If you’ve never had a billing dispute with a vendor, you probably will. It’s inevitable that at some point, you’ll disagree with a vendor over an invoice. When it happens, the following questions will arise: If the invoice is incorrect, should you pay it?
Should you pay only for the charges you believe to be correct?
What’s the process for challenging an incorrect invoice?
Most vendor form contracts require you to pay the full invoice—period. Other form contracts give you the right to question the invoice but still require you to pay in full. Either way, you’re at a disadvantage: The vendor gets your money. It’s up to you to get some, or all, of it back. Is that fair? When you are negotiating with a new vendor or renegotiating with an incumbent one, add an invoice dispute provision to your list of objectives. Having it in the contract is handy when you believe your vendor may have made a billing mistake. Questioning an invoice should be your right. It’s risky to assume that your vendor will work with you to resolve a billing dispute. After all, it will have your money. Vendors may listen to your concerns, but having the right to withhold your payment guarantees their attention.
In negotiations, secure the right to withhold payment for any item on any invoice you believe to be incorrect. Reassure your vendor that you’ll pay all undisputed amounts.
Most vendors’ first response will be: “Our billing systems work fine. Trust us and pay. If there’s a problem, we’ll work with you.” Your answer could be, “Well, if you have such faith in your billing system, why is this an issue? It’s an unlikely event. Right?” Be persistent; holding firm should produce a favorable vendor response.
Some vendors may offer counterproposals, limiting the total amount you can withhold—usually a fixed amount or a percentage of the total invoice.
There’s no reason to accept limits. Pressing your point will usually eliminate any limits on withheld amounts. If you have to concede this, make sure the withholding limit is large enough to still draw the vendor’s attention.
What’s more, invoice disputes shouldn’t be allowed to go on forever. It’s in neither party’s best interest.
In the end, lack of timeliness can cloud the issue and has the potential to harm the relationship. So place a time limit, like 60 days, on any dispute resolution process that’s written into the contract.
Also, remember that the vendor’s sales representative probably isn’t the same person who will handle invoice problems. Get clear protection in the contract.
Here’s some contract language that helps:
If customer disputes, in good faith, any amount on a supplier invoice, customer and supplier will use all reasonable efforts to resolve and settle such dispute within 60 days after customer provides written notice of the dispute to the supplier.
Each party will provide full supporting documentation concerning any disputed amount within 30 days after receipt of written request for such documentation.
Customer will have no obligation to make any payment of disputed charges on the invoice during the time it is subject to good-faith dispute.
Once the invoice dispute is resolved and settled, Customer will pay any amount due within 30 days following resolution of dispute. If the invoice dispute is not resolved and settled within the 60-day period, the dispute resolution provision will apply.
It’s important to link the invoice dispute resolution to a broader dispute resolution process, creating a complete process that assures that both you and your vendor behave appropriately in handling all disputes.
If you don’t have a general dispute resolution process in the contract, you should consider one. No one wants a fight, but given one, you should at least establish some rules—and a time limit for each round.
JOE AUER is president of International Computer Negotiations Inc. (www.dobetterdeals.com), a Winter Park, Fla., consultancy that educates users on high-tech procurement. ICN sponsors CAUCUS: The Association of High Tech Acquisition Professionals. Contact him at joea@dobetterdeals.com.
Copyright by Computerworld, Inc., 500 Old Connecticut Path, Framingham, MA 01701. Reprinted by permission of Computerworld.