Without a doubt, the most prevalent excuse used by debtors for not paying is “I never got the invoice.” Normally good-paying as well as regularly slow-paying customers use this excuse. In reality, every account in your receivables portfolio, large or small, is capable of hitting you with this excuse at one time or another.

The excuse that “I never got the invoice” is all the more frustrating for collectors in that it implies payment would have been made if only the invoice had been received by your customer. As such, it is an attempt by the debtor to lay the blame back on your doorstep. Worse yet, the customer just might be right. Invoices sometimes don’t get printed as they should or are addressed incorrectly.

Responding to the missing invoice excuse therefore requires that you attack the problem from two perspectives. One possibility is that non-receipt is a system problem and that can either be due to a glitch on the creditor’s part or a deficiency in handling bills by the customer. The other possibility is that the excuse is nothing more than a stall tactic on the debtor’s part.

If invoices are not being delivered and received as they should, addressing the root cause will return dividends. By identifying the root cause and fixing the problem, fewer invoices will be “lost” and more bills will be paid without the necessity of collector intervention. That translates into better cash flow and a reduction of the burden of work placed on the collection staff, allowing the collectors to concentrate on more serious delinquencies and thus collect even more than before.

At the same time, you still need to be ready to respond to the missing invoice excuse, whenever it does arise, as if it were a collection issue. To help you in this two pronged attack on the problem of missing invoices, here are eight action steps to consider:

1. Check Your Systems
Somebody in your organization should have the responsibility of making sure transmission matches invoice creation. Whether your firm sends invoices by mail, email, fax, EDI, or all the above, you need to make sure that every invoice that gets billed also gets sent to your customers. If an invoice (or group of invoices) gets lost in the system (printer jams and server crashes are examples of issues that can cause an invoice to fall between the cracks, not to mention the ever present problem of faxes and emails not going through and mail being returned), the person monitoring your systems needs to make sure a replacement invoice is immediately sent.

2. Verify the Address
Whether you are faxing, emailing or just plain mailing an invoice, make sure it is being set to the right place. When you are dealing with large customers who can have either large or multiple A/P functions, an invoice sent to the wrong place is likely to get lost. Even if the invoice eventually gets to the right person for payment processing, there is a good chance it will be paid slower than if it was delivered properly in the first place. Whenever a customer claims an invoice is missing, you need to verify the address to which it should be sent.

3. Follow Proper US Postal Service Protocols
If you are mailing invoices, make sure the fields in your customers’ addresses are printed in the proper sequence. The Postal Service reads mailing addresses from the bottom up. If your computer systems force you to combine both post office and street addresses, make sure the P.O. box numbers are coded to appear under the street addresses. If the P.O. box is above the street address, the post office will deliver the mail to the street address, and your invoice may never reach the right party.

4. Watch for Skipped Invoices During Cash Application
It’s a good rule of thumb to try to identify missing invoices as early as possible. The people applying cash should therefore be trained to identify customers who skip invoices when making their payments. This information then needs to be passed on to a collector for immediate follow-up. If your computer systems are capable, an even better way to identify skipped invoices without putting any extra burden on your cash app staff is by creating a report that does the job. Just as there are reports for checks that have not yet cleared the bank, you can create a report to identify invoices that remain open on a customer’s account despite more recent items having been paid.

5. Be Able to Automatically Reprint and Transmit Invoices
One of the most valuable functions provided by collection automation software is the ability to automatically reprint and transmit multiple invoices. When an A/P clerk claims to be missing invoices, the collector should be able to immediately email or fax them over, and thereby stay on the telephone to verify a payment promise. Even if you do not have a collection software package, it is not difficult build invoice e-mail and fax capabilities using existing computing resources and off-the shelf software.

6. Make Sure Your Invoices Conform to 3rd Party Invoice Processing Services
More and more firms are outsourcing their A/P function. When everything clicks, this can result in more consistent, more on-time payments. Unfortunately, 3rd party processors often require very specific invoice transmittal formats. If your invoice details do not arrive in the format they prescribe, they will be rejected by the system and possibly not even acknowledged. This can be a problem if your software cannot produce an acceptable transmittal file – you will then have to enter the invoice details by hand. Fortunately, the ability to configure invoices in multiple formats is being built into the recent releases of most A/R software modules and bolt-on collection software products.

7. Identify customers that regularly “lose” invoices
As mentioned in the introduction, sometimes the problem originates with the customer. Then you must determine if they have system problems or are simply stalling your collection efforts. In either case, the first step is to identify those customers for which lost invoices are a recurring problem. Once identified, you need to learn the ins and outs of the individual customer’s payment process to determine if there is a problem with their systems or personnel. It is not uncommon for invoices to get held up by an over-burdened purchasing agent or some other approval authority if they are not first being logged in by the A/P department.

If there is a system problem, you may then be able find a solution that will serve your needs as well as help your customer improve their systems. On-site visits with the customer are also a good idea because they help you to learn what the problem is and send the message to the customer that you consider this a serious issue. If you can’t resolve the problem with your customer, there are still some things you can do to put a stop to “lost” invoices or at least mitigate their effects:
a. Call the customer 7-10 days after invoicing to confirm the bills have been received.
b. Send invoices via courier or certified mail, and make sure you get a delivery receipt for future reference.

If all else fails, you can also choose to treat problem customers as any other delinquent account. If you have been thorough in your approach to the matter, you should be able to readily document your efforts to resolve the matter amicably, so if the customer remains unwilling to cooperate, you may need to consider cutting back on their credit line, using credit holds, or requiring COD or cash terms.

8. Post your Customers’ Invoices On-Line
This is a proactive step that serves to push some of the burden for invoice research and retrieval back on the customer. In its most advanced form, Electronic Invoice Presentment and Payment (EIPP) provides for billing notification, invoice delivery, payment processing options and even dispute and deduction identification. In a simpler configuration, customers are only given the ability to review their account status and retrieve invoices on line.

In either case, a lost invoice is only a mouse click away. When customers are given self-service tools, A/R and collection management staff are able to reduce the burden of responding to customer queries and may also benefit from a reduced collection load due to the payment/settlement information captured by an EIPP deployment. Missing or skipped invoices are an annoying problem, but aggressive remediation can reduce the frequency of invoices being “lost” and catch them much earlier in the collection cycle. That, in a nutshell, is what good collection management is all about.

Editors Note:
The following members of Credit Today’s ListServ were involved in a discussion of how best to handle lost invoices, and their insights formed the basis for this article: Dave Aitken, Mitsubishi Digital Electronics America, Inc.; Debra Brassieur, Director of Credit, Gund; Bruce Diamond, Alco Industries; Bill Edgar, Zippo Manufacturing Company; Bruce Galletly, Director of Credit, Teknor Financial Corporation; Bob Rollins, Raycom Media; George Rooke, Credit Manager, Lenox; Harris Semegram, Director of Credit, Prestige Brands Holdings; Dan Sproat, Corporate Credit Manager, Jaco Oil/Wholesale Fuels Inc.; Rocky Thomas, VP Credit, Space Flooring & Supplies, Inc.; and Joel Watters, CFS Manager, Lamson & Sessions Co.