Chargebacks wrecking your cash flow? Here are some tips for getting them under control

Whether they’re triggered by criminal fraud, duplicate charges, a technical glitch or a dissatisfied customer, credit card chargebacks can become a nagging pain point for A/P and a disruptor to the efficiency and profitability of your business.

In fact, Mastercard predicted that businesses would collectively lose more than $1 billion on them in 2023 alone.

Because chargebacks involve a credit card issuer repaying the customer, there’s a chance you could get hit with a processing fee on top of losing money on a disputed transaction. The amount can vary depending on the reason and the card network involved.

If left unchecked, chargebacks can damage your company’s business relationships and negatively impact customer trust, leading to decreased sales and brand loyalty.

Often, it’s up to A/P not just to resolve chargebacks, but to ensure they’re not suspicious. A 2023 report from SaaS company Chargebacks911 found that nearly three-quarters of surveyed respondents reported a 19% average increase in “friendly fraud” incidents where customers falsely disputed legitimate transactions.

Proactively preventing disputes

Here are some effective best practices for minimizing the impact of chargebacks and protecting your revenue:

1. Prioritize security and fraud prevention. Consider an audit of the strength of your fraud prevention measures for online and physical transactions. This includes an evaluation of the security of your payment gateway, your customer verification tools and if your fraud prevention software is up-to-date.
2. Refund policy transparency. How clear are your return, refund and order cancellation policies? Are they easily accessible? Is the language clear and concise, ensuring that customers understand their options before purchasing?
3. Clear billing data. Any confusing billing descriptors need to be fixed as soon as possible because customers may dispute a legitimate transaction if they’re reconciling expenditures and either don’t recognize your business name or the charge amount.
4. Collaborate with your merchant account provider to analyze any disputed charge trends.
5. Ensure your product and service descriptions are accurate. Misleading language in product descriptions can lead to chargebacks. Adding high-quality images and/or videos to product descriptions can be a big help.
6. Manage expectations. Is your fulfillment team communicating realistic shipping and delivery timelines? How about updates to customers about any delays?
7. Customer service. Do you offer multiple “contact us” channels? Are customer issues being resolved promptly and fairly?

Efficiently resolving chargebacks

Having sufficient chargeback counter-claim evidence to present to a credit card bank is crucial. A/P’s investigation needs to identify the reason for the dispute and turn up all related invoices, shipping receipts, order confirmations, transaction logs and customer correspondence. And it needs to get done by the card-issuing bank’s deadline.

But if possible, it’s easier and less expensive to resolve the dispute directly with the customer through open communication, and offer alternative solutions like a refund, product replacement or credit.

If you’re getting a high volume of chargebacks, or complex disputes are taking your team away from other important tasks, you may consider looking into a chargeback management software vendor.