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Which refund policy you need to choose for your business

Which refund policy you need to choose for your business

While you would expect all customers to be happy with their purchase, the reality is that at least a small part of your buyers will want their money back. According to UPS, 68% of customers check a return policy and exchange it before making a purchase. It means that regardless of how good your product is, customers always want to make sure that they can easily get their money back if the product doesn’t suit them.

Never underestimate the impact of a refund policy on scaling your business. If the process of return or exchange isn’t monitored and optimized, it can result in several problems to your business: from a negative reputation and loss of loyal customers to the mess in your e-commerce accounting software.

Note: check our article with e-commerce accounting best practices to be prepared for everything.

That’s why solving refund problems on the fly is not a good idea. A far better plan is to have a proper refund policy. Yet many small business owners don’t know where to get started on this task. Hopefully, when you have finished reading this article, you will have a step-by-step plan of what to do to create a refund policy that will not only make all your customers happy but will also improve your sales.

What is a refund policy?

Let’s find out first, what is a small business return policy? The one that gives the customers what they want. Refund policy is exactly as it sounds – a policy that dictates the terms of any refunds or returns.

  • As a customer, before you make a purchase, you may decide to review the refund policy of a given website to make sure you are comfortable with the terms.
  • As a business owner, you should create conditions that your potential customers could be more willing to take a chance on a product they haven’t tried before because they know it can be returned easily.

Why does your business need a refund policy?

  1. Reputation

According to Nielson’s Global Trust in Advertising Report, 66% of people surveyed trust consumer opinions posted online. A poorly implemented returns system could start to negatively affect your overall reputation as a business. Unhappy customers could start to complain about your return policy in social media, or even misrepresent your company in Google searches. Good relationships with customers is the first step in sales success.

  1.   Powerful marketing tool

Many savvy businesses have recognized that a strong return policy is a powerful marketing tool. Positive customer reviews and word-of-mouth recommendations about the buying experience will pay off as the long-term free marketing. 

  1. More sales

Having an easy to understand and easy to return policy will bring in more sales. Well-developed return policy makes potential clients more active and bold in buying your goods.

How to write a great refund policy?

The first and foremost rule is to make the return process as fast and simple as possible. The cornerstone of shortening time for the return process is having a clear return policy. When your staff face a return, they should have a step-by-step strategy on what to do. Forethemore, train your sales staff to get in the habit of referring to the return policy when finalizing a sale.

And one more small but very important advice –  not to use phrases like “you must” and “you are required” or “we are not responsible for.” You should become friends with your customer, so please be as mild as possible in the wording.

What to include in refund conditions?

  • How long does the customer have to return the product

You need to determine how long you are willing to let the customer keep the product before you will no longer accept a return. It depends on the type of products you sell. 30 days is a common allowance which is seen in many refund policies of physical goods stores, while 14 days is usually common for websites offering digital products and services.

  • What type of refund will be provided

There can be various ways of making a refund. Some businesses choose to refund the price of the product, once it is returned. Another option is to provide refunds in the form of store credit. The stricter return policy may offer to replace the original unit but will make no refund available in terms of cash or credit. 

Some companies may choose to go with a no refund policy. Simply put, it’s the policy that states the cases when refund is not possible. For example,  if you have a trial version or a trial period, during which customers can decide whether your offer fits them before making a purchase. And going this way, you need to clearly articulate such cases in the policy, and ensure that customers can access this information before making any purchase. Choosing a no-refund policy, you need to be prepared to review each return request individually to decide if the return is applicable.

In fact, there is no basic type of refund that can fit anyone. You will need to carefully analyze the expectations of the target audience and rely on your business strategy to choose the right type of a refund policy.

Refund policy examples

Although we have already mentioned that there is no ideal return policy, to see the full picture let’s have a look at some examples of  client-oriented refund policy

PayPal is an American company operating a worldwide online payments system that supports online money transfers and serves as an electronic alternative to traditional paper methods like checks and money orders. Let’s check how refunds work with online payments.

How do I request a refund in Paypal?

You can request a refund of a completed payment by sending the seller an email. Ask the seller to go to the Transaction Details page for your transaction and click Issue a refund.

You can request a refund up to 180 days after you pay for your item. If you sent a payment, but it’s still pending, you can cancel it on your Activity as long as you see the “Cancel” button next to it. If the payment isn’t claimed within 30 days, it will be automatically refunded to you.

Intuit is the financial software company that produces TurboTax, Mint, and QuickBooks. It’s easy to imagine how the refund policy works in, for example, a dress shop, but how it works in  software companies? Let’s find out!

How do I request a refund in Intuit?

Intuit offers a 60-day money back guarantee for TurboTax and QuickBooks desktop software, if for any reason you need to refund the software.

You have 60 days from the purchase date to obtain a refund for product downloads, product unlocks, and all other electronically delivered Intuit media. You will be required to uninstall and remove the application from your computer. Since there is no physical product shipped, you are not required to send anything back to the Returns Department. Refunds for electronically delivered QuickBooks products can be requested via the web. Your license will be deactivated and you will no longer be able to use the product.


Having a refund policy is not about losing time and money. In contrast, it has lots of advantages such as increasing the number of happy clients and consequently maintaining a perfect reputation for your business.

Kate Fidrik

Kate Fidrik

Kate is a FinTech writer with a degree in innovation technologies and experience in the e-commerce services industry. She draws inspiration from stories about unique startups and passionately follows the latest trends in global markets. Her day starts with a latte and a news digest from the world of accounting, finance management, and online-business to always keep her articles up to date.

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