Invoice Dispute Letter Generator

How to dispute an invoice in Australia

Receiving an incorrect invoice is common in business, whether it is a duplicate charge, incorrect pricing, goods not delivered, or an unauthorised amount. The key to resolving disputes quickly is putting your objection in writing immediately, referencing the specific invoice and purchase order, and clearly stating what resolution you require.

Under Australian contract law, you are not obligated to pay an invoice that does not reflect the agreed terms of your purchase order or contract. However, you should dispute promptly. Most supplier payment terms require notification of disputes within 7-14 days of invoice receipt. Failing to dispute within a reasonable timeframe may weaken your position if the matter escalates.

Best practice is to pay any undisputed portion of the invoice on time while formally disputing the balance. This demonstrates good faith and avoids late payment charges on the amount you do agree is owed.

Worked example: pricing discrepancy on a materials order

A Melbourne manufacturing company receives an invoice from a steel supplier for AU$18,450 (excl. GST). The purchase order specified 5 tonnes of structural steel at AU$3,200 per tonne (AU$16,000 total). The invoice shows AU$3,690 per tonne.

The dispute letter should:

• Reference the invoice number and the PO number
• State the agreed unit price (AU$3,200/tonne per PO #2847)
• State the invoiced unit price (AU$3,690/tonne)
• Calculate the overcharge: AU$2,450
• Request a credit note for AU$2,450 plus AU$245 GST, or a revised invoice at the agreed rate
• Set a response deadline of 14 days

The business should pay the undisputed amount (AU$16,000 + GST = AU$17,600) by the due date and hold the disputed AU$2,695 until the supplier issues a credit note. This approach protects the relationship while asserting the contractual position.

Common invoice dispute types

• Incorrect amount: The invoice total does not match the agreed price, purchase order, or quote.
• Duplicate invoice: The same charge has been invoiced twice for a single delivery or service.
• Goods/services not received: The invoice is for items never delivered or work not performed.
• Defective goods: Items received were damaged, faulty, or not fit for purpose under the Australian Consumer Law.
• Incorrect pricing: Unit prices or quantities do not match the agreed rates in your contract or PO.
• Unauthorised charges: The invoice includes items or services you did not order or approve.

What to include in your dispute letter

1. Your company details and the specific invoice number, date, and amount.
2. The purchase order number (if applicable) for cross-reference.
3. A clear description of the discrepancy with supporting evidence (delivery dockets, PO, photos of defective goods).
4. The correct amount (if known) and how you arrived at it.
5. The resolution you require: credit note, revised invoice, or refund.
6. A reasonable deadline for response. 14 days is standard.

Escalation paths if the dispute is not resolved

If the supplier does not respond within your stated deadline, escalate with a firmer letter referencing the original dispute. If the matter remains unresolved after a second attempt:

• Withhold the disputed portion only. You may withhold the disputed amount but must pay the undisputed balance. Withholding the entire invoice when only part is disputed is not good faith and may expose you to late payment claims.
• State small claims tribunal. For disputes under AU$25,000 (threshold varies by state), file with the relevant tribunal: NCAT (NSW), VCAT (VIC), QCAT (QLD), or SAT (WA). These proceedings are designed for businesses to resolve disputes without lawyers, though legal representation is permitted.
• Formal legal demand. For larger amounts, a letter of demand from a lawyer often prompts resolution. The cost of a letter of demand is typically AU$500-1,500, which is justified when the disputed amount is material.

Throughout the escalation, keep copies of all correspondence. A documented dispute trail is essential evidence in any formal proceedings. If your AP process does not automatically log dispute communications against the invoice record, you risk losing the trail in email threads and shared inboxes.

Preventing disputes before they happen

Most invoice disputes are caused by mismatches between what was ordered and what was invoiced. Three-way matching (PO to goods receipt to invoice) catches these before payment. When AP automation performs the match automatically, discrepancies are flagged at the point of invoice capture rather than discovered during payment processing or, worse, after payment has been made. For businesses using purchase orders, generating a clean PO through a purchase order generator with agreed pricing ensures the reference document is unambiguous.

Frequently asked questions

How quickly should I dispute an invoice?

As soon as possible after receiving it. Most supplier contracts require disputes to be raised within 7-14 days. Delaying beyond a reasonable timeframe weakens your position and may result in the supplier treating the invoice as accepted.

Can I withhold payment on a disputed invoice?

You can withhold the disputed portion, but you should pay the undisputed amount by the due date. Withholding the entire invoice when only part is disputed is not good faith and may trigger late payment interest or damage the supplier relationship.

What if the supplier does not respond to my dispute?

Send a follow-up letter with a firmer tone and a shorter deadline. If still unresolved, consider the state small claims tribunal (for disputes under AU$25,000) or a formal letter of demand from a lawyer for larger amounts. Keep all correspondence as evidence.