You worked too hard to create a popular product, only to have outside elements eat into your profits. Supply chain issues are breaking havoc in various ways. For example, a recent study found that chargebacks cost e-commerce over $40 billion a year.
Yet, many companies don’t do enough to prevent chargebacks before they get out of control. Common mistakes that are repairable could save you considerable amounts.
If your business is suffering supply chain issues that cost you money, keep reading. Here’s what you need to know about the cost of chargebacks. Learn how to prevent them from damaging your business.
What Are Chargebacks
In retail, there are reasons beyond a seller’s control when a customer will refuse the sale. A product may get sent in error, or the charge gets disputed because of fraudulent activity. In most cases, the customer has simply changed their mind about wanting the product.
No matter the reason, an electronic refund becomes necessary. And processing returned funds will come at a cost to the supplier.
In the supply chain, chargebacks are almost always the result of a system breakdown. Often, the circumstances are within the supplier’s control. But as a result, vendor and distributor agreements always involve fees for noncompliance.
Types of Chargebacks
Some chargebacks are mere factors of an arranged sale, and they get authorized as discounts. Yet, the more common types of chargebacks stem from returns or unauthorized transactions. Late delivery and fraudulent or miscalculated charges can cause customers to demand refunds.
Yet, chargebacks are occurring in processing that is preventable. Vendors rely on suppliers to provide the correct information for smooth transport. Proper packaging and labeling play critical roles in moving goods.
Sending incorrect data to vendors will also cause immediate supply chain issues. Each time an item is noncompliant with contract agreements, delays and changes occur. Left unchecked, the cost of these chargebacks can cost you significant revenue.
How To Prevent Chargebacks
Preventing chargebacks begins with changing the culture of your compliance. Taking back lost funds involves a supply chain chargeback management plan. Visibility for all involved is the first essential ingredient.
Compliance, communication, and documentation are crucial to a successful system. Labeling and packaging must keep up to expected standards. Filing of paperwork and data must arrive on time and without errors.
All departments need to work from the same guidelines and have access to each other. Set up meetings with your department heads to discuss common supply chain issues. Often, problems can be prevented when departments interact.
Develop a cohesive plan to ensure the data is shareable with all parties in the supply chain. The best way to create that supply chain chargeback management system is with suitable software. Using a database like this for all company movements will keep every aspect of your business in the loop.
Manage Your Supply Chain Issues
Technology advances have given businesses the tools they need to track their finances. With that awareness, the next step is to work together with your supply chain partners.
Through communication, you can learn to prevent chargebacks before costs rise. If this piece helped define what you need to know about chargebacks, come back for more valuable tips.