Dispute Resolution: The AR Team's Biggest Time Sink (And How to Fix It)

Ask any AR team what consumes their time, and disputes will be near the top of the list. Not because there are so many of them—usually disputes represent a small percentage of invoices—but because each one takes forever to resolve.

A dispute isn't just an unpaid invoice. It's a black hole that sucks in time, attention, and goodwill. While your team chases down documentation, coordinates with operations, and goes back and forth with the customer, the invoice sits. And often, so do all the other invoices from that customer—because many AP departments won't pay anything while there's an open dispute.

The average dispute takes 30-45 days to resolve. Some stretch to 90 days or more. Every day a dispute sits open, you're financing it—and losing leverage as the invoice ages. Yet most companies treat dispute resolution as an ad-hoc process: someone raises an issue, collectors scramble to respond, and resolution happens whenever it happens.

There's a better way.

Why Disputes Take So Long

Before we fix the process, we need to understand why disputes drag on. It's rarely because the underlying issue is complex. Usually, it's because the process itself is broken.

1. Documentation Is Scattered

The customer says quantity was wrong. To verify, you need the delivery ticket, the signed POD, the original order, and maybe photos. These documents live in different systems, owned by different people. Just gathering the evidence takes days.

2. The Wrong People Are Involved

AR raises the dispute. Operations has the answer. But AR doesn't have a direct line to operations, so they email their manager, who emails the ops manager, who asks a supervisor, who asks the driver who made the delivery three weeks ago. Each handoff adds days.

3. Nobody Owns Resolution

The collector's job is to collect. The ops team's job is to run operations. Dispute resolution falls in the gap between them. Neither team is measured on dispute resolution time, so neither team prioritizes it.

4. Disputes Aren't Categorized

A pricing dispute is different from a delivery dispute is different from a quality dispute. Each requires different investigation and different decision-makers. But most companies treat all disputes the same way—which means none of them are handled efficiently.

5. There's No Escalation Trigger

Disputes age silently. Nobody notices that a $50K dispute has been open for 60 days until someone runs a report. By then, the customer has learned that disputing invoices is a great way to extend payment terms indefinitely.

The Hidden Cost of Slow Dispute Resolution

Most companies don't calculate the real cost of disputes. If they did, dispute resolution would get a lot more attention.

Now multiply this across all your open disputes. If you have 50 disputes averaging $25K each, and they average 45 days to resolve, you're looking at $1.25M in delayed cash and $65K+ in direct costs annually—just from the resolution process being slow.

Building a Dispute Resolution Process That Works

An effective dispute resolution process has five components:

1. Categorize Disputes Immediately

Not all disputes are the same. Create categories that map to your business and route each dispute accordingly:

2. Set SLAs for Each Category

Every dispute category should have a resolution SLA. These aren't aspirational targets—they're commitments that get measured:

• Documentation disputes: 24-48 hours (AR can usually resolve these alone)
• Pricing disputes: 3-5 business days (needs sales/pricing review)
• Quantity/delivery disputes: 5-7 business days (needs ops investigation)
• Quality disputes: 7-10 business days (may need inspection, return processing)

3. Create Clear Escalation Paths

When a dispute exceeds its SLA, it should automatically escalate. Define who gets notified and what happens:

4. Establish Resolution Authority

One reason disputes drag on is that nobody has authority to make a decision. Define who can approve what:

• Collector: Can approve adjustments up to $500
• AR Manager: Can approve adjustments up to $2,500
• Credit Manager: Can approve adjustments up to $10,000
• Controller/CFO: Required for adjustments over $10,000

Sometimes the fastest resolution is a small adjustment. If a collector has to escalate every $200 dispute to a manager, you're adding days to resolution for no good reason.

5. Track and Learn

Dispute data is gold—if you use it. Track:

• Dispute volume by category: Where are disputes coming from?
• Resolution time by category: Which types take longest?
• Root causes: Why do disputes happen in the first place?
• Win rate: How often do you collect vs. credit?
• Customer patterns: Which customers dispute most? Why?

This data should drive process improvement. If 40% of disputes are documentation issues, fix your documentation process. If one customer accounts for 30% of disputes, have a conversation about what's going wrong.

Getting Cross-Functional Buy-In

AR can't fix disputes alone. You need operations, sales, and management to participate. Here's how to get them on board:

Show Them the Cost

Most ops and sales leaders don't know how much slow dispute resolution costs. Show them the numbers—delayed cash, financing costs, collector time, customer friction. Make it real.

Make It Easy

If resolving a dispute requires operations to dig through emails and pull documents from three systems, they won't prioritize it. Create a simple process: here's the dispute, here's what we need, here's where to send it.

Create Accountability

Include dispute resolution time in operational metrics. When ops managers are measured on how quickly their disputes resolve, disputes suddenly become a priority.

Close the Loop

When you identify root causes, share them with the teams that can fix them. "Last month, 23% of disputes were due to missing PODs from the Chicago branch." Now Chicago knows they have a problem—and you've given them a reason to fix it.

Quick Wins: What You Can Do This Week

You don't need a perfect process to improve. Start with these quick wins:

The Bottom Line

Dispute resolution is a process problem, not a people problem. Your collectors aren't slow—they're working within a broken system. Fix the system, and resolution times plummet.

That means categorizing disputes from day one, setting SLAs, creating clear ownership, building escalation triggers, and tracking everything. It means getting operations and sales to participate, because AR can't resolve disputes alone.

The payoff is substantial: faster cash, lower costs, better customer relationships, and AR teams that can spend their time collecting instead of chasing documentation.