Automating Management of Disputes and Deductions: Preventing small invoice issues from becoming large DSOs

The longer it takes for a business to resolve a disputed invoice or deduction, the higher the chance that it will not be able to collect the amount due, in full.

What begins as a docile objection or a "small query", takes no time to snowball into something large and unwieldy. This 'issue' is now a 'dispute'. And businesses abhor disputes - especially when it comes to collecting their dues! Invoice disputes are a big hurdle to getting paid. If you’ve spent some time in the Collections space and find yourself nodding in agreement, you’ll also agree that sound Order-to-Cash processing is imperative to the financial health of a business. And the way a business deals with disputes on its invoices has a direct impact on its Order-to-Cash cycle.

In fact, as per the U.S. Department of Commerce, disputed invoices and deductions set the US economy back by a massive sum of $7 billion a year! The Indian scenario isn’t very different either.

And more importantly, ineffective and long-drawn dispute management, costing customers countless emails and phone calls strains their relationship with the business and can result in the catastrophic consequence of them wanting to take their business elsewhere.   

Why is management of Disputes And Deductions in such bad shape?

There are several reasons why disputes and deductions are handled in ways that are far from efficient or effective. And that end up taking a heavy toll on the business’s cash flow.

The biggest reason is the manual handling of disputed invoices and deductions that relies on endless and painfully time-consuming back-and-forth exchanges between the staff and customers. This just doesn’t make it complex for different departments to interact and resolve the disputes in question, but gives the management no clear picture of the money stuck in disputed invoices and unauthorised deductions.

Within a manual setup, people involved have limited access to information about the dispute or deduction, with no clear record of the mostly inconsistent exchanges between the customers and staff, and no clear reporting or insights into the causes behind the disputes or deductions.

Along come the added complications of distinguishing between the deductions that have been budgeted for, the ones that have been deducted twice erroneously, ones that aren’t applicable and so on.

What’s the Solution then?

Automating the management of invoice disputes and deductions can help immensely with faster resolution of each dispute, right from the time it is logged into the system, by ensuring that all the information pertaining to a dispute is stored in one central location and that everyone involved in the resolution process has instant access to that information and is on the same page at all times. 

Using features like automated data collection, real-time tracking of information, online discussions and access to a dispute management dashboard, the automated system eliminates any possible friction in the process, making the entire dispute resolution process seamless, transparent and easy on both the customer and the business.

It’s a wonder then, as to why scores of businesses still depend on archaic and ineffective dispute and deduction management processes, when just switching to workflow-driven automation can instantly reduce their DSOs and improve their cash flows.

It's important though to understand that the broad solutions like ERPs and CRMs might NOT hold the answers to automation. Like I have explained in detail in my previous articles, what one needs is a particular scalpel, not a generic Swiss knife.

The trifold benefits of Automating Dispute resolution

Automating the management of invoice disputes and deductions helps accelerate cash flow and ensures a good customer experience. This would also mean augmenting your existing solutions (even if they are scores of excel sheets) with something more specific to identifying and resolving stuff specific to AR.

Automating dispute resolution and deduction management offers:

• Reduced number of write-offs: Automation enables businesses to recover up to 10% more on unauthorized deductions, compared to manual and time-consuming traditional methods of resolving disputes and deductions.
• Speedy Issue Resolution: Automation of dispute resolution reduces the average resolution time and unauthorized deductions by up to 30%, escalating disputes beyond a specified period. The faster and more transparent resolution also brings down customer frustration arising from back and forth emails and phone calls. 
• A more productive staff: Automation reduces the time spent by staff on trying to manage disputes and deductions by a whopping 40%, enabling them to spend their time on activities that directly impact the company’s bottom-line.
• Great customer experience: This is an obvious one - but seldom credited! Managing the origins and the resolution of issues tells greatly upon the relationship that the business shares with its customers.

The Automatic(!) Conclusion

For a business, disputed invoices aren’t a surprise. They’re a part of running a business. But this rather small bottleneck shouldn’t be allowed to have the power to choke the business’s cashflow or put any kind of strain on customer relationships.

And since the traditional approach of leaving things to paper and time-consuming processes hasn’t been of much help in the past, it’s clearly time to automate this critical and basic function and cut-short your Order-to-Cash cycles while extending the life of your customer relationships.