Updated 2026-05-19

Short pay

When a customer pays less than the full invoice amount.

Why it matters

A short payment leaves a balance that may need to be resolved through chargeback, reserve deduction, or customer dispute resolution before the invoice closes. If the customer short-pays because of a disputed amount, the short-pay triggers the factor dispute handling process. If the underpayment reflects a pricing discrepancy, the seller may need to issue a credit memo to close the balance. Until resolved, the factor typically holds reserve on the affected invoice. Under some agreements, any unpaid balance after a defined period triggers a chargeback regardless of the dispute status.

How it appears in contracts

Factoring agreements require the seller to notify the factor within a specified number of days when a customer short-pays. The agreement may define a threshold below which deductions are applied to reserve without triggering a formal dispute process. For larger short-pays, the seller provides a written explanation and documentation of the dispute. If the short-pay becomes permanent, the factor charges it back to the seller under recourse provisions. Repeated short-pays from the same customer can affect that account debtor credit limit or eligibility for future funding.

Related terms

• Reserve
• Recourse
• Chargeback
• Notice of assignment