Accounting for Chargebacks

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From beginning to end, chargebacks are one giant headache—the process is time consuming, difficult to understand, skewed in favor of the cardholder, and expensive.

If you thought the loss of profits, fines, and decreased credibility with your merchant processor was bad, it gets worse. Accounting for chargebacks is a nightmare.

Chargeback Accounting Problems

Each time you are hit with one, a credit chargeback must be manually entered into your accounting system. This can lead to several problems.

  • Each accounting program is different. There is no universal process for entering chargebacks into a system. And because they aren’t extremely common, you might have trouble finding step-by-step instructions for how to deal with them. Plus, if you ever change or upgrade your accounting software, you’ll have to re-learn the process.
  • Unlike checks or deposits, you won’t be dealing with chargebacks on a daily basis. When you do encounter one, you might have to re-teach yourself the chargeback accounting process you instigated the last time. This means you could easily document them wrong (or at least differently) every time. This will lead to a big headache at the end of the year when you try to settle the books.
  • The chargeback dispute process is quite lengthy. It can be drawn out even more if you decide to submit a chargeback rebuttal letter or take the case all the way through arbitration. That means the process could easily be extended several months. If the chargeback process took funds out of your account in May but the claim isn’t resolved until July, your books will be out of whack for quite a while.
  • Each chargeback comes with a fee. That means you’ll have to document not
    one, but two transactions in your accounting software.

You might have heard about chargebacks before you ventured into the business world. But even if you were aware of them, you probably had no idea the extent of drama associated with accounting for chargebacks!

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Prevention is the Key

In many situations, it is wise to fight a chargeback. If you feel you have a strong case with sufficient documented proof, it makes sense to try recouping your losses. However, once the chargeback has been filed, the damage to your accounting has already been done.

That’s why prevention is so important. If you want to reduce the stress associated with accounting for chargebacks, you must be diligent about preventing them.

Services like those provided by Chargebacks 911 can help. By taking a look at your current situation (customer service tactics, merchant processor tools being utilized, etc.), Chargebacks 911 can identify areas of improvement.

Once you take a proactive approach to prevent chargebacks, you will see some relief when it comes to chargeback accounting.

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