Disputed Work Orders Cause Delays in Payment and Increase Unnecessary Interest Expense

Disputed Work Orders Cause Delays in Payment and Increase Unnecessary Interest Expense

Guest writer Ron Wilson covers a crucial snowball effect we experience in our businesses in this week’s blog post: “Disputed Work Orders Cause Delays in Payment and Increase Unnecessary Interest Expense.”

We are all aware of the common causes that impact the accuracy of work order reviews, closing, and the customers invoices not being paid on time.

Digging a little deeper into the specific causes and frequency for the invoice being disputed by the customer can have a major impact on the reduction of the Service Department’s receivables. We often correct and resolve the disputed invoice without determining the root cause of the issue, and the problem often re-occurs.

Reducing the disputed and aged invoices also reduces the corporate interest expense due to not carrying the aged invoices within the accounts receivables.  This can greatly improve profitability without much effort.

Some of the common reasons work orders are disputed are:

1. Pricing Discrepancies

• Unexpected Costs: The final bill is higher than the original estimate, and the customer wasn’t informed beforehand.
• Disputed Labor Charges: The customer believes the labor charges are excessive or doesn’t understand how they were calculated.
• Parts Pricing: Customers may feel the parts are overpriced or question whether they were necessary.

2. Scope of Work Issues

• Unapproved Repairs: Work was performed that the customer didn’t authorize.
• Missed Repairs: The customer feels the dealership failed to address the initial issue or left something undone.
• Over-repairing: Customers may dispute repairs they believe were unnecessary.

3. Quality of Service

• Recurring Issues: The problem persists after the repair, leading the customer to question the quality of the work.
• Damage During Service: Equipment is returned with new damage or wear that wasn’t present before the service.

4. Miscommunication

• Poor Documentation: The work order lacks clear descriptions of the problem, repairs, or costs.
• Misunderstood Terms: The customer misunderstood warranty coverage or service agreements.
• Incomplete Updates: Failure to update the customer about changes in the scope or cost of the repair.

5. Warranty and Coverage Disputes

• Warranty Denial: The dealership claims the repair isn’t covered under warranty, which the customer disputes.
• Incorrect Coverage Application: Misunderstanding of extended warranty or service contracts.

6. Timing Delays

• Delays in Repairs: The customer disputes the bill if they feel the service took too long or caused operational downtime.
• Missed Deadlines: Promised completion times were not met.
• The age of the invoiced work order is excessive:  Customer feels the work order is should have been billed in a timelier manner.  The machine may have been sold or the job the machine was on is completed and the customers internal billing has been closed out.

7. Customer Expectations

• Performance Post-Repair: The equipment doesn’t perform as expected after the service.
• Lack of Preventative Insight: Customers may feel they weren’t informed about future issues during the service.

8. Inadequate Communication about Diagnostics

• Charges for Diagnostics: Customers may not realize diagnostic fees apply even if they choose not to proceed with repairs.
• Disagreement on Findings: Customers may not agree with the dealership’s assessment of the problem.

Strategies to Prevent Disputes

Below are some recommendations to prevent the disputes:

• Clear Communication: Provide detailed and upfront explanations of the work, costs, and expected timelines.
• Customer Approvals: Always seek explicit approval before performing additional repairs.
• Thorough Documentation: Keep clear records of customer complaints, work performed, and parts used.
• Warranty Clarifications: Ensure customers understand their warranty coverage and any exclusions.
• Proactive Updates: Regularly update customers on the status of their equipment.

These steps can reduce misunderstandings and foster better customer-dealership relationships.

Sometimes the smallest, non-flashy improvements can yield the greatest improvements.

Below is a table and a chart showing some possible  ways to prioritize reducing the number disputed work orders.

 

Cause	Occurrence	% Total	Accumulated
Warranty	981	34.6%	34.6%
P.O	793	28.0%	62.6%
Labor Dispute	615	21.7%	84.2%
Program Credit	237	8.4%	92.6%
Freight	99	3.5%	96.1%
Core Credit	76	2.7%	98.8%
Tax	18	0.6%	99.4%
Proof of delivery	17	0.6%	100.0%
Total	2836

The chart above shows the data in a visual format that makes it easy to see that 84% of the overall causes are related to the first three areas.  

Take each of the first three causes and identify which of the reasons listed on page one contributed to the invoicing dispute.  Implementing the proper processes, training, policies, proper communication, and coaching can quickly reduce a costly issue and improve customer satisfaction.

Once the first three have been resolved take some time to review the remaining issues.  Often addressing the first three issues will contribute to resolving the remaining issues.

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