What it means
Every finance team has invoices sitting in a queue because a customer says the price is wrong, the delivery was short, or a purchase order number is missing. Dispute resolution time turns that messy reality into a single number that can be tracked and improved.
The clock starts when the dispute is logged and stops when it is resolved, whether that means a credit note is issued, the customer accepts the invoice or the amount is written off. Measuring only closed disputes matters, because counting open ones would flatter the average.
The metric matters because disputes are a hidden driver of days sales outstanding. A company can have excellent credit control and still collect slowly if 12% of its invoice value spends three weeks in dispute before anyone can chase it.
Most teams break the number down by root cause, because the average alone does not tell you what to fix. Pricing errors, missing purchase order references, delivery shortages and incorrect billing addresses each have different owners, and the fix usually sits upstream in sales or operations rather than in finance.
A sensible target depends on complexity, but many business-to-business teams aim to close routine disputes within ten working days and to keep the volume of new disputes below a small percentage of invoices raised. Tracking both speed and volume prevents a team from looking fast simply by conceding every claim.
In practice
Real-world examples.
Example
A packaging supplier finds that 60% of its disputes come from missing purchase order numbers on invoices. Adding a mandatory field at order entry cuts average resolution time from 21 days to 8 days within one quarter.
Example
A managed IT services firm routes every dispute to the account manager who owns the relationship rather than to a shared inbox. Accountability is clear, and the average falls from 16 days to 11 days with no extra headcount.
Example
A food wholesaler tracks resolution time separately for short-delivery claims and pricing claims. Short deliveries close in 4 days because the depot has the evidence, while pricing claims take 24 days, which points the improvement effort squarely at the contract pricing process.
Think of it
“Dispute resolution time is how long it takes to settle disagreements-speed of resolution.
Formula
Calculation
Average dispute resolution time = Total days taken to resolve all closed disputes / Number of disputes closed
A distribution business closes 40 disputes in a month. Adding the days taken on each one gives a total of 720 days.
Average dispute resolution time = 720 / 40 = 18 days
The disputed invoices in that month were worth $850,000. If the business borrows at 8% a year, the financing cost of holding that value for 18 days is $850,000 x 8% x 18 / 365 = $3,353.
Halving the resolution time to 9 days would cut that carrying cost to $850,000 x 8% x 9 / 365 = $1,677, saving about $1,676 a month, or roughly $20,000 a year, before counting the improvement in cash headroom.Case study
Seen in the real world.
Ashgrove Industrial Supply is an illustrative, fictional distributor with $60,000,000 of annual revenue and a stubborn days sales outstanding figure of 62 days. The credit control team was chasing hard and taking the blame, but the real problem sat elsewhere.
An analysis showed that 14% of invoice value was under dispute at any time and that the average dispute took 27 days to close, mostly because claims bounced between the depot, sales and finance with no single owner. The illustrative fix was unglamorous: one named owner per dispute type, a 48-hour first-response rule and a weekly review of anything older than ten days.
Average resolution time fell to 11 days over two quarters and days sales outstanding dropped to 51 days, releasing roughly $1,800,000 of cash. No customer was pushed harder and no additional credit controllers were hired.
Watch out
Common mistakes.
- Measuring only disputes that are still open. Averaging open items understates the true time taken, because the slowest cases are the ones still sitting in the queue.
- Treating disputes as a finance problem. Most originate in sales, pricing or fulfilment, so the fix belongs upstream and finance is only where the symptom appears.
- Chasing speed alone. A team can close disputes fast by issuing credit notes without investigation, which quietly hands away margin.
Questions
People also ask.
What is a good target?
Many business-to-business teams aim for an average under ten working days for routine claims, with complex contractual disputes tracked separately.
How does it affect days sales outstanding?
Disputed invoices sit uncollected, so a long resolution time inflates days sales outstanding even when standard collections are working well.
Should the clock stop while waiting for the customer?
Keep the total elapsed time as the headline measure and track internal handling time separately, otherwise the metric can be improved by simply blaming the customer.
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