Do you need a refund policy? | CFIB
Whether selling goods or services, it’s important to have a written policy explaining when and how your company will issue refunds. We have tips and a refund policy template to save time and protect your business.
Should you have a refund policy?
There is no legal requirement for Saskatchewan businesses to offer refunds. How you provide customers the option to return goods or get a refund for unsatisfactory services very much depends on your products or services. Either way, you should have a policy that clearly outlines when and how refunds will be given.
For example, if you sell clothing, you may permit refunds of unworn garments that still have the tags on within 14 days of purchase. Whereas with window washing services, you're unable to recoup time and money spent on paying employees for the service, and therefore a refund might not make sense.
When should I not offer refunds?
If you sell services, you can offer a service guarantee rather than a refund. A service guarantee means that the service is performed to the client's expectations or as outlined in a contract agreement. If the completed service does not meet expectations, you will make every reasonable attempt to remedy the situation. A service agreement should be part of your policy, and the customer should be aware of it before purchasing your services.
If you sell 'big ticket' items, you might also consider not issuing a refund option. Generally, large purchases are made on credit, and when these payments are processed, your merchant services provider will charge you between 1.5-4% of the total cost of the sale. To process a refund you will be charged that same fee a second time. Merchant services fees for both the sale and reimbursement, plus the cost of a sale including employee wages and merchandising costs can be a pretty significant hit.
Something to consider is that by not offering refunds, there is a higher risk that customers who paid by credit card may take other means to gain satisfaction, such as a chargeback.
What if I don’t have a refund policy?
Saskatchewan businesses are required to take returns/exchanges on goods that fail to meet the warranties under The Consumer Protection and Business Practices Act. Some examples of these warranties include that an item works properly, and is free from defects and hidden damage.
Of late, there