Disputes happen. No matter how carefully contracts are drafted or how strong supplier relationships are, there will be disagreements. Deliveries that didn't match specifications. Invoices that don't align with purchase orders. Service levels that were—or weren't—met. Quality standards that were—or weren't—achieved.

How you handle these disputes matters enormously. Handled badly, disputes destroy value and damage relationships. Handled well, they can actually strengthen partnerships and drive improvement.

The Cost of Unstructured Disputes

Many organisations handle disputes through extended email exchanges, escalating calls, and whoever shouts loudest. This informal approach has real costs.

Time drains away. Days or weeks spent arguing over details, rehashing the same points, and waiting for responses. Nobody is tracking progress. Resolution keeps slipping into the future.

Relationships deteriorate. Frustration builds on both sides. What started as a legitimate disagreement becomes personal. Even when the immediate dispute resolves, the relationship carries scars.

Money leaks. While disputes drag on, payments are delayed or made incorrectly. Credits aren't applied. Overcharges aren't recovered. The financial value of resolution gets eroded by the cost of the process.

Knowledge disappears. When the dispute finally resolves, what was learned? Nothing is documented that would prevent similar disputes in future. The same disagreements happen again with the same suppliers or different ones.

Structuring the Dispute Process

Effective dispute resolution requires a structured process that moves disagreements toward resolution while preserving relationships and capturing learning.

The first step is acknowledgment. The dispute exists, has been logged, and is being actively managed. This seems obvious but is often skipped. Disputes linger in email threads without anyone formally owning them or tracking their status.

Clear ownership is essential. Someone specific is responsible for driving resolution. Not a shared inbox or a team—an individual with accountability. If ownership isn't assigned, nobody moves the dispute forward.

Evidence gathering follows. What are the facts of the situation? What documentation exists? What do both parties claim happened? This stage focuses on understanding, not judging. Jumping to conclusions before facts are established prolongs disputes.

Root cause analysis asks why the disagreement occurred. Is it a genuine difference of interpretation? A process failure? A communication breakdown? An honest mistake? Understanding the root cause informs both the resolution and prevention of recurrence.

Resolution options are then explored. What are the possible ways forward? Full payment? Partial credit? Remediation? Contract amendment? The range of options depends on the dispute type and what both parties need.

The Dispute Status

In financial systems, flagging items as "In Dispute" serves important purposes beyond just tracking.

Payment processes pause. When an invoice is legitimately disputed, it shouldn't be paid while disagreement continues. The dispute flag prevents normal payment workflows from proceeding until resolution.

Visibility increases. Disputed items should be visible to management. How many disputes are open? How long have they been open? What value is involved? These questions should be answerable at any time.

Escalation triggers activate. Disputes that remain unresolved beyond defined timeframes should automatically escalate. Left alone, disputes tend to stagnate. Escalation mechanisms ensure attention when needed.

Audit trails accumulate. Every action on a disputed item should be logged. When the dispute resolves—or if it becomes a formal claim or legal matter—the history is preserved.

Preserving Relationships

The paradox of dispute resolution is that how you handle disagreements affects relationships more than whether disagreements occur. Every supplier relationship will have disputes. Not every relationship will survive them.

Focus on facts, not blame. Disputes often become personal when they shouldn't. "Your team made an error" is less productive than "there's a discrepancy here—let's understand what happened." Keeping the focus on the issue rather than the individuals preserves working relationships.

Assume good faith until proven otherwise. Most disputes arise from misunderstanding, miscommunication, or honest error—not deliberate wrongdoing. Approaching disputes as problems to solve together rather than battles to win changes the dynamic entirely.

Separate the dispute from the relationship. A disagreement about one invoice shouldn't contaminate the entire commercial relationship. Continue normal business while the dispute is resolved. The supplier is still your supplier; you just disagree about this specific matter.

Close disputes cleanly. When resolution is reached, confirm it clearly in writing. Document what was agreed. Then genuinely move on. Lingering resentment from resolved disputes poisons future interactions.

The Commercial Reality

Not all disputes are created equal. A £50 invoice discrepancy doesn't warrant the same process as a £500,000 contract interpretation disagreement. Proportionality matters.

Small disputes should resolve quickly, even if that means accepting less than ideal outcomes. The cost of extended process often exceeds the value at stake. Pragmatic resolution beats principled stalemate.

Large disputes warrant more formal process. Documentation becomes more important. Senior involvement may be appropriate. External advice—legal or commercial—may be needed. The stakes justify the investment.

Strategic disputes require special handling. When the supplier is critical and the relationship is essential, dispute resolution must account for ongoing partnership. Winning the battle while losing the relationship is no victory.

Learning from Disputes

Every dispute contains lessons. About contract clarity. About process weaknesses. About communication gaps. About supplier capabilities. The organisation that learns from disputes improves; the one that just resolves them repeats the same patterns.

Post-resolution review asks: how did this dispute arise? What would have prevented it? What changes should we make? These questions should be routine, not exceptional.

Pattern analysis across disputes reveals systemic issues. If certain dispute types recur, the cause is probably structural. If disputes concentrate with certain suppliers, that's a relationship red flag. If disputes spike at certain times, process or capacity issues may be involved.

Prevention is better than resolution. The best dispute is one that never happens because clear contracts, good communication, and strong processes prevented the conditions that create disagreements.

The Professional Approach

Dispute resolution is a skill that can be developed and a process that can be designed. Organisations that treat it as an inevitable but manageable aspect of supplier relationships handle disputes more effectively than those who see each one as an unwelcome crisis.

Train people in dispute resolution. The skills involved—evidence gathering, negotiation, documentation, escalation management—are learnable. People who handle disputes regularly should develop these capabilities deliberately.

Design processes for dispute handling. Define stages, responsibilities, timeframes, and escalation paths. Make the process visible and understood. Don't leave dispute handling to improvisation.

Measure dispute performance. How many are open? How long do they take to resolve? What value is involved? What's the resolution rate? Metrics enable management and drive improvement.

The goal is not to eliminate disputes—that's impossible—but to handle them efficiently, fairly, and in ways that preserve rather than destroy value and relationships.