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Dealing with Customer Payment Disputes

Most business owners at some point will find themselves dealing with a customer who disputes a payment in some way.  This is more likely to occur with online sales as customers are unable to see and evaluate the product in person before clicking on the Buy button.  Large e-commerce websites like Amazon, eBay and PayPal offer individual claims process and can process refunds to unhappy customers internally.  This is an issue that any business owner selling via these platforms will need to be aware of. 

Some sites, including Amazon and PayPal, allow sellers a set amount of time to respond to disputes, but this is a process that can be disadvantageous to the seller if the customer is slow in raising a dispute in the first place.   PayPal allows customers to start a claim against the seller up to 180 days after purchase.  This means that if you make a sale in March and are asked for a refund in July, the payment has already been processed and paying it back may cause cashflow problems.  In cases of dispute, the amount in question is held by PayPal and becomes a late payment for your business, resulting in your being unable to start debt collection procedures.

However, if you’ve sold a product and the payment is rescinded, you’ll need to take action to minimise the damage done to your business and your income.  A great way to avoid issues of this type is to add a sentence (both on your website and on the invoice) asking customers to get in touch with you direct if there is a problem so that you can put things right immediately. 

If the item is faulty, then you must issue a refund and an apology – this is just good business sense and will increase trust in your brand when customer know that their problems will be dealt with quickly and in a fair manner. 

If the customer has changed their mind about the product, you are not legally obliged to refund the payment.  However, many businesses issue refunds under these circumstances as a gesture of goodwill.  It makes sense to do so, especially for lower cost items.  If the item is expensive, then a refund issued when the item has been returned is good business practice.

The best methods for preventing payment disputes include putting in place the following measures;

  • Make sure your products and services are accurately represented in the product descriptions.
  • Be clear and transparent about your company’s refund policy.
  • Arrange the safest and most reliable delivery services.
  • Encourage customer to contact you first if there is an issue with the product or service they’ve received.
  • Make sure you fully understand the terms and processes for any sites you sell through.

Whilst it’s unlikely that you will avoid disputes altogether, making sure you are clear and transparent about your products, services, refund policy and shipping methods is likely to keep disputes to a minimum, which will benefit your business in the long term.