Invoice software for Hong Kong

How to Deal with an Underpaid Invoice (Short Paid Invoice) in Hong Kong

The situation of an underpaid invoice occurs when the customer does not make full payment in comparison to the total amount of the invoice. To put it another way, it is when the payment received from the customer is less than the agreed amount and this is known as an underpaid invoice or a short paid invoice.

Whether the invoice is underpaid or not, can be discovered by comparing the payment received with the invoice sent to the customer.


underpaid invoice

Take the example of when a customer has agreed to pay HK$10,000 for product A, but has instead, paid HK$8,000. This means that the invoice is underpaid by HK$2,000 (HK$10,000 - HK$8,000).

This situation is referred to as an underpaid invoice. So, the next question that arises is, what are the reasons for underpaid invoices?

What are the reasons for an underpayment?

There are various reasons for an underpaid invoice and some are as follows:

All of the above situations may result in underpaid invoices. However, these kinds of situations can be resolved by open communication and negotiation. Following will be a discussion on how to handle underpayments from the perspective of the seller and buyer.

How do you Handle Underpayments from the Seller's perspective?

Often times, it can be frustrating and challenging to handle underpayments from the seller’s perspective. The best approach is to resolve the matter by communicating and understanding the customer’s point of view. It is important to realize that there is no need to panic, but to handle the situation diligently.

Following are the steps to take to handle this situation amicably:

  1. Verify underpayment

    The first step involves the verification of your claim for the underpayment. This verification can be done by comparing the payment amount with the invoice to confirm whether the amount billed or invoiced to the customer is more than the payment that has been received. When the underpayment of the invoice is verified, the next step is to communicate this underpayment to the buyer.

  2. Diligently communicate the situation to the buyer

    Politely explain to the customer that there has been a discrepancy in the recent payment that has been received from them. It will further your case, if you mention specific numbers for the bill and payment and supporting documents can be attached for their review and consideration. For example, the relevant invoice and payment receipt can be presented which will highlight the difference as an underpayment. To stay organized, it is wise to mention the amount invoiced, the payment received and the resulting underpayment. This will facilitate the customer in the next steps.

  3. Define the deadline for the additional payment

    Even though the dialogue with the customer should remain professional and show gratefulness, the seller will need to provide a deadline for the remaining payment. This will create an element of urgency at the buyer’s end and will make them consider the matter as a priority.

  4. Maintain professionalism

    An underpayment may be a result of an understanding gap at the customer’s end. It is vital to maintain a professional impression throughout the process so that it will not lead to an impairment of the working relationship with the customer. Despite this, you can opt to explain the consequences if the matter does not get resolved, especially in the case that the products have already been delivered, or the services have already been performed for the customer.

  5. Consider taking legal action

    Taking legal action should be considered as the last resort. However, it may have to be taken if you have been unable to recover the underpayment, despite reasonable reminders, or emails, and recovery attempts.

It is important to ensure a solution-oriented approach throughout the recovery process and attempt to facilitate the client into making the payment. The following example of an email template can be effective when sending underpayment notifications to the customer.

Email Template for Underpayment (Seller’s Perspective)

Subject: Underpayment notification for invoice # {XXXX}

Hi {Name of the customer},

This email intends to communicate that we have identified an underpayment in the invoice # {XXX} paid on {DATE}. Following are the details of the discrepancies.

Invoice & payment details:
  • Invoiced amount: {AAAA}
  • Payment received: {BBBB}
  • Underpayment amount: {CCCC}
{Supporting documents for these numbers are attached}

We understand that this underpayment may be the result of some error or understanding gap. So, we are open to understanding if you have anything to explain in the context of underpayment. However, if the underpayment stands on some error, we request that you to make the remaining payment as soon as possible.

Payment instructions:
  • Payment amount: {Underpaid amount on invoice}
  • Payment method: {Bank account number or some other detail}
  • Deadline for payment: {Specify the date to get paid}
Please note that failing to address the underpayment may result in {define consequences of not making additional payment. It can be an order cancellation, late delivery, short quantity, etc}.

We are committed to ensuring your satisfaction and appreciate the solution to the problem as soon as possible. If you have any questions or queries, please reach out us at {Your email / phone number}.

Thank you!
{Your name}
{Your post in the company}
{Your company name}

Accounting Perspective of Handling Underpayment (Seller’s Books)

Next will be a discussion on the accounting aspects of handling the underpayment:

Further, if you are the customer and you discover an underpayment, the following content can be helpful.

