It's the time you've been waiting for; the end of the order-to-cash cycle. You receive your customer's payment. But wait … the amount does not match the statement. Sound familiar? Payment overages and shortages are more common than you might think, said Paulyne VanderSloot, CCE, CICP, credit manager with Mutual Materials Co. (Bellevue, WA).
"When a payment is off, it is an inconvenience for the credit department because we are the ones that get all the complaints when something goes wrong," VanderSloot said. "It's just one extra task we have to deal with, and it can usually be avoided."
In a recent NACM eNews poll, more than half (53%) of respondents said the credit department is responsible for resolving payment variances. Other common ways businesses handle payment overages and shortages include tracking and resolving by reason type (23%) and having a maximum dollar write-off (7%).
Customers often give the same reasons for under paying: damaged material, lost shipment, waiting on a pricing credit from sales or read the invoice incorrectly. Sometimes the problem is just a miscommunication, and the dispute can be easily fixed; others times, it is more complicated, said Sheila Bruce, cash, capital & collections manager with The Gorilla Glue Company (Cincinnati, OH).
"Each customer is different on how it wants to go about resolving issues, whether it be through a portal or face to face or email; that all depends on how easy it ends up being to resolve the issue," she explained.
Bruce's credit and collections department was so bogged down with handling payment issues that the company hired a full-time employee whose primary duty is handling these disputes. This is not a common solution (only 3% of eNews respondents said they have a separate dispute resolution team), but she said doing so has paid off. "A lot of times, we end up finding there is an issue on the customers' end and we'll get at least 50-60% of that money back. If we never had someone who could dispute most of these issues, we wouldn't get any money back."
Payment overages are not as common as shortages, but they still happen. "One time we had a customer misread an invoice that was $800 and they sent us $8,000," VanderSloot said. In this rare case, the credit team caught the mistake early enough, and the customer was able to call her bank and stop the payment before it posted.
-Annacaroline Caruso, editorial associate