Resolving customer payment disputes

At some point in your business operations, you may find that a customer disputes a payment.

This is typically more likely to happen if you make a lot of your sales online. It’s a convenient way for customers to buy, but does mean they don’t see and evaluate the item in person before clicking ‘pay now’.

Sites such as eBay, Amazon and PayPal can process refunds internally. They have individual claims processes, which you’ll need to be aware of if you sell on these platforms.

No matter where you sell, disputes over items can put you into debt. When you send out the product and then have the payment rescinded, your business is down on both inventory and cash. And if the amount’s in holding during a dispute, the clock keeps ticking until it becomes a late payment.

Get to the heart of the problem

So, there’s an issue – why?

This isn’t always easy to find out.

The UK Cards Association advises consumers to contact the seller first, but they might not bother. You may only realise the payment’s been disputed when the refund goes through.

Add a sentence or two on your website and on invoices, urging customers to get in touch straight away if there’s a problem.

Is the customer right this time?

No company wants to have to refund money.

Good business means representing your products and services accurately and fairly. If the item looks purple on your website but is clearly pink when it arrives, customer complaints are to be expected.

If the item is faulty, you must provide a refund. If the customer has changed their mind, you’re not legally obliged to give their money back. However, many businesses process these refunds as a gesture of goodwill.

You might want to consider putting a time limit on refunds.

Pick the best postage method

Once you dispatch the item, it’s in the hands of the delivery service. This is another opportunity for things to go wrong.

You become liable for items lost in the post, damaged during transit, or automatically returned if the buyer’s not home.

The occasional issue is likely unavoidable. Should you start having repeated, regular problems with a delivery service, it’s time to switch.

Dispute the dispute

Some sites, including Amazon, give sellers a set amount of time to respond to disputes.

This process can put sellers at a huge disadvantage if the buyer is slow to raise the issue. PayPal, for example, lets users start a claim up to 180 days after their purchase.

You could make a sale in January and be asked to refund it in June. If that money’s already gone into inventory or bills, paying it back’s likely to cause cashflow problems.

During a raised dispute, the amount in question is ‘held’ by the payment service. It’s kept separate from both you and your customer’s bank accounts. This means that once it becomes a late payment, you can’t start debt collection procedures.

Can payment disputes be prevented?

Our top tips for payment dispute resolution:

  • Represent your services and products accurately
  • Know the terms and processes for sites you sell through
  • Be clear about your company’s own refund policy
  • Arrange the safest, most effective delivery services you can
  • Encourage customers to contact you if there’s an issue

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