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From the Desk of Attorney Don Leviton: Resolving A/R Disputes | Brown & Joseph

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From the Desk of Attorney Don Leviton: Resolving A/R Disputes

February 8, 2013

“From the Desk of Don Leviton, Esq.” is a featured monthly article from Brown & Joseph’s General Counsel, Don Leviton.

What can be done to help resolve disputes and invoicing problems before they become collection issues?

Sorting out legitimate disputes from those purely designed to avoid payment can be a challenge. By implementing several preemptive practices, you may be able to reduce both.

Consistent follow-up with the buyer before the account comes due has long been recognized as a key to heading off problems before they develop into disputes that delay payment. Call the buyer when the goods should have arrived; ask if the shipment was received timely, if the quality is satisfactory, if your invoice is clear and correct. In addition to alerting you to any potential problems, these customer service contacts also serve to remind the buyer of his obligation. He also becomes aware that you are following his account and will take quick action to assure payment.

Requiring written purchase orders should also become part of your sales policy if your goal is to reduce problems and disputes. Having the details of the purchase in written form goes a long way toward helping to determine whether or not a customer has a legitimate complaint. These documents provide protection for both buyer and seller, and eliminate the error, misunderstanding and loss of confidence that often results when orders and their details are left to verbal agreement. Items such as price, quantity, terms of sale and warranties should all be clearly agreed upon and stated in the purchase order. Once received it is important that the purchase order be reviewed for errors or ambiguities. If these are resolved early on, problems can be avoided later on ensuring the cash flow process is uninterrupted.

The following are specific account management steps that can be taken to reduce disputes.

Set a policy that requires all disputes to be resolved within two business days. 

Work with billing to ensure that the invoices that are mailed are correct, effectively eliminating much of the dispute issue.

E-mail the customer to find out if there are any discrepancies - before the due date of the invoice. 

Fax a copy of the statement to the payables person at those accounts where disputes occur frequently. Do this prior to the due date of the invoice. 

Call customers 10 days after large invoices have been mailed to identify potential disputes and get them resolved before the due date. 

Exchange invoice information with comments on all major accounts. 

Mail quarterly statements to help resolve small disputes and keep them from growing into a large amount. 

This information is provided as a matter of information and education only. It is not intended to provide legal advice or counsel. Do not take action in specific cases without full knowledge of the facts, and competent legal advice from your attorney