How do you Handle Underpayments From the Customer's Perspective?

It is comparatively easier to handle the situation when you notice an underpayment as a customer. It is called an underpayment, when as a customer, you have noticed that the amount that you have paid, is less than the agreed amount.

Following will be some tips on how to tackle this situation diligently:

  1. Review the invoice and payment made

    The first step is to review the total amount in the invoice and compare this along side the payment that you have made to the supplier. As explained above, if you notice that the payment that you have made to the supplier is less than the amount on the invoice, it is known as an underpayment.

  2. Acknowledge the mistake

    After reviewing the document and verifying the underpayment, it is time to acknowledge the mistake at your end, take ownership of it, and then communicate with the seller about the situation.

  3. Clearly communicate the underpayment to the seller

    It is good to be transparent and open when communicating and sharing details with the supplier. In addition, so that there is no confusion at the seller’s end, it is better to include the amount of the invoice, the payment and underpayment details with the supplier.

  4. Be apologetic as there was an error or oversight on your part

    To maintain a good business relationship with the supplier, it is helpful to express your understanding with the supplier about the underpayment and also assure the supplier that you will be taking prompt action to make the remaining payment.

  5. Make sure to document all the communication

    It makes good business sense to keep a sorted and organized record of all the communication that you have made with the supplier in regards to the underpayment. For example, details about the invoice, payment receipt, underpayment, communication with the supplier and their response, final payment and confirmation should all be recorded for documentation purposes. This documentation of all the correspondence with help to keep a back up and also will prove your position at the time of the tax and financial audit. It is also recommended to send all communication in writing, such as by sending emails, so that the correspondence is recorded.

If you opt to send an email for the underpayment, the following template can be effective and helpful.

Email Template for an Underpayment (Customer’s Perspective)

Subject: Underpayment notification for invoice # {XXXX}

Dear {Name of the seller},

We are writing this email to communicate that there has been some discrepancy in the recent payment that we have made under the invoice number {XXX} paid on dated {DATE}.

The amount we paid was less than the amount billed to us with the following details.

Payment details:
  • Invoice number {XXXX}
  • Invoiced amount: {AAAA}
  • Amount paid: {BBBB}
  • Amount underpaid: {CCCC}
We understand the importance of timely payments, and we further understand the importance of keeping accurate financial records for reporting and compliance purposes. It would be appreciated if you could please review your records and confirm if there has been an underpayment or if there is some understanding gap at our end?

If an underpayment is confirmed, we assure you that we will make the balance of payment as soon as possible without any delay. Additionally, please let us know if you have any set SOPs (Standard Operating Procedures) to deal with such types of situations.

We thank you for your cooperation and coordination and look forward to hearing back and assisting in the correction process. Please reach out to us at {Your email / phone number}.

Thank you!
{Your name}
{Your post in the company}
{Your company name}

Next will be a discussion about the accounting aspects of handling the underpayment.

Accounting Perspective of Handling Underpayment (Customer’s Books)

The following steps can be effective when handling the accounting from a customer's perspective, once you discover an underpayment on the invoice:

Can the Late Fees be Charged in Case of an Underpayment or an Overdue Amount?

Whether you can charge late fees on an under or overdue balance is dependent on whether you have included a late fee provision in the terms and conditions of the contract or agreement that you have with the customer. Businesses do frequently use late fee provisions in the contract with customers in order to enhance their cash flow management and liquidity.

The following points should be carefully thought of, if a business is considering whether to collect late fees from a customer:


An invoice is deemed underpaid when the customer does not make the payment in full. There are various reasons for an underpayment of an invoice with include, errors, disputes, customer financial difficulty, misunderstandings, ongoing negotiation as well as others.

The approach to take in the situation of underpaid invoices is to have clear and transparent communication. There will be a need to understand why the invoice was underpaid, so that this situation can be avoided in the future. The underpayment of the invoice may be identified at both the seller’s and buyer’s end.

As noted above, the seller is entitled to charge interest on the underpaid or overdue amount. However, this is dependent on whether there is a provision for the late fee in the contract with the customer. In addition, legal regulations and the working relationship between the seller and customer also plays a significant role in the decision on whether to collect interest fees on the underpaid or overdue invoice.

Invoicing tools for Hong Kong: