As your online store grows and attracts more customers, so does the risk of facing a dispute on the charged amount.
Disputes can lead to discrepancies and add more challenges to your accounting routine. How to deal with the dispute largely depends on the payment processor you use. With Stripe being among the most popular sales channels for e-commerce businesses globally, the question of resolving Stripe disputes is especially worth uncovering.
This article will help you be prepared for Stripe disputes and keep your business losses to a minimum in the worst case scenario.
What is a Stripe Dispute?
A typical example of a Stripe dispute for an e-commerce business owner would be a situation where you charge your client a certain amount via the Stripe gateway, but later the client does not agree on the amount charged from their balance and wants their money back.
When both of you don’t agree, the card issuer and the bank step up as moderators of the conflict.
A dispute is a method of resolving a conflict between the parties without a lawsuit when the validity of the payment gets questioned by either party.
List of related terms
- Dispute Fees
Inquiry and retrieval
Some card issuers may begin to investigate a questionable online payment before making an official chargeback. They request further information about the charge and usually call these procedures retrievals or inquiries.
Inquiries and retrieval don’t incur a dispute fee until they become a chargeback. To avoid this adverse scenario, submit all required evidence or refund the payment in full.
A chargeback is a forced reversal of a transaction whose status remains unknown and amounts withheld until the dispute is resolved.
If the card issuer has chosen not to create an inquiry or retrieval or is unsatisfied with the evidence, this may escalate a chargeback. To process a chargeback, the issuer creates a formal dispute, which immediately reverses the payment. A dispute fee gets withheld.
Stripe Dispute Fees
To help users submit the best possible response, Stripe provides a guided process that you can follow in your Stripe account. In return, the payment provider will charge a fee for this service.
Dispute fees vary by region. In the USA, the amount of the Stripe Dispute fee is $15. In case of a dispute, this amount gets deducted from your Stripe account balance.
Reasons for Opening a Dispute
Why might your client want to open a dispute with your online store? A cardholder can dispute a transaction for a variety of reasons, including:
- goods or services not received
- unprocessed credit
- unrecognized transaction
- by mistake
How Do Stripe Disputes Work?
Every card network has its own way of working with the disputed amounts. It means that for example PayPal or Amazon Pay will differ from Stripe in terms of how they deal with the disputes. Still, all of them follow a similar pattern.
Here is what it looks like in Stripe:
- As a merchant, you receive a dispute.
- The transaction amount and a dispute fee are debited from your Stripe account and put on hold till the settlement of the dispute.
- You want to regain the transaction amount and provide evidence in response that can negate the customer’s claims. Usually, you have 7-21 days to respond with the necessary documents.
- Stripe then sends your evidence to other financial institutions involved in resolving the dispute.
- The final arbiter reviews the evidence and makes a final decision either in your favor or in the favor of the customer. They typically have 60-75 days to respond.
- If you win the dispute, the full amount including dispute fees is reversed to your Stripe account.
- If you lose the dispute, the client is sent the transaction amount, and Stripe holds onto the dispute fees.
How are Stripe Disputes Reflected in Accounting?
One of the biggest issues that disputes create for e-commerce accounting is the freezing of the disputed amounts and the unclear status of the transaction.
Synder is an accounting automation product that helps e-commerce businesses to ease the pain of dealing with such issues. Once you connect your Stripe account and adjust the right settings, the software automatically synchronizes all transaction details into your accounting eliminating errors during data migration.
As soon as Stripe confirms the settlement of the dispute, the transactions will be synced by Synder, and the same-name status will appear. Your disputed amount will be recorded in Synder software with the Adjustment type of transaction.
There are two ways that the disputed transaction could end up being recorded in your accounting system:
- If you lose the dispute, this transaction will go to Expenses.
In the case of losing the dispute, Synder will record an expense for the Chargeback withdrawal plus another expense line for the Stripe Dispute Fee.
- If you win the dispute, this transaction will go to Deposits.
As the result of the dispute win, in your accounting, you will see the lines for the Chargeback Reversal reflecting the disputed amount of the sale and Stripe Dispute Fee Reversal amount.
Multicurrency Disputes and Discrepancies in Accounting
If the chargeback is out on the transaction in the foreign currency, the amount of a dispute can sometimes change due to currency conversion, as Stripe will withdraw the amount in the home currency, not in the currency of the initial payment. Synder keeps track of the exchange rates provided by Stripe and can adjust exchange rates for the correct ones if some error is indicated.
Small discrepancies due to chargebacks are commonly inevitable, but Synder helps put detailed records in your accounting. The high-level detailing helps easily identify gaps and missing data so that you can easily reconcile and get perfect P&L and balance sheet statements.
You can always double-check the outcome in the Exchange Gains and Losses reports in the accounting.
Best Tips on How to Win Disputes and Chargebacks
Disputes are unpleasant both for customers and for merchants. They can be closed in the favour of either, entailing losses for the other side of the dispute. It is no wonder that the best way to manage them is to prevent them from happening at all and avoid a chargeback becoming a net loss for the company. But if you find a dispute notification in your Stripe account, here are the best things to do.
Tip 1: Communicate With Your Customer
It is always a good idea to reach out to your customer first and get more information about the reason for the dispute. In the end, they could have opened it by mistake! So contact the customer when you receive a dispute, and discuss the issue and collect more details of the potential problem before you respond with evidence.
Tip 2: Collect Detailed Payment Information During Checkout
At the next step, you will have to provide details on the charged transactions as evidence to close the dispute in your favor. Some disputes are lost because only the minimum information was required during checkout and merchants failed to provide sufficient backup for the validity of the charged amount.
It is best to provide such relevant payment information which, among others, includes:
- customer name
- e-mail address
- product name
- shipping address
To fulfill this task successfully, you need to keep your financial information in order. The right accounting integration products may help record the data correctly.
Synder works smoothly with Stripe, ensuring seamless data flow with perfectly recorded transaction details into the accounting system.
Tip 3: Improve Your Refund Policies
In case of a dispute, there must be reasonable evidence that your customer was presented with a full copy of your policies prior to their purchase. You may want to provide a full version of your terms & policies on the checkout page or as a pop-up with a requirement to agree to them prior to submitting the order.
Tip 4: Use Delivery Tracking Services
When shipping goods to customers, use services that provide online tracking and delivery confirmation. Provide this information to your customers as soon as it becomes available. You can use screenshots of the tracking information as the dispute evidence later.
Stripe disputes can be challenging for e-commerce business owners to deal with in terms of accounting. But accounting automation products, like Synder, help ensure the management of disputing and chargeback liabilities is easier.
Synder can effectively help you with processing Stripe disputes and chargeback reversals by:
- Recording detailed Customer information for each Stripe transaction
- Categorizing disputes in a separate category, so that you can track them in your P&L
- Avoiding discrepancy due to correct foreign currency sync.
- Providing accurate balance statements and financial reports due to accurate sync and reconciliation, avoiding duplicates and data gaps.