How can small business can Prevent and Manage Chargebacks?

You’ve likely received at least one chargeback request if you’re reading it. You probably thought it was the end of the road for your business. And you were right—but only half the story. Chargebacks can be a major headache, but they can also be an opportunity to win again, especially if you manage them properly. Let’s begin;

First thing first…

Let’s understand more about chargeback…

Chargeback is a credit card processing dispute. Chargebacks are initiated when a customer disputes a purchase transaction with their credit card issuer by alleging the purchase was not authorized or that the goods were never received.

If you are a small business owner, you should know how to prevent and manage chargebacks. Here’s how you can avoid them in the future.

1. Be updated

The card brands created chargeback codes to provide more detail about the reason behind a dispute. Each code has specific guidelines merchants must follow to fight against the claim. These codes can be updated multiple times each year, so you must stay informed about any changes that could affect your business.

2. Document all card usage in a log

Merchants need to keep precise documentation of all card transactions — not just those that result in a chargeback. This includes all original sales receipts, electronic records from POS systems, email correspondence with customers, and other relevant information such as proof of delivery (e.g., tracking numbers). In some cases, if your documentation is not exact enough, you may be liable for the entire disputed amount — even if a portion of it was legitimate!

3. Train your team

Payment processors are responsible for regulating chargebacks and issuing guidelines for when it’s appropriate to dispute a transaction. You should ensure that everyone who handles payments — from customer service representatives to salespeople — receives training on properly processing transactions so that no one makes mistakes that could result in chargebacks later down the line.

This will help you to spot any potential issues before they blow up into full-fledged disputes.

4. Commit to consistent payment descriptions

This is the most common reason for disputes, so double-check that you’ve entered all the information correctly before submitting it.
If you sell products on eBay, Amazon, or Etsy, ensure your seller name is consistent across all platforms. You can also use the same description for each platform so that customers can easily find you on all channels.

5. Invest in customer service

You can keep customers happy by providing great customer service. If a customer has an issue with their purchase, they’ll be more likely to contact you directly rather than file a chargeback. It’s much easier to resolve the issue before it becomes a BIG issue with their bank or credit card company. If you have an online store, ensure your website has live chat functionality so customers can get answers quickly and efficiently.

6. Consider risk management software

If you haven’t already done so, it’s time to consider using a risk management solution that can help you manage your chargeback risk. Businesses that accept payments online may benefit from risk management software that monitors fraud and other suspicious activity transactions. This can help you avoid the types of transactions that lead to chargebacks.

These solutions can be set up in minutes and typically offer features such as real-time fraud detection, chargeback alerts, and predictive analytics tools.

7. Offer delivery confirmation

If you’re selling a digital product or service, offer delivery confirmation, so the buyer knows when they’ll receive what they paid for.

A delivery confirmation service shows that an item was delivered or attempted to be delivered within a certain time frame. This helps merchants prove that they fulfilled their end of the transaction, which may lead to fewer disputes over missing goods or services.

Conclusion

Chargebacks pose a serious threat to any business, but they are more than just an inconvenience—they eat into your profits and overall revenue stream. Chargebacks shouldn’t be seen as an inevitability, though; they can be prevented with some careful oversight and effective review of payment data. By implementing procedures to manage chargebacks early on, businesses can rest assured that they are doing their best to prevent the issue from becoming a reality. If you want your healthy revenue flow to continue in the correct direction, take charge of chargeback today with Payment Pilot – the best payment processor of the USA.