Secure your business's Reputation and financial stability by managing chargebacks, refunds, and voids

Credit and debit card transactions may present different modifications such as chargebacks, refunds, and voids (these last two are also called modifications), which imply a significant investment of resources for their management, affecting the profitability and reputation of businesses.

We will analyze the effects of these situations and show you how Simetrik becomes the perfect ally of companies to minimize their impact.

Chargebacks

A chargeback process typically begins when a customer or cardholder files a claim at their financial institution, known as an issuer, seeking a refund for a transaction they either don’t recognize or authorize. There can be several reasons for such discrepancies, including billing errors, fraudulent activities, or instances where the customer disputes making the transaction and seeks a refund.

Different parties are involved in the chargeback process:

The consumer or cardholder who purchases with a credit or debit card.
The business or merchant in which the purchase of a product or service is carried out.
The issuer of the card used in the transaction and who is responsible for representing the consumer when initiating a chargeback.
The acquirer who processes the merchant's payments and represents its part in the process.
The international or domestic network that in some countries plays as an intermediary between issuers and acquirers.

Solving a chargeback is a long and complicated process that leads to significant losses for merchants or aggregators because if the decision favors the customer, they must pay for the product or service that caused the dispute and bear the associated administrative fees for its management.

Refunds

A refund is a financial transaction that involves reversing a charge and reimbursing the buyer for the product or service they have purchased. The refunded amount is usually returned to the original payment method and reflected in the customer's bank account or credit card statement.

The buyer must fulfill the merchant's return policy criteria to initiate a refund. The merchant or aggregator generally manages the refund process through the acquirer.

Mismanagement of refunds can significantly impact a company's reputation. Additionally, managing this change requires a substantial investment in administrative resources, which can affect the company's profit margins.

Voids

Voids occur when a buyer cancels an order before a specific time, which may vary depending on the policies of the merchant and purchaser and the payment method used. In this case, the merchant doesn’t receive the payment, so there is no need for a refund.

The complexity of reconciling these transactional modifications

It is important to analyze why chargebacks, refunds, and voids are so complex to manage and reconcile at the accounting level:

It is very complex if the merchant processes a large volume of transactions, keeping an accurate record of each one of them.
Each payment method has its reconciliation process, which makes it more challenging to keep a consolidated record of all transactions.
The transaction amounts may differ due to the charges associated with managing these modifications. Further, keeping an accurate record of how much money has been moved in a transaction is even more complex, depending on whether the return is partial or total.

How to efficiently manage these situations?

To reconcile transactions with modifications such as chargebacks, refunds, or voids, keeping a detailed record is crucial, including amounts, customer information, and the payment method used.

Automating the reconciliation process saves time and significantly reduces the risk of errors. This will help quickly identify any inconsistencies that need to be reconciled and allow visibility into these transactional developments.

Simetrik is an excellent ally in minimizing these transactions' impact on companies. Our financial automation software provides a robust and flexible no-code/low-code technological solution that allows accounting and finance teams to manage these modifications and any type of transaction appropriately.

In Simetrik, once the reconciliation rules are configured, the transactional information is permanently updated, providing traceability and control over a high volume of data that, if the appropriate technology is not available, it is very easy to lose visibility, increasing the probability of making mistakes that would trigger significant money leaks.