How to Prevent Chargebacks for Your Business

Chargebacks are a significant concern for businesses of all kinds and sizes, and they can have serious financial and operational impacts. When a customer disputes a charge on their credit card, they may initiate a chargeback, leading to a refund directly from the business’s bank account. For accounting firms and other service-based industries, understanding and preventing chargebacks is crucial to maintaining healthy cash flow and preserving client relationships.

What Are Chargebacks?

Chargebacks occur when a credit cardholder disputes a charge on their account, requesting a refund from their card issuer instead of contacting the business directly for a refund. This process is different from a traditional refund, where a customer requests their money back directly from the business. In the case of a chargeback, the funds are automatically withdrawn from the business’s bank account, often before the business has had a chance to defend itself.

Why Do Chargebacks Happen?

There may be various reasons for a chargeback. For instance, a client might not recognize a charge on their statement, believe the services provided were not as described, or claim that they never authorized the payment in the first place. Chargebacks can also result from fraudulent activity, where the cardholder’s information was used without their consent.

Why Are Chargebacks Harmful?

Chargebacks are more than a financial inconvenience; they can also damage a business’s reputation and relationship with payment processors. For accounting firms, the impact can be particularly severe, as chargebacks can disrupt ongoing client relationships and lead to increased scrutiny from financial institutions. Additionally, repeated chargebacks can result in higher processing fees, account freezes, or even the loss of the ability to accept credit card payments.

11 Ways to Prevent Chargebacks

Preventing chargebacks is essential to protect your business’s revenue and maintain a positive client relationship. Below are 11 strategies to help minimize the risk of chargebacks.:

1. Accept In-Person Payments

Accepting payments in person can significantly reduce the likelihood of chargebacks. When clients pay in person, they can immediately review the transaction details and confirm that the charge is correct. This direct interaction helps prevent misunderstandings and builds trust, reducing the likelihood of chargebacks.

Additional benefits of in-person payments include:

• More efficiency: In-person payments are faster and eliminate delays, allowing clients to confirm transactions immediately. This reduces follow-up tasks, streamlining the payment process and freeing up time for more important business activities.
• Increased security: Verifying the client’s identity and collecting a physical signature during in-person payments adds a layer of security against fraud. This provides tangible proof of authorization, which is crucial in defending against chargeback disputes.

Bonus: For more information on the benefits of accepting in-person payments, check out this post.

2. Get Proof of Payment Authorization

To defend against chargebacks, it’s crucial to have proof that your client authorized the payment. This can be as simple as a signed credit card receipt for in-person transactions. Collecting the cardholder’s address and CVV code (a three-digit number, usually appearing on the back of the card) for online payments can help prove that the payment was legitimate.

Another effective strategy is to use a signed credit card authorization form, which can be included in your new client onboarding paperwork. This form provides clear evidence that the client has consented to the charges, especially for large or recurring payments.

Tip: Download a free sample credit card authorization form and customize it for your firm.

3. Get a Signed Agreement for Payment Policies

Including clear payment policies in your contracts or engagement letters is another way to prevent chargebacks. Ensure that your return or refund policy is explicitly stated, and ask clients to initial the section to confirm their understanding.

For example, some firms include a “Promise to Pay” provision that outlines the client’s obligation to pay all fees and clarifies that credit card payments cannot be reversed. This can help prevent disputes over payment obligations later on.

Bonus: Below is an example of a Promise to Pay provision. (Be sure to customize this language to suit your firm’s needs.)

Promise to Pay Provision

Once services are engaged, the client recognizes that they are contractually bound to the professional for their entire fee. All fees paid are non-refundable and must be paid in full. It is further understood and agreed that if the client or any third party paying professional fees for the client pays such fees through the use of a debit card, credit card, or other electronic means, such payments cannot be revoked or reversed in any manner by the client.

Client initials: ____________

4. Document Proof of Services Rendered

To defend against a chargeback, you need to prove that the services were delivered as promised. Detailed invoices, time logs, and records of communications can all serve as evidence. Make sure to document every step of your engagement, from initial consultations to the final delivery of services.

5. Use Clear Product Descriptions and Terms

Ambiguity in product descriptions or service terms can lead to misunderstandings, which can result in chargebacks. Be as clear and detailed as possible when describing your services, and make sure your terms and conditions are easy to understand.

6. Deliver Excellent Customer Service

Providing good customer service can also prevent chargebacks by resolving issues before they escalate to a dispute. Encourage clients to reach out with concerns and make it easy for them to contact your firm with any questions or issues.

7. Use Fraud Prevention Tools

Implementing fraud prevention tools, such as AVS (Address Verification System) and CVV (Card Verification Value) checks, can help you catch potentially fraudulent transactions before they result in a chargeback.

8. Ensure Your Company Name Shows on Credit Card Statements

As previously stated, a common reason for chargebacks is that the client doesn’t recognize the charge on their statement. Make sure your company name is clearly displayed on credit card transactions to avoid this issue.

9. Regularly Review and Update Policies

Your payment policies should evolve with your business. Regularly review and update your terms and conditions to reflect changes in your services or pricing structure. Keeping clients informed of these changes can help prevent misunderstandings that lead to chargebacks.

10. Educate Your Customers

Helping your clients understand your payment process, policies, and terms can prevent many disputes. Consider providing educational materials or FAQs on your website that address common questions about payments.

11. Use a Payment Processor with Quality Customer Support

A reliable payment processor with strong customer support can make all the difference in managing chargebacks. For example, CPACharge offers dedicated support to help you navigate payment disputes and reduce the risk of chargebacks.

Reduce Chargebacks with CPACharge In-Person Payments

Accounting firms are particularly vulnerable to chargebacks due to the nature of their services and the high value of transactions. CPACharge’s In-Person Payment feature offers a secure and efficient way to accept payments, reducing the risk of chargebacks. With CPACharge, you can take payments face-to-face, ensuring that clients clearly understand the transaction and reducing the chances of a dispute.

Implementing these strategies can protect your firm from the financial and reputational damage caused by chargebacks, ensuring that your business continues to thrive. Experience the CPACharge difference for yourself—book a demo today.