Why they’re beneficial, and how they help reduce fraud
Every business that sells merchandise––whether from a storefront, by mail or through the Internet––should establish an efficient return/exchange policy and inform customers about the policy before they make purchases.
Well-conceived return/exchange policies increase sales because when customers feel assured they can return or exchange items (under specified terms), they feel more comfortable making a purchase. In addition, such policies establish systematic procedures that make it easy for employees to handle returns and exchanges with minimal hassles from customers.
Also, return/exchange policies reduce the potential for fraud by individuals attempting to return stolen, discounted or used items for cash refunds. Employees are often among those who attempt fraud by facilitating fraudulent refunds on their own behalf or for others.
The essentials of a written return/exchange policy include:
- The types of merchandise that can and cannot be returned or exchanged.
- Whether the store allows both returns and exchanges or exchanges only.
- Reasons for return/exchange (i.e. faulty goods, items not represented accurately on the package or in advertisements, not what customer expected, unconditional, etc.)
- Requirements for cash refunds. Usually, cash for the full purchase price is returned only with receipts, with merchandise that is unused or in good condition (this must be stated in policy) or with merchandise brought back within the specified time period from the purchase date (usually 30 days).
- Whether cash refunds will be given for purchases made only by credit card or cash or also by check. Many businesses state in their written return/exchange policy that when purchases are made by check, a company check will be mailed to the customer for return within 30 days.
- Whether shipping will be paid, if return/exchange is by mail. The address to which merchandise is to be mailed should be included in policy. The time required by the company to make return/exchange by mail should be stated.
- Whether a partial refund will be given after the return/exchange period, or if the merchandise is returned used.
- Whether a restocking fee will be charged.
Before writing a return/exchange policy, examine the policies of established businesses in your field to see what is customary. All of the large online sellers have comprehensive policies. Look them over and cull what is relevant to your business. Remember, your return/exchange policy is, in part, a sales tool, and if you set overly restrictive terms, you may give your competition an edge.
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Once you have completed your written return/exchange policy, post it so customers can see it easily. Place it on check-out counters and include it on your website and in all sales literature near ordering information. Make sure that your employees familiarize themselves with the policies, so they can give accurate information to customers who ask about returns/exchanges. You may want to print out your policy so employees can hand it to customers.
By insisting that employees follow established guidelines of the policy, you can greatly reduce fraud. When receipts are required, or when only unused (unopened) merchandise can be returned or exchanged, fraud can be kept to a minimum.
Andrew Osterland has edited various financial websites at QuinStreet for a span of four years. Because of his talent and hard work, he was raised to the role of senior editorial manager of the company’s insurance sites and was a contributing writer at CNBC.com. He is also an entrepreneur and has been the editor manager of Insure.com. Full profile here.