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If you’re a business owner, chasing unpaid invoices can be a time-consuming job. However, this job can become even more troublesome if a customer wants to dispute the invoice. Dealing with invoice disputes can be stressful. Furthermore, it doesn’t fix your business’ cash flow problem. This article will guide you through the steps to respond to a disputed invoice and resolve the issue quickly.  

Keep Communicating

It is essential to communicate clearly and openly with the customer when attempting to resolve the dispute. Stay professional and avoid any aggressive or emotional language in your communications. Ask the customer to clarify, in clear terms, what they are disputing. Disputes commonly relate to the:

It is essential to narrow the issues in dispute down and clearly agree on what problems are at hand.

Disputes often arise due to a misunderstanding by one party and can be easily resolved with clear communication. Ensure the customer knows you are keen to work with them to resolve the problem. You should also keep a record of all communications as you may need to rely on them if the dispute escalates at a later stage.

Check the Contract

A dispute over an invoice is a contractual dispute. Once you have narrowed down the issues in dispute, review any written agreements you have with the customer. Check that you have fulfilled all of your obligations as stated under the agreement. There may be steps beyond the provision of the goods or services that you have overlooked and can easily fix. If the agreement has a dispute resolution clause, follow all required steps to deal with the dispute. You may need to show that you complied with this clause at a later stage if the matter moves to legal proceedings.

If there was no formal written agreement, review any discussions or other correspondence that may combine to form your agreement with the customer.

For example, you may have email correspondence that sets out:

  • what you agreed to;
  • pricing; and
  • timeframes.

Similarly, you may have varied the terms of the original written contract in a later conversation or email exchange. So, you should carefully review your records for any such changes.


Next, you should attempt to negotiate a resolution to the dispute. Keep an open mind about resolving the dispute in whatever way possible and be prepared to compromise.

For example, can you offer to replace the goods or re-deliver the services in some way? Would you consider discounting the full invoice price?

Look at the bigger picture with this customer. If you hope for further work from them, it may be worth compromising for the sake of the business relationship. Furthermore, it may be worth accepting less than the full price to resolve the issue and allow you to move on with business.

Alternative Dispute Resolution

If you can’t resolve the dispute by communicating with the customer, you may need a third party to assist with more formal negotiation attempts. Mediation or arbitration are good options and are less costly than court proceedings.

Mediation is a structured negotiation process with an independent, qualified mediator to assist parties to work through the issues. Any agreement that you reach with the other party can be confirmed in a written agreement.

Arbitration is used where your ability to negotiate with the other party has broken down. Here, an independent arbitrator acts as a judge to determine a binding result. 

Take Legal Action

If you are still unable to resolve the dispute after undertaking methods of alternative dispute resolution, you may consider legal action. However, this method is very costly and time-consuming so it should always be the last resort.

For smaller debts, you can save court costs courts by issuing proceedings in a lower court or tribunal. However, larger debts will involve proceedings with higher costs, and you will need legal representation. Before commencing proceedings, you should get advice to get an informed opinion on your prospects of success with any legal action.

Key Takeaways

Many disputes can be resolved quickly and easily with clear, calm communications between you and the other party. However, you will need an open mind about possible resolutions. When confronted with a dispute, you should first undertake negotiation. However, if that does not work, alternative dispute resolution and even legal action may be your best option is the dispute escalates. If you have any questions about a dispute over an invoice, contact LegalVision’s dispute resolution lawyers on 1300 544 755 or fill out the form on this page.


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