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Ouch! A Hit to the Wallet – How to Avoid and Handle Chargebacks

There’s nothing lovely about a chargeback.
Florists cringe during those nasty instances when customers call their credit card companies to complain or claim that they didn’t get what they paid for.

“It’s a horrible process,” Mark Anderson, founder of Toronto-based POS system FloristWare for retail florists, told Canadian Florist.

Anderson spent more than a decade in the retail flower business in Mississauga and recalls a lot of frustration with chargebacks.

“It’s skewed in favour of the card holder. The customer is right until you can prove them wrong, and you usually have a very short amount of time to do it, maybe 15 days or less… and if you’re not opening your mail quickly and responding quickly, you could easily just miss the window,” he said.

If you think about it, chargebacks are a double whammy — not only is the customer disgruntled, but he or she also isn’t paying you — for a product and service you already ate the cost for and can never get back.

It’s a hard hit to take as a florist, especially if your profit margin isn’t particularly high.

“It’s so upsetting,” Anderson said. “The net profit of the flower business is 10 percent. If someone disputes a charge for 70 bucks, you have to fill 10 more orders to make it back.”

If you think about it, chargebacks are a double whammy — not only is the customer disgruntled, but he or she also isn’t paying you — for a product and service you already ate the cost for and can never get back.

It’s a hard hit to take as a florist, especially if your profit margin isn’t particularly high.

“It’s so upsetting,” Anderson said. “The net profit of the flower business is 10 percent. If someone disputes a charge for 70 bucks, you have to fill 10 more orders to make it back.”

That’s why we’re tackling the topic now, to give florists time to prepare for the big bills that florists especially get hit with after Valentine’s Day. Not so romantic, huh?

“Typically, the most dangerous time (for chargebacks) is Valentine’s Day or Mother’s Day because the volume of business is greater,” Anderson said. “You’re dealing with a lot of people who don’t normally order flowers.” Plus, florists are more vulnerable to overlooking or not following up on chargebacks during those times. “Florists are so swamped and so desperately trying to get things mopped up after the date, and then they go on vacation, come back and miss bills,” Anderson said.

Shop owners should be ready to provide documentation that the order was placed and the delivery was made. If you don’t respond to a chargeback and it goes through uncontested, not only does the customer get his money back, but it also will appear that you were in the wrong. If you get another claim, the credit card company will be less likely to believe you if you contest it because you have a history — whether or not it’s deserved.

Anderson named three reasons customers give for reporting a false charge and requesting a chargeback:

  • The customer doesn’t recognize the charge as listed and thinks it’s a mistake
  • He or she is making a false claim to avoid paying
  • He or she believes the arrangement never was delivered

“Sometimes, it’s an honest mistake. They see the charge, don’t make the connection and refile the charge back,” Anderson said. “Then again, some people are just scammers.”

The best way to avoid chargebacks from people who don’t recognize the charge is to get a receipt in the customer’s hand as soon as possible by email that says, “This charge will appear on your statement as “(fill in the blank).” Anderson also suggests announcing recent name changes in bold on the printed receipt you hand the customer.

If you’re not sure how your shop’s charges appear on a credit card statement, order flowers from your own shop to find out. You might be surprised what you see.

“Sometimes florists are set up as a numbered corporation through a bank account,” Anderson said. “There can be weird things where one shop buys another shop or they buy a customer list (and a different name appears on the statement).” The key is to do everything possible to make sure there’s no confusion about what’s going to appear on their statement, he said.

Read on for more expert advice on avoiding and handling chargebacks.

Avoiding Chargebacks

These tips will help your company avoid chargebacks in the first place. Elisabeth Napolano, of Visa’s global media inquiry department, shared these top highlights with Canadian Florist.

Be clear about return, refund and cancellation policies.

State your policies clearly at the time of transaction. Your policy should be pre-printed on your sales receipts; if not, make sure to add the policy information on the sales receipt near the customer signature line before the customer signs. Be sure that the policy is legible on all copies of the sales receipt. Failure to disclose such policies at the time of transaction could be disadvantageous should the customer try to return the purchase.

Deposit receipts quickly.

Deposit your sales and credit receipts within one to five days of the transaction date. Do not hold on to them. Failure to deposit receipts in a timely manner can result in “late presentment” chargebacks.

Be careful when logging transactions.

Ensure that incorrect sales receipts are voided and that transactions are processed only once. Entering the same transaction into a terminal more than once, or depositing both the merchant copy and the bank copy of the sales receipt with your acquirer, or depositing the same transaction with more than one merchant bank can all result in “duplicate transaction” chargebacks.

Keep customers informed on the status of their transaction.

If delivery of the cardholder’s purchase will be delayed, let the cardholder know about the delay as well as the new expected delivery or service date.

Ship merchandise before depositing transaction.

Don’t deposit transactions with your merchant bank until you have shipped the related merchandise. If customers see a transaction on their monthly Visa statement before they receive the merchandise, it could lead to a preventable chargeback.

SIDEBAR 2:

Responding to a Dispute

If you do receive a dreaded chargeback at your flower shop, it’s important to swiftly provide accurate information. Here’s a breakdown of the process so that you can anticipate what to expect, as shared by Elisabeth Napolano, of Visa’s global media inquiry department.

Step 1: A cardholder disputes a transaction.

A cardholder contacts their issuer to question a charge on their billing statement

Step 2: Find the transaction receipt.

Your acquirer contacts you for an accurate copy of the transaction record.

Step 3: Send a copy to your acquirer.

Promptly fax or mail an accurate, legible copy to keep the process on track.

Kathryn Deen is a magazine editor in Clermont, Florida and the social media coordinator for The Villages Florist Inc.

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Kathryn Deen
Kathryn Deen is a freelance writer in Central Florida who works part-time at The Villages Florist Inc., teaches yoga, and runs Stories Remembered, a story-recording business for seniors. She has more than five years professional journalism experience for newspapers and magazines. The Inland Press Association recently recognized her special projects on longevity.
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