Disputes are the silent killer of AR performance. A single unresolved dispute doesn't just block one invoice—it often blocks everything else from that customer. And while the dispute sits in limbo, your cash sits on the sideline.
The average B2B company has 3-8% of their receivables tied up in disputes at any given time. For a company with $10M in AR, that's $300K-$800K in cash that's stuck. And the longer disputes take to resolve, the less likely you are to collect the full amount.
This handbook provides structured workflows for the most common dispute types. The goal isn't just faster resolution—it's consistent resolution with clear ownership and documented outcomes.
The Five Most Common Dispute Types
While every business has unique dispute patterns, these five categories cover 80%+ of B2B disputes:
- 1Pricing/Rate Disputes
Invoice doesn't match agreed pricing, contract rates, or quote.
- 2Quantity/Delivery Disputes
Customer claims they didn't receive what was invoiced, or received different quantities.
- 3Quality/Service Disputes
Customer claims goods were damaged, defective, or service didn't meet expectations.
- 4Documentation/PO Disputes
Missing or incorrect purchase orders, wrong billing addresses, missing backup.
- 5Payment Application Disputes
Customer says they paid, but payment wasn't applied correctly or at all.
The Universal Dispute Resolution Framework
Before diving into specific workflows, every dispute should follow this basic framework:
Step 1: Log and Categorize (Day 0)
Document the dispute immediately with: dispute type, dollar amount, customer's stated reason, date raised, and invoice(s) affected. Assign an owner.
Target: Within 24 hours of dispute being raised
Step 2: Gather Documentation (Days 1-2)
Collect all relevant documentation: contracts, POs, delivery receipts, prior communications, payment history. Don't contact the customer until you have the facts.
Target: Within 48 hours of logging
Step 3: Investigate and Determine Position (Days 2-3)
Review documentation and determine: Is the dispute valid? Partially valid? Invalid? What's our position and what documentation supports it?
Target: Within 72 hours of logging
Step 4: Communicate Resolution Path (Days 3-5)
Contact the customer with your findings and proposed resolution. Be clear about what you found, what you're willing to do, and what you need from them.
Target: Within 5 business days of logging
Step 5: Execute and Close (Days 5-10)
Execute the agreed resolution: issue credit, rebill, provide documentation, or confirm original invoice is correct. Close the dispute with documented outcome.
Target: Within 10 business days of logging (for standard disputes)
Dispute-Specific Workflows
Pricing/Rate Disputes
Common causes: Outdated pricing in system, verbal agreements not documented, contract terms misinterpreted, promotional pricing not applied.
Resolution Workflow:
- 1. Pull current contract/price list and compare to invoice
- 2. Review order documentation for special pricing notes
- 3. Check for recent price changes and effective dates
- 4. If pricing is wrong → issue credit and rebill correctly
- 5. If pricing is correct → provide documentation showing agreed rates
- 6. If unclear → involve sales for customer conversation
Resolution target: 5-7 business days
Escalation trigger: No resolution after 10 days → escalate to sales management
Quantity/Delivery Disputes
Common causes: Shipping errors, partial deliveries not documented, customer receiving errors, theft/loss in transit.
Resolution Workflow:
- 1. Pull proof of delivery (POD) with signature and quantities
- 2. Compare POD to order and invoice quantities
- 3. Check for documented partial shipments or backorders
- 4. If shortage confirmed → issue credit or ship replacement
- 5. If POD shows full delivery → provide signed documentation to customer
- 6. If unclear → request customer's receiving documentation for comparison
Resolution target: 7-10 business days (may require carrier investigation)
Escalation trigger: Carrier claim needed → initiate within 5 days
Quality/Service Disputes
Common causes: Damaged goods, manufacturing defects, service not meeting spec, items not fit for purpose.
Resolution Workflow:
- 1. Request specific details: what's wrong, when discovered, photos if applicable
- 2. Review service records or QC documentation
- 3. Determine if issue was present at delivery or occurred after
- 4. If quality issue confirmed → process return/credit per company policy
- 5. If service issue → involve operations to determine appropriate credit/redo
- 6. If claim is questionable → request inspection or return of goods
Resolution target: 10-14 business days (quality verification takes time)
Escalation trigger: Customer refuses return/inspection → escalate to management
Documentation/PO Disputes
Common causes: Missing PO on invoice, wrong PO number, invoice to wrong entity, missing required backup.
Resolution Workflow:
- 1. Identify what documentation is missing or incorrect
- 2. Locate correct documentation internally
- 3. If PO exists → rebill with correct PO reference
- 4. If no PO → work with customer to obtain retroactive PO or approval
- 5. If billing entity is wrong → credit and rebill to correct entity
- 6. Attach all required documentation to corrected invoice
Resolution target: 3-5 business days (straightforward fix once identified)
Escalation trigger: Customer won't provide PO → escalate to sales for relationship discussion
Payment Application Disputes
Common causes: Payment applied to wrong invoice, payment to wrong entity, unapplied cash sitting in suspense, duplicate payment.
Resolution Workflow:
- 1. Request payment details: date, amount, check number or reference
- 2. Search cash receipts for matching payment
- 3. Check unapplied cash and suspense accounts
- 4. If found misapplied → move payment to correct invoice
- 5. If not found → request proof of payment (cancelled check, bank confirmation)
- 6. If duplicate → process refund or apply to future invoices
Resolution target: 5-7 business days
Escalation trigger: Payment not found and customer provides proof → escalate to accounting manager
When Disputes Are Tactical
Not all disputes are legitimate. Some customers use disputes as a cash management tactic—raising issues to delay payment with no intention of resolving quickly.
Warning signs of tactical disputes:
- Pattern of disputes near payment due dates — Every invoice gets disputed right before it's due
- Vague or shifting dispute reasons — Can't provide specifics, or reason changes when original is resolved
- Non-responsive to resolution attempts — You provide documentation but they go silent
- Disputes only raised when you call about payment — Never proactively raised
For tactical disputes, the approach changes:
Handling Tactical Disputes
- 1. Set firm timelines — "We need specific documentation of the issue by [date] or we'll consider the dispute closed"
- 2. Separate disputed and undisputed amounts — "We understand you're disputing $5K of this $50K invoice. We expect payment of the undisputed $45K per terms."
- 3. Escalate appropriately — Go over AP's head to operations or procurement contacts who have interest in the relationship
- 4. Document the pattern — Track dispute history by customer to support credit decisions
- 5. Consider service impact — If disputes are chronic, discuss with sales whether to continue extending credit
Prevention: Reducing Disputes at the Source
The best dispute is the one that never happens. Most disputes trace back to breakdowns earlier in the process:
Pre-Invoice Prevention
- • Confirm pricing in writing before work begins
- • Get PO numbers before delivering goods/services
- • Document delivery with signatures and photos
- • Confirm service completion with customer sign-off
Invoice Quality
- • Include all required backup with invoice
- • Reference PO numbers prominently
- • Bill to correct entity and address
- • Match invoice line items to order/contract language
Track dispute root causes monthly. If the same issues keep appearing, fix the upstream process rather than just getting better at resolving disputes.
Key Takeaways
- Log and categorize disputes immediately—untracked disputes age forever
- Target 10-day resolution for standard disputes, faster for documentation issues
- Handle tactical disputes differently—firm timelines and escalation
- Track root causes and fix upstream processes to prevent future disputes