Withholding payment of incorrect invoice?

[RB Will]

Hi all. Just wondering would I just be shooting myself in the foot if my business withheld payment to one of our suppliers unless they send us a correct invoice?

The supplier, as well as being a bit crap at actually supplying stuff, has not managed to send us a correct invoice in about 2 years. They either put a delivery charge on that we are not supposed to pay or put items on it at full price rather than our official quoted discount.

It takes ages figuring out what they have buggered up each time then multiple emails or phone calls to sort it out. The woman I have dealing with invoices at my place has to spend hours just sorting out their mistake every time.

We have complained to the sales rep, customer services and the U.K. head but nothing changes.
Ideally we would move to another supplier but it’s a bit of a specialised field and nobody else produces an equivalent product.

Would I be ok to give them written warning that I will not be wasting anymore time on their incorrect invoices and will only pay correctly issued ones?

Alternatively what about if on receipt of an invoice I just paid what we actually owe not what is on the incorrect invoice?

[Sir Bagalot]

Depends how important the supply of those goods are to the business?

I had similar. I tried to sort it out. We would spend £30/35K pm with them. In the end my CFO wasn't happy with the amount of time spent on invoicing and paying money out we knew we owed them without an invoice. Account manager said he was trying to sort..... but little action. I was instructed to tell him that we would only pay £20K per month until it was sorted.

This went on. And on. And on. Year later it still wasn't sorted.

15 months in the letter arrives. 14 days to pay all outstanding amounts or no more supplies. No more supplies meant major major issues for our firm. My CFO went ape, and their CFO wouldn't take our calls.

3 days in CFO calls my CFO. We owed them £187K (we did keep ~£200K free) and he wanted to know why we weren't paying it.... my CFO tore strips off him, the upshot was he wasn't prepared to pay money out without proper invoicing. Transpired the account manager wasn't sorting the invoicing We gave the assurance that he could produce correct invoices then all outstanding invoices would be paid within 7 days.

Correct invoices were emailed to him 2 days later. I checked them the next day and payment was made the day after.

Within a week I was advised of an account manager change

So my advice is to get your head of Finance involved asap

Edited by Sir Bagalot on Thursday 28th May 22:37

[Pit Pony]

One of my colleagues in a previous job had done an improvement project in a major aerospace company on the employee expences process. One of the biggest causes of waste in the process, was incorrectly filled in expenses forms. One of the reasons was that the employees making the claim couldn't be arsed getting it right, because the expenses department would sort it out.
Apart from making the claim.form easier to understand, they communicated the common faults and then said that as from a particular date, they woukd just reject them and that would put them at the bottom.of the pile. Which meant the employee was now 3 weeks into a cash flow issue. Within a couple of months people got the message.
They won't pay if it's not right.

Do the same with invoices. Ignore the ones that are wrong. When they eventually chase it, explain it's wrong and start the clock again.
Improve the cash flow of the business. Improve the none value added time.

[BlackTails]

RB Will said:

Alternatively what about if on receipt of an invoice I just paid what we actually owe not what is on the incorrect invoice?

...is the correct answer. And tell them you dispute the balance, and why.

[Countdown]

BlackTails said:

RB Will said:

Alternatively what about if on receipt of an invoice I just paid what we actually owe not what is on the incorrect invoice?

...is the correct answer. And tell them you dispute the balance, and why.

The only thing is - it messes up your Accounts Payable and their Accounts Receivable records. To some degree this only becomes an issue if you have tens/hundreds of their invoices being processed each month through your Finance system. if that's happening then statement reconciliations would become a nightmare.

The correct approach is to ask them to issue a part credit note for the incorrect invoice (and you pay the difference) or a full credit note for the incorrect invoice and a correct new invoice.

If you don't use an Accounts payable system and just write out cheques then ignore the above

[RB Will]

Countdown said:

The correct approach is to ask them to issue a part credit note for the incorrect invoice (and you pay the difference) or a full credit note for the incorrect invoice and a correct new invoice.

This is what we do at the moment and is what I am trying to get away from as the back and forth and arguing about it takes up so much time. They cant even get that sort of thing right half the time. Recently we told them what was wrong with 3 invoices they were moaning hadn't been paid. We had already told them they were wrong and why and were waiting for correct ones! Got 3 reissued ones and they were wrong still. Then with one the issued a credit not for the difference but issued a new invoice as well so ended up with 2 active invoices for the same thing and a part credit not for one of them! resolving this is still ongoing.

[Countdown]

RB Will said:

Countdown said:

The correct approach is to ask them to issue a part credit note for the incorrect invoice (and you pay the difference) or a full credit note for the incorrect invoice and a correct new invoice.

This is what we do at the moment and is what I am trying to get away from as the back and forth and arguing about it takes up so much time. They cant even get that sort of thing right half the time. Recently we told them what was wrong with 3 invoices they were moaning hadn't been paid. We had already told them they were wrong and why and were waiting for correct ones! Got 3 reissued ones and they were wrong still. Then with one the issued a credit not for the difference but issued a new invoice as well so ended up with 2 active invoices for the same thing and a part credit not for one of them! resolving this is still ongoing.

