Invoice Rejection – Why does this happen and what is the impact?

By Andrew Kingstone - Updated on August 19, 2022

Why do Invoices get rejected what is the impact?

Invoices are often rejected because they did not meet the guidelines of the receiving business – i.e., they did not conform to the minimum requirements in terms of detail.

Rejected and disputed invoices will inevitably result in delays in payment being made. This can severely impact the business’s cash flow and reputation in the marketplace.

A number of studies have been undertaken over time and within different business sectors – all of which have a very similar common theme that invoices are rejected due to missing important detail. These studies highlight the significant importance of making sure the information on invoices is correct before distributing them to customers/clients.

Some of the reasons those invoices were rejected by customers were:

  • The customer’s company name on the invoice was incorrect
  • The purchase order number on the invoice sent by the supplier was not a valid open purchase order from the customer.
  • The total value or total tax submitted in the invoice did not match the sum of the line items on the invoice.
  • The value on the invoice sent by the supplier exceeded the value on the purchase order or receipted value of goods against that order.
  • A product code on the invoice did not match a product code in the catalogue held for that supplier.

Of those concerns raised above, each of these issues is very easily avoidable, provided appropriate processes and structure are in place to generate and validate invoices before they are issued.

Within Gravity Credit and from our experience as a debt recovery specialist/credit reporting agency to businesses of all sizes, these are merely a small of the invoicing issues we commonly see which contribute to slow customer payment and engagement with the client.

In a recent referral from one customer, it was with great disappointment that we discovered that both their terms of business and invoice lacked detail around collections and payment terms when in default. Consequently, any additional costs of collection and interest were not able to be applied to the original debt. Any collection costs would come from the referred amount.

Surprisingly as it may seem, this is not a rare occurrence, especially if the business has just grown on the back of huge success and sales – one doesn’t often go back to old terms if the sales growth is extreme and one learns the hard way.  

Review your systems and processes and manage your debtors

We encourage the review of all systems and processes around invoicing, internal credit management and manage your debtors on a regular basis. Simply put, it makes enforcement of your terms and conditions when it comes to collections a much cleaner process.

If you need any assistance with issues in invoice rejection or about credit management, please reach out or take the time to read our other blogs.

You can contact me at [email protected]. I would welcome your questions and or feedback.

Andrew Kingstone, Managing Director
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