Solving Invoicing Problems
By Michael C. Dennis, MBA, CBF

Like most creditors, we have our fair share of deduction problems. Many of them frustrated us because trying to figure out whether the customer was right or wrong was often a case of "He said --- She said." For example, some of our customers would claim:

• They never ordered the product

• The buyer did not instruct us to drop ship the product to an end user -- that coincidentally never paid them

• We charged a higher price than the price the buyer was quoted

• They were offered extended dating terms by the salesperson, but the invoice listed standard Net 30 day terms

• The PO number listed on our invoice was incorrect, and until it is corrected the invoice cannot be paid

• The person who placed the order with us did not have the authority to do so, and therefore the customer wants to return the product for a full refund

It became clear to us that all of the problems listed above occurred because we were accepting verbal purchase orders. Without something in writing from the customer, it was impossible to know for certain if the customer's complaints were legitimate. We decided to require hard copy purchase orders on every order over $5,000. We met with limited resistance from our sales department and from customers. When customers did call, we explained that a purchase order protected them and us... and that if we accepted their PO without protest, even if we found a problem later we would honor the PO terms.

Is there any magic to a $5,000 limit? No. It seemed to be dollar figure large enough that we would not be bothering our customers placing small rush orders. Do we review the purchase orders we receive? Yes. Do we find lots of problems? Not any more, but we did at first. There were errors involving price, quantity, terms of sale, and product warranties among many others. Now our customers are accustomed to being asked to generate purchase orders, and understand that each PO is checked in detail the problems we used to have are now rare.

Can an idea this simple work? I believe this tactic will reduce the number of disputes and deductions for every company that uses it.