How to Dispute an Invoice: Understanding Non-Payment of Invoice

Understanding Invoice Disputes and Their Impact

Invoice disputes can significantly disrupt your business’s cash flow and strain customer relationships. A disputed invoice occurs when a customer questions or refuses to pay, often due to disagreements over pricing, quality of goods or services, or delivery issues. These disputes can lead to delayed payments, increased administrative costs, and potential loss of future business.

Under UK law, you have certain rights when dealing with disputed invoices. The Late Payment of Commercial Debts Act allows you to charge interest and compensation on late payments, provided the invoice is not legitimately disputed. To minimise the impact of invoice disputes, ensure you clearly communicate payment terms, provide detailed invoices, respond promptly to customer concerns, and implement a formal dispute resolution process. For more information on handling invoice disputes, you can refer to our guide on What to Do When a Customer Disputes Your Invoice.

Legal Time Limits for Invoice Payment in the UK

In the UK, the standard legal time limit for paying an invoice is 30 days, unless you and your customer agree otherwise. If you don’t specify payment terms, the default payment period is 30 days from the date of invoice receipt or delivery of goods/services, whichever is later. For public sector bodies, the payment deadline is typically 30 days from invoice receipt, while in the private sector, you can negotiate payment terms up to 60 days from invoice receipt.

Keep in mind that while longer payment terms can be agreed upon, they must be “fair” to both parties. If payment isn’t received within the agreed timeframe or the statutory 30-day period, the invoice becomes overdue. At this point, you have the right to charge statutory interest on the overdue amount, claim compensation for debt recovery costs, and potentially take legal action to recover the debt. Our Late Payment Fees Calculator can help you determine the statutory late payment interest and compensation you can charge on overdue invoices.

Common Reasons for Disputing an Invoice

Customers may refuse to pay or question an invoice for several reasons:

• Pricing discrepancies or unexpected charges
• Quality issues with products or services
• Late or incomplete deliveries
• Administrative errors on the invoice
• Misunderstandings about payment terms

It’s worth noting that in the UK, even if you haven’t issued an invoice, payment is still generally required if goods or services have been provided and agreed upon. However, it’s best practice to always provide clear, accurate invoices to avoid disputes and ensure prompt payment. For strategies on preventing unpaid invoices, check out our article on Effective Ways for Preventing Unpaid Invoices.

Steps to Resolve an Invoice Dispute

When faced with a disputed invoice, follow these steps to resolve the issue:

1. Acknowledge the dispute promptly in writing.
2. Investigate thoroughly by reviewing all relevant documentation.
3. Communicate clearly with the customer throughout the process.
4. Offer fair and reasonable solutions based on your investigation.
5. Document the resolution in writing once an agreement is reached.
6. Implement the agreed-upon solution promptly.

If the dispute remains unresolved after following these steps, consider more formal dispute resolution methods. Under non-payment of invoice law UK, you have the option to pursue legal action, but this should generally be considered a last resort. If you need assistance with recovering overdue payments, our Business Debt Collection services can help you navigate this process professionally and effectively.

Late Payment Charges – Legal Implications in the UK

In the UK, late payment charges are legal and governed by the Late Payment of Commercial Debts (Interest) Act 1998. You can charge statutory interest on late payments at 8% above the Bank of England base rate, as well as claim fixed compensation for the costs of recovering late payments. These charges apply automatically to commercial transactions between businesses, and between businesses and public authorities, unless varied or excluded by contract terms.

While late payment charges are legally enforceable, carefully consider their implementation to balance protecting your cash flow with maintaining positive customer relationships. Clear communication of payment terms and potential late payment charges is essential for effective implementation of these legal provisions.