Freelancers vs. Business Owners

Invoice disputes are one of the most common financial issues in the world of freelancing and small-business ownership, often causing payment delays and damaging business relationships. To better understand how invoice disputes play out in the modern business landscape, we surveyed 510 freelancers and 234 small-business owners to gain insight and find solutions.

We explore the most common causes of invoice disputes and practical tips for preventing and managing conflicts to minimize financial loss and maintain positive business relationships.

Common Causes of Disputes

Our data revealed several key dynamics contributing to invoice disputes. From pricing disagreements to delayed payments, freelancers and business owners don't always see eye to eye when it comes to invoicing. Here's what we found.

In the past year, 65% of freelancers and 38% of small-business owners have experienced an invoice dispute. Invoice errors were the most common reason.

We also found that pricing disagreements were at the root of these conflicts for 35% of small-business owners, while nearly as many freelancers (33%) listed payment delays as the primary cause. Some small-business owners seemed to verify this; 13% reported difficulty paying their freelancers due to the current recession.

Invoice disputes can have serious financial impacts, particularly for freelancers who depend on sporadic income. Small-business owners also rely heavily on income, and late or delayed payment by a client can lead to legal action or debt collection. It's important to have a clear understanding of invoicing terms and procedures to prevent these costly outcomes.

While most respondents were familiar with invoicing terms, 20% of freelancers and almost 18% of small business owners were unfamiliar with them and chose the wrong answers on our pop quiz.

Outcomes and the Aftermath

Invoice disputes can lead to a range of outcomes. So, we asked small-business owners and freelancers what happened most often in these situations. Are both parties likely to seek a resolution, or would they rather cut ties?

While negotiations can be a viable strategy to resolve an invoice dispute, we found this isn't always the case: 35% of small-business owners and 27% of freelancers said that they've dropped the other party as a result of an invoice issue. And on average, both parties were only

willing to negotiate two invoice disputes before refusing to work together again.

Strained relationships were the most frequent impact of invoice disputes on small-business owners (42%). Freelancers, however, were more likely to say it was delayed payment (47%). But across the board, the most common way to end a freelancer/client relationship was to send an email (53%).

These outcomes underline the importance of careful communication and understanding when it comes to invoices, as well as the need for businesses to take appropriate steps to mitigate risk and ensure timely payments.

How To Work Together

It's possible to prevent invoice disputes from becoming too contentious. Next, let's see what steps small-business owners and freelancers take to resolve them and create positive working relationships.

Setting clear expectations and arranging payment terms upfront was the top strategy for preventing disputes, according to both freelancers and small-business owners. Providing an itemized invoice and a clear timeline were the next most common steps.

Regular communication was also key to resolving disputes; 65% of freelancers said quick response times would help, and 42% of small businesses agreed. Clear and respectful communication can also go a long way in establishing trust between both parties.

But they also must keep an open mind and be willing to compromise in order to reach an understanding. Negotiating payment terms can be particularly helpful, as it can give both parties a clear understanding of when and how money will be exchanged.

From Dispute to Agreement

Invoice disputes can be a time-sensitive and complex challenge, but small-business owners and freelancers can use a number of strategies to turn things around when they happen. Clearly setting terms and agreements upfront, providing error-free and itemized invoices, and communicating quickly will go a long way to help maintain positive business relationships.

Methodology

For this study, we surveyed 510 freelancers and 234 small-business owners that had dealt with invoice disputes in the past year.