Accounts Receivable Dispute Resolution

All businesses have accounts receivable to record and manage transactions with customers that have yet to pay in full. These transactions are made on credit in some fashion, and payment is ultimately expected, if not right away.

However, in some cases, the customer may dispute some aspect of the charge. Accounts receivable dispute resolution is the process that a business undergoes to research and rectify these disputes.

Accounts receivable disputes involve several steps:

• The first step is for the business to receive and intake the dispute from a customer

• Next, a member of the accounts receivable staff will track, code, and prioritize the dispute

• At the next stage, staff will gather all relevant data concerning the dispute and analyze it to determine the root cause

• The staff may also need to request additional info from the customer

• Once all information is gathered, accounting staff will evaluate the dispute and make a determination

• Staff may need to get management approval for the dispute resolution

Finally, the business will communicate the resolution to the customer, and make the appropriate adjustments

Accounts receivable disputes can originate for a number of reasons:

• If the pricing of the item invoiced to the customer does not match what was agreed to at the time of purchase, the customer will lodge a dispute

• Customers will dispute accounts receivable when either the quantity or the quality of the item does not meet expectations, for example, some goods may be damaged, or the wrong goods may be shipped

• If relevant documents are missing or incorrect, the customer will file an administrative dispute

• Customers will also dispute an accounts receivable for missing or unaccounted for items

• Billing disputes also may arise when an item is double billed or otherwise bill incorrectly

Accounts receivable disputes and their resolution can be a time-consuming process, and they put strain on customer relations.

It is important for businesses to have an effective process for managing disputes.

The process will involve:

• Careful review of payment terms and credit policies to minimize pricing and billing disputes

• Similarly, a careful review of invoicing, pricing, and delivery of goods before shipping will help avoid administrative and product disputes

• Proactive communications with customers before accounts receivable become past due will also help avoid disputes

• Finally, accounting automation including data analytics, will help the business more quickly and efficiently process accounts receivable when disputes occur

Once the dispute is researched and analyzed, the business will make a determination if the dispute is valid.

In making the determination, the business has a few options:

• Deny the dispute and request full payment from the customer

• Approve the dispute for a portion of the payment and request payment for the remainder of the amount

• Approve the dispute for the entire amount