Disputed invoices: Overview, definition, and example
What are disputed invoices?
Disputed invoices refer to bills or charges that one party challenges because they believe the amounts owed, terms, or services provided are incorrect. This can happen in business transactions when a buyer disagrees with the invoice issued by a seller, often due to errors in pricing, quantity, quality, or other issues related to the goods or services provided. Disputed invoices can lead to delays in payment until the issue is resolved and may require communication or negotiation between the parties involved.
Why are disputed invoices important?
Disputed invoices are important because they can affect cash flow, delay payments, and cause frustration between businesses. For companies, having a clear process for handling invoice disputes helps resolve issues quickly, maintain good relationships with clients or suppliers, and ensure that payments are made accurately. Addressing disputed invoices promptly and fairly also reduces the risk of escalation to legal action or prolonged financial disagreements.
Understanding disputed invoices through an example
For example, a supplier sends an invoice to a retailer for 100 items at $10 each, totaling $1,000. However, the retailer receives only 90 items and disputes the invoice, claiming that they were overcharged for items they didn’t receive. The retailer then contacts the supplier to clarify the discrepancy, and the supplier may issue a corrected invoice reflecting the 90 items, or they may provide a credit for the overcharge.
Another example could be a service provider invoicing a client for 20 hours of work, but the client disputes the charge, claiming that only 15 hours of work were performed. The client might request documentation or a breakdown of the work done to verify the hours before agreeing to pay the invoice.
An example of a disputed invoices clause
Here’s how a disputed invoices clause might appear in a contract:
“In the event of a disputed invoice, the Buyer shall notify the Seller in writing within [X] days, specifying the reasons for the dispute. The parties agree to work together in good faith to resolve the dispute within [X] days from notification.”
Conclusion
Disputed invoices are common in business transactions and typically arise when there is a disagreement over the charges or services provided. Addressing these disputes promptly and clearly helps maintain healthy business relationships and ensures that payments are processed correctly. Having a defined process for handling disputed invoices can prevent unnecessary delays and financial complications for both parties involved.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.