When a business sells merchandise, it might occasionally face returns and refunds. Returns and refunds are part of running any business. The average returns and refunds rate is around 6-8%. In accounting, a sales return represents a refund for a returned item, while a sales allowance represents a partial refund for an item that a customer keeps. This is a contra-revenue account, which means you subtract it from total, or gross, revenue on the income statement.

In today’s episode, we are going to talk about the best way to manage returns and refunds by focusing on your return and refund policy to best serve your customers.

As much as you can, avoid arguing with your customers. Best way to minimize that, is to write a very clear return & refund policy! Company policies say a lot about you and your values. For instance, a product being shipped back and forth might not be cost effective for you, especially for small items. Hence, it is preferable to just refund a customer. Ask the customer why they want to return the product and ask for a picture of it.

The goal here is to focus on having returning customers. A great way to do that after an incident is to give a discount.

Another great way to deal with a defective item would be to suggest to the customers to donate it to a charity or recycle it. You could add a list of charities you are working with in your policy that the customer might be interested in donating the product to.

These are original and personal ways of managing returns and refunds that will always set you up for repeat customers.