7 types of invoice discrepancies (and how to resolve them)

The FBI’s Internet Crime Complaint Center (IC3) reported 21,832 complaints of business email compromise (BEC) for adjusted losses of more than USD 2.7 billion in 2022 alone. While invoice fraud isn’t the only type of BEC, it’s easy to see how much hangs in the balance when it comes to invoicing and invoice processing.

This post walks through everything you need to know about invoice discrepancies, including how to resolve them—and how to prevent them.

What is an invoice discrepancy?

An invoice discrepancy refers to any difference between an invoice and its related purchase order, receipt, contract, or expected cost. In other words, something about it doesn't add up—sometimes literally. Invoice discrepancies happen for a variety of reasons, from innocent clerical errors to outright fraud. Whether small or large, it's important for businesses to address invoice discrepancies quickly and efficiently to ensure accurate financial records and protect company assets.

Common invoice errors and root causes

Most invoice errors come down to one of these 3 issues:

• Missing information
• Incorrect information
• Sending or delivery problems

In some cases, the errors are minor. If a zip code is missing, for example, but the supplier is paid by ACH, there may be no need for a correction. Other errors can be far more significant. An invoice that was sent twice by mistake—or one that includes the wrong items or pricing—can lead to major headaches, especially if that invoice is inadvertently paid.

What causes invoice discrepancies?

The root cause of invoice discrepancies often boils down to simple human error. When entering invoice information by hand, a host of problems can crop up:

• A line might be dropped between a purchase order and an invoice
• Pricing information can be incorrectly copied from a price list to an invoice
• The price list might not have been updated when prices recently changed
• The wrong customer can be selected from a dropdown list by mistake

The list goes on and on. With so many opportunities for error, many companies are turning to financial automation software that leverages machine learning to capture invoice information and compare it to underlying purchase orders. BILL Accounts Payable, for example, offers automated 3-way matching to help catch invoice irregularities.

7 frequent invoice discrepancies and how to resolve them

Unfortunately, questions and disputes over invoices are not uncommon. Here are seven of the most common invoice discrepancies.

1. Late invoicing

Sending an invoice too long after products or services were delivered can easily lead to incorrect information or mistakes. This in turn may lead to delayed payments, strained relationships, and cash flow problems—especially if the expense should have been attributed to a previous fiscal period.

2. Duplicate invoices

Duplicate invoices may lead to overpayment or incorrect financial statements. Once the issue is discovered, the company that paid the invoice twice has to try to reclaim that loss. On the other side of the coin, the company that was paid twice may find itself short on cash if it didn't notice the error and now has to resolve it.

3. Calculation errors on an invoice

Calculation errors on an invoice can easily lead to financial discrepancies. Errors may be due to system glitches, accounting errors (such as incorrect tax information), or sections that have to be calculated manually. The more human touches a system includes, the more chances there are to introduce mistakes.

4. Including billing errors on an invoice

Billing errors may come from incorrect pricing or tax tables, mistakes in copying info from those tables, applying tax table information incorrectly, or misreading the pricing and terms in an underlying contract. Whatever the root cause, the customer ends up getting a bill for the wrong amount.

5. Timesheet discrepancies

Timesheet discrepancies are invoice errors that flow from mistakes in employees' time records when companies bill by the hour, such as accounting firms, law firms, or advertising agencies. In some cases, errors are introduced by accident when copying hours over from timesheets to an invoice. In others, the hours may have been entered incorrectly in the original timesheet.

6. Incorrect or missing invoice information

Just about any information can be missing from an invoice, from the invoice number to the payment terms. Alternatively, the information may be present but inaccurate. Here, again, mistakes are usually introduced in one of two ways—they can be copied over incorrectly, or they may flow from incorrect data entry that happened somewhere further up the chain.

7. Sending invoices to the wrong buyer

Sending invoices to the wrong purchaser creates problems with two customers at the same time—the one who received the invoice and the one who didn't. This can happen via snail mail when the wrong invoice is stuffed into the wrong envelope, or it can happen electronically when the wrong email is copied over by hand from a customer list.

How do invoice disputes affect small businesses?

Invoice issues can easily undermine a company's cash flow, causing all kinds of monthly obligations to be jeopardized—from loan payments to payroll. For a small business, cash flow disruptions from disputed invoices can lead to major financial trouble, but even minor issues can cause strained business relationships and a damaged reputation.

How to resolve invoice discrepancies

Tackle invoice discrepancies head on, as soon as you catch them. The first step is to decide whether the mistake is a material one. A minor typo in a long product description, for example, might not be worth fixing. If the discrepancy needs to be addressed, here’s how to handle it.

Settling an invoice dispute—talk and investigate

Whether you're on the sending or receiving end of an invoice discrepancy, the best approach is usually direct, honest communication. Reach out to your customer or vendor and let them know what happened as soon as possible so you can work through the inaccuracy and resolve the dispute. Hopefully, those mistakes are rare, but companies still need well-defined procedures for handling inaccuracies in both accounts payable and accounts receivable.

Stay in touch with your customers, suppliers, and vendors

It's also important to stay in touch with your customers, suppliers, and vendors on a regular basis, maintaining open lines of communication. If you interact with your business partners often, one innocent error isn't likely to undermine the strength of the relationship, especially if it's resolved with a mutually beneficial solution.

How to avoid invoice discrepancies: Prevention strategies

The very best way to resolve invoice disputes is to avoid them in the first place. Today, companies use automation to reduce the chance of human error in the invoicing process—minimizing discrepancies by minimizing the number of times human beings have to enter data or copy data from one place to another throughout the process.

Establish effective invoice policies and processes

Companies should also establish effective policies and processes for adding new customers and vendors, double-checking time reports, updating pricing information, and so on. The more steps that are completed in an ad hoc way, the more chances there are for mistakes. Standardizing and automating every step in your AP and AR processes can go a long way toward reducing mistakes.

Review invoices before you send them (or pay them)

Automation can include review rules and steps that are applied automatically. For example, automated systems can check invoices against purchase orders, using 2-way matching or even 3-way matching.

An automated AP system, such as BILL Accounts Payable, should also apply your invoice approval rules—sending the right invoices to the right people for review. In manual AP systems, these kinds of steps are too easily skipped when people are in a hurry. Automation helps ensure compliance with internal rules and procedures.

Use invoicing software

Using invoicing software like BILL Accounts Receivable can streamline AR processes, saving you time and money. It can help you automate things like invoice coding, recurring invoices, identifying unpaid invoices, and payment tracking.

On the bill pay side, the AP automation in BILL Accounts Payable can help companies catch incoming invoice errors and standardize processes for handling them.

Invoice discrepancy FAQs

What to do if an invoice is incorrect?

If you sent the invoice, contact your customer immediately. Explain the mistake and propose a plan to resolve it—one that respects your customer's position and cash flow needs.

If you received the invoice, contact your vendor immediately. Make sure you follow any internal processes for invoice resolution and remove that invoice from the payment flow so it isn't paid by accident.

When can you dispute an invoice?

While business laws vary from state to state and country to country, one general legal principle is that companies should have a reasonable amount of time to catch and dispute issues. That clock generally starts from the time when you could have caught the error, so make sure your AP processes include strong review systems to find mistakes right away.

How do I ask for an invoice correction?

The best way to ask for an invoice correction is simply to ask. Reach out to your vendor and explain what you're seeing, starting with questions rather than accusations. If the mistake was innocent, they'll be more than happy to address it.