Disputes are a natural part of life. Everyone can’t always be on the same side and there are always going to be differences of opinion, particularly when it comes to financial matters. Indeed, a report by FSB found that 70% of members had experienced at least one serious payment dispute in the last five years and it is a trial that costs businesses around £12.4 billion a year.
A business owner is always going to have to deal with some form of payment dispute at one point in their journey of building their business and brand. It could be an outstanding invoice or a product or service that the client deems unfit but more often than not it will be a simple chargeback.
What is a chargeback?
A chargeback is when a purchase is rejected by the cardholder after the purchase has been made and can prove incredibly costly for businesses if not handled carefully.
A chargeback can occur for several reasons:
• A customer doesn’t recognise or remember the charge
• The offering provided doesn’t live up to the standards of the customer
• The offering was not delivered to the customer
• Fraudulent behaviour such as trying to claim an item or service for free
• Recurring charges that the customer forgot to cancel
• Duplicate charges are made for the same transaction.
At a fundamental level, the reason is irrelevant, though they should all be dealt with in very different ways. For the business, however, the significance of a chargeback is that the charge is reversed and the funds are deducted from the business’ account. And more often than not, that revenue will not return.
Tips for avoiding payment disputes
Be consistent – customers cancelling payments because they don’t recognise the name of the company is the most common reason for chargebacks. To avoid this, ensure that your business is trading under the name that buyers are going to recognise.
Keep records – sales records are a great way of keeping track of your sales and can be vital in helping you sort out payment disputes without resorting to the courts. If a customer disputes a transaction and you have solid evidence that it was made legally they won’t have a leg to stand on. Also, always use a postal tracking service. A customer can’t realistically claim an item hasn’t arrived when you can prove it has.
Have a clear returns policy – for purchases made in person, all receipts should include the business’ returns policy. Though note it can only be enforced if the customer signs the receipt. For online purchases, meanwhile, ensure that the returns policy is clearly stated on the website and on the email you send to confirm the purchase.
Use technology – fraud is a lot easier to detect with the latest software and hardware at your disposal as the latest encryption technology is that much more advanced than that which came before.
Tips for handling payment disputes
Be clear – ensure that the policies put in place for suppliers and customers are clear and outline in exact detail how complaints should be dealt with.
Listen carefully – listen to customer and client concerns and make your best efforts to deal with them before it escalates. You should also be training all of your staff to manage payment dispute complaints and let them know they can discuss issues with management when necessary.
Be expedient – don’t take too long to respond to your customers and clients. The dispute is not going to disappear just because you ignore it. In fact, it will probably just get worse over time. If things are not progressing, don’t be afraid to get third parties involved either.
Document everything – all correspondence should be documented in case the dispute can’t be solved amicably and the case gets taken to court.
We can help
If you’re interested in finding out more about solving your small business payment disputes, or any other aspect of your business finances, then get in touch with our financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.