What to Do if Your Customer is Disputing a Debt 

When you run a business, there may be times when your customers pay your business invoices late. Unpaid invoices are not unusual for a company and are something you may have to put up with from time to time. However, there may be occasions when your customers do not pay your invoices or make late payments because they dispute the debt they owe you. You should take swift action when this occurs, which may include the need to instigate court proceedings. Without resolving the debt dispute, you may lose income and, as a result, have a limited ability to pay off other business expenses and debts. This article will explain some steps you can take if your customer is disputing a debt.

Why Might My Customer Dispute a Debt?

There are different reasons why your customer may dispute a debt with your business. One key reason may be that the invoice you give them has a mistake on it. This can result in a commercial dispute, which may cause delays in payment. Alternatively, the customer may not make payment at all. Mistakes on invoices can include:

• sending an invoice to the wrong person in a business;
• not being clear on when payment is due;
• failing to include precise payment details of where to pay you; 
• detailing a different amount of money than that which you agreed to originally. 

Beyond mistake, there are also other reasons a customer may dispute a debt with you. Some examples of these are where:

• the debt is not the customer’s to pay;
• the payment amount is incorrect;
• the provided goods are faulty (or allegedly faulty);
• service is poor (or allegedly poor);
• late delivery occurs; or
• your customer does not have the funds.

What Do I Do if My Customer Disputes a Debt? 

If your customer disputes a debt with you, you should try to resolve it as soon as possible. Sometimes, this can be as simple as a gentle reminder about the payment and a discussion about the debt. You must also take the dispute seriously and respect that it may be genuine. Your customer is essential to your business, and how you handle a dispute will reflect this.

Potential Valid Dispute

There is an essential point when, if your customer disputes a debt and it appears the dispute is valid, you should stop any steps you have taken to recover your debt. Valid grounds could include where:

• your customer is not the actual person who owes the debt;
• there is no debt in question; or
• there is a dispute about the amount of the debt.

If your customer disputes a debt and their claim could be valid, you should ensure that you:

• look into the dispute; 
• give your customer details of the amount of money they owe;
• establish whether the customer is the person who actually owes the debt if they claim they are not; and 
• show the debt amount is correct where the customer disputes this.

You must make sure you have a timeframe for the total debt dispute resolution process, after which you will expect your customer to make payment. Once you have investigated the debt dispute, and it is on a valid ground, you should give your customer the results of your investigation. At the end of the timeframe will be when you decide to allow an experienced debt collector, debt collection agency or other third party to collect your customer’s debt. This may be, for example, after 30 or 45 days. 

A third-party debt collector may be successful in resolving the debt dispute and payment. Alternatively, if this is unsuccessful, you may need to take legal action. Where a debt dispute is not genuine but just a delay tactic for making payment, a letter from a lawyer may be enough to encourage payment.  

How to Manage a Business Dispute

This fact sheet outlines how your business can manage a dispute.

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Key Takeaways

If your customer does not pay your invoice, it may be because they dispute the debt. There are various reasons a customer may dispute the debt, such as if you have made a mistake on the invoice. When your customer queries a debt, it is important that you act as quickly as possible to prevent the problems from escalating. You should also treat the invoice dispute as though it may be genuine. Where your customer has a valid reason to dispute the debt, you should investigate the dispute and provide them with more information. During this time, you should not be trying to recover the debt. After this, you should notify your customer of the timeframe they have to repay the debt. If the debt remains unpaid, you may enlist a third party to resolve it or take legal action in an extreme scenario. 

If you need help understanding what to do if your customer is disputing a debt in the UK, LegalVision’s experienced disputes lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.