far from uncommon to hear the line that they have not received their invoice, particularly if the creditor is still sending their invoices by post and the debtor knows this. Therein lies a prime opportunity to blame the post-man for the invoice going missing. So simple things like asking for an email address to send the invoice to can help mitigate the risks of coming up against that basic delaying tactic. For some companies delaying payment of their invoices even by a couple of weeks can make a huge difference to them financially.

And yet, that is not the main issue that this blog is concerned with. Our blog is concerned with the genuine disputes raised against invoices. The invoice(s) for which payment is intentionally being withheld by the debtor citing a problem with the product or service that the invoice is claiming payment for. We want to talk about this because it can be extremely costly.

Of course, we will always hold the view that prevention is better than cure, however, what we always know is that commercial disputes have been around for as long as companies have and they are likely to remain for as long as companies do too. So, what kind of things have we seen happen in the past that has resulted in effective dispute resolution? In this instance, we are referring to the stage where attempts to resolve a dispute are done in-house.

Well, a lot of the measures which can be taken to proactively resolve a longstanding dispute, or a large one in monetary terms, or a significant one in terms of the strategic value of the client with whom the dispute exists, depending on the circumstances of the dispute itself. But we feel that there are some common features which seem to appear time and time again.

A dispute on costs is arguably one of the most common forms of commercial disputes and although you cannot have a commercial dispute without the costs involve being at least an element of it, what we mean here is that the client will usually feel that they have been over-charged. It is usually good practice to ensure that as much clarity about the costs of the work is agreed upon upfront but that is not always possible, such as in the legal sector where clients will agree upon an hourly rate for the services that they are procuring, and cost management then becomes about the amount of time which they are being charged for.

So, a reasonable step then would be to agree upon a framework of services that are to be provided as part of the contract. This can take the form of a schedule of works which can be based on hourly rates or individual costs of services. The challenge then is being able to prove that the services which are not being disputed were instructed. Often companies will stipulate that an order cannot be accepted until a purchase order has been received if that is a requirement of ensuring that payment will be forthcoming but even that is subject to commercial pressures.

On many occasions, and at the very least an email from the buyer to the seller instructing them to act or provide a service can be relied upon to serve as evidence of the order being placed but without this as a minimum, it would be a challenge to overcome such a defence for non-payment. The antidote to this is clear communication. Simply assuming that a client will want an additional (and chargeable) piece of work, even if you know for a fact it will benefit them greatly in one way or another is fraught with risk and bound to result in a dispute down the line. Always get the instruction confirmed!

If it has not and the client has exposed a weakness, it may be time to take a “commercial view” and consider a write-off. The alternatives are likely to be even more expensive as dispute resolution and arbitration services are big business and legal costs when going into litigation can mount very quickly. Consider it a learning curve. Perhaps analyse what drove the behaviour, be honest. Are sales targets too high? Are the team up to standard? Did you pitch too low to win the deal hoping to add more flesh to the bones as the contract progressed?

Sometimes a commercial dispute can be a disguise for cash-flow problems and that is another area that needs to be looked out for. Having cash-flow problems does not always mean a company is about to go out of business and you should start preparing your paperwork for the ‘meeting of creditors’. Often in large corporations, there are a great number of different ‘pots of money’ (budgets) and if you are a marketing company selling your marketing services and just so happen to have exceeded your buyer's marketing budget you may find they have conveniently found a missing detail on your invoice.

In other cases, it might be a genuine concern for the liquidity of the company, but this kind of suspicion is not always easy to confirm. Companies are unlikely to volunteer that information up to stakeholders they work for various reasons, embarrassment and shame being amongst them. So before directly asking the question, a more tactful approach could be to do some research on them behind the scenes. Check their companies house filings, get a credit report done on them, even better sign up for a monitoring service. Much can often be revealed that way alone.

JSP Credit Management’s whole ethos is about getting companies paid on time, more often. We reject the sometimes stereotypical view of credit management companies, or debt collection agencies as ruthless, cold-hearted number-crunchers who will stop at nothing to get their money. There is a place for being direct and firm with companies who are not willing to pay but it does not need to be the first port of call. Rather, it should be the last resort.

If you have been struggling to get an invoice paid because of a long-standing dispute and would appreciate another pair of eyes to look at it for you then visit our website at or give us a call to discuss your needs. We operate on a no-win-no-fee basis for bad debt recovery and our credit control and credit risk services can be ordered via our website with the littlest of hassle.

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