The 5% Rule

“If 5% or more of your invoices are in dispute your credit management team is in trouble.”

New to the business, our client quickly diagnosed that his company had a problem due to the volume of invoices in dispute. The value was another question. 5% of volume could represent anything from 1% to 26% of their monthly invoice value as their customer orders varied considerably in the number and value of line items.

Why volume is more important than value in terms of invoice disputes

Each invoice represents the total effort by sales, logistics and Accounts Receivable plus the cost of goods sold and is one important customer interaction. Additional time spent on disputes adds to OpEx and reduces profitability whether or not it is diluted across hundreds or thousands of invoices and customers. The multiplied risk of a similar error or issue recurring with a customer or individual order that represents a high proportion of your total income should be sufficiently uncomfortable to mean it is taken seriously. Plus, one invoice dispute can arrest payment of all subsequent invoices by the same customer.

If your customers a plentiful, cheap to acquire and churn quickly, then you can probably put up with a higher number of low value invoice disputes. But they are not. Few companies selling B2B or B2B2C can say they don’t work hard to win and retain customers. It’s is also not ethical or attractive to employees to work in a culture that endures poor standards. Customer retention is the responsibility of all parties in the customer value chain, and finance teams should know better than other departments the negative effect of reduced lifetime customer value.

Value in query or Value in Dispute

The value does matter and some of our clients use the capabilities in Corrivo to isolate line items in dispute while the remaining invoice value is paid. However, disputes by definition typically mean that the customer refuses to pay the entire invoice until the dispute is resolved.  Reducing your value in query by fast dispute resolution is likely to be one measure on which your team’s performance is judged. We have seen clients reduce the value in dispute by 40% within 3 months of implementing the Corrivo Disputes Module and continue that downward trend over time.  The same customers found their customer satisfaction scores going up. If you are selling online, the power of customer reviews is critical to your success in winning and retaining customers.

The CRM for credit teams

The Corrivo Disputes module acts like a Customer Relationship Management tool for collections specialists and dispute handlers. The functionality allows interactions to be logged and tracked for later review. Corrivo, however, has specific features to support invoice dispute workflow that CRMs used in sales and general account management do not have. It is also configured to your business processes so it talks your language in terms of references, departments, codes and product categorisation so that each dispute is handled thoroughly, professionally and in line with regulatory guidance.

Insurance, financial services, pharmaceuticals, defence, utilities, aerospace to name just a few are industries in which disputes and complaints are subject to the probity of regulatory bodies at whose discretion fines and public scrutiny can be meted out. Here, disputes process workflow must be conducted with thorough tracking, timely communication and often in specific sequences. Corrivo is designed to meet these industry-specific process flows precisely.

Structure, sequence and authority

Corrivo allows businesses to define a well structured and orderly process that meets requirements and helps root cause analysis. We take the time to understand your business and plan for likely categories of cause and the unclassifiable or new scenarios and we ensure that those with the appropriate management authority can flex the process where needed without losing speed or structure.

Factual and friendly

Best practice suggests that sticking to the facts and repeating the known or established data is important throughout the dispute process. Our systems ensure the pertinent facts are present in all communications and that agents cannot mess up the process by mistyping an important date or reference. Our automation assists in the achievement of accuracy and completeness in communications and arms agents with the facts so they can apply their skills to the tone of the engagement, giving it the human touch that automation cannot.

Timing, flagging and escalation pathways

Workflow tools help managers keep to the process and alert senior team members or stakeholders at appropriate junctures triggered by time, value in dispute or a combination of these.  Corrivo is designed to allow businesses to structure their resolution pathways as far as possible, certainly where regulatory requirements demand that responses and updates are given to the customer within a certain number of days of receiving notice of a complaint or dispute. The additional value of this comes in the post-analysis of cases. Management information becomes a new source of intelligence for further pattern identification and improvement.

David Harris

Author David Harris

David Harris is the Business Development Executive at Data Interconnect. Dave works with companies planning the implementation of Corrivo, the cloud-based credit control software which improves cashflow, minimises aged debt and streamlines processes for finance departments. If you would like to know more, contact Dave on: Davidh@datainterconnect.co.uk

More posts by David Harris

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