Sales are what make or break a business’ success, and in the shadow of the coronavirus crisis, sales revenues are more valuable to America’s businesses than ever. That’s why a new trend is causing growing concern among those selling both services and products: it’s known as “friendly fraud.”
“Friendly fraud” (also known as chargeback fraud) is anything but friendly. It happens when consumers facing their own economic concerns dispute legitimate charges on their credit card to the card’s issuer. The issuer generally pursues a less-than-diligent investigation and issues a refund to the cardholder, while the seller not only loses their money in the form of a “chargeback,” but may also get hit with a significant penalty fee.
For you as a small business owner, the trouble with friendly fraud doesn’t end with having to pay out between $20 and $100 in penalties. If you end up on the receiving end of too many of these fees, the credit card issuer is able to increase the fee that you pay for each of your business’ transactions, or even to stop accepting charges for your goods or services. Arguing that the fault is not yours may not do any good. When they say, “the customer is always right,” they’re not talking about the vendor.
Friendly fraud can happen when a customer honestly doesn’t receive the product or service that they ordered or say that the product was damaged or didn’t match the description or what they expected. But there are also instances where the client tries to get out of paying for some other reason. One way or another, when it happens, it leaves the vendor with few options.
The best way to prevent the situation is to be proactive. Disputing the customer’s assertions can lead to poor reviews and a lot of aggravation. Instead, protect yourself by using the myriad tools available to help you track the products that you ship so that you can prove that an item was received. From having customers sign to prove that they got your package to using a delivery service that takes photos of the delivery, the more proof you have of fulfilling your end of the bargain, the better you’re able to defend yourself and prove that delivery took place.
If somebody is determined to commit fraud and try to get away with these antics, there is little that can be done to prevent it. Still, the more actions you take to confirm a purchaser’s identity and to prove delivery, including using authentication software, the better off you will be.
About Martinez & Shanken, PLLC
Martinez & Shanken, PLLC is a Certified Public Accountant (CPA) firm based in Gilbert, Arizona. We provide a full range of accounting, bookkeeping, consulting, outsourcing and business services. Partners Deborah Martinez and Earl Shanken work to ensure your business accounting is done with integrity and to your satisfaction.