Depending on how much of a ballache it was for you I'd contact either their Credit Controller or their FD and explain why you're not payng. Unpaid invoices will be impacting on their cashflow and increasing their borrowing costs. A lack of cash is why firms go bankrupt. I definitely wouldn't part pay as that is just making extra work for myself.

[BlackTails]

Countdown said:

BlackTails said:

RB Will said:

Alternatively what about if on receipt of an invoice I just paid what we actually owe not what is on the incorrect invoice?

...is the correct answer. And tell them you dispute the balance, and why.

The only thing is - it messes up your Accounts Payable and their Accounts Receivable records. To some degree this only becomes an issue if you have tens/hundreds of their invoices being processed each month through your Finance system. if that's happening then statement reconciliations would become a nightmare.

The correct approach is to ask them to issue a part credit note for the incorrect invoice (and you pay the difference) or a full credit note for the incorrect invoice and a correct new invoice.

If you don't use an Accounts payable system and just write out cheques then ignore the above

Ah, see this is a good example of the old adage that if the only tool you have is a hammer, everything is a nail.

A lawyer will give an answer which focusses on what the payer can say has discharged their legal obligations and what they can say is legally disputed. An accountant will give an answer which focusses on how best to account for the transaction in your books of account.

[2 sMoKiN bArReLs]

BlackTails said:

RB Will said:

Alternatively what about if on receipt of an invoice I just paid what we actually owe not what is on the incorrect invoice?

...is the correct answer. And tell them you dispute the balance, and why.

Nightmare answer, you'll both end up with an unholy mess. I'd stick with plan A.

When confronted with this problem I always wrote to supplier concerned explaining their error and ask for either a credit note for the difference or a credit and new invoice.

[BertBert]

What does your contract with the supplier say about payment of invoices and disputing them?
We try to get some clauses in about what happens to disputed invoices (involving not paying them).
Bert

[Alucidnation]

Are they really the only supplier you can use?

If so, you run the chance of them refusing to supply you if you mess about with payments etc.

[RB Will]

Alucidnation said:

Are they really the only supplier you can use

There are other suppliers but their products are not as good and would require us changing our stockroom, buying and qualifying large refrigerators and spending more time and money on QC testing due to different storage conditions required and a much shorter shelf life.

[martinbiz]

RB Will said:

There are other suppliers but their products are not as good and would require us changing our stockroom, buying and qualifying large refrigerators and spending more time and money on QC testing due to different storage conditions required and a much shorter shelf life.

Just pay them the correct agreed amount and write a debit note for the balance with details recorded as to why you are not paying the invoiced amount and send a copy with the remitance. we do it all the time. You are are not alone, probably 25% of our suppliers seem incapable of submitting correct invoices.

Doing it this way shows you are trying to keep your side of the bargain, witholding say a 5k invoice over a £50 discrepancy would be bit over the top

[QBee]

martinbiz said:

RB Will said:

There are other suppliers but their products are not as good and would require us changing our stockroom, buying and qualifying large refrigerators and spending more time and money on QC testing due to different storage conditions required and a much shorter shelf life.

Just pay them the correct agreed amount and write a debit note for the balance with details recorded as to why you are not paying the invoiced amount and send a copy with the remitance. we do it all the time. You are are not alone, probably 25% of our suppliers seem incapable of submitting correct invoices.

Doing it this way shows you are trying to keep your side of the bargain, witholding say a 5k invoice over a £50 discrepancy would be bit over the top

This is the correct answer, for two reasons:
1. It keeps the accounting records straight, with a trail you can follow later or at audit.
2. It keeps your VAT accounting straight and legal.
Non-payment is not the right answer.
But then I am an accountant, not a lawyer.

[Johnnytheboy]

And that, kids, is why business buyers are getting so anal about purchase orders.

[codenamecueball]

Johnnytheboy said:

And that, kids, is why business buyers are getting so anal about purchase orders.

POs have made things on my end, as a small-time freelancer, so much easier and quicker.

[Ian Geary]

I work for a council, and we've been using a PO system for a dozen years or so.

Initially suppliers paid little heed to them, or would just continually quote "the same" purchase order number on every invoice.

But in the last few years there's been far less problems, with many being up front asking for a PO before they'll even start work (hallelujah).

Of course, any invoice received that doesn't contain a PO is automatically returned to sender saying "no PO no payment", which helps.

The last big hurdle is tackling staff who buy things without going through the (very straight forward) ordering system first

[Pit Pony]

RB Will said:

Alucidnation said:

Are they really the only supplier you can use

There are other suppliers but their products are not as good and would require us changing our stockroom, buying and qualifying large refrigerators and spending more time and money on QC testing due to different storage conditions required and a much shorter shelf life.

So what you are saying is thay if the product I can supply you is as good, and the invoices are correct, you'll buy from.me instead ? We need to talk.

[sospan]

How safe is your sole supplier? Are they likely to go bust?
If they did how would that leave you?
As a long term strategy it might be worth the effort to look for a second ( even third) supplier.
It gives added safe continuity of supply.
It enables price haggling.
It can focus you on developing good systems within your business.
Early QA might be a load but as you gain confidence in a supplier you can ease it back. If you get issues reinstate it.
The initial effort/ cost to diversify supply needs to be weighed against future safety of supply .
Do a costing exercise. Keep things as simple as pissible. Don’t overthink it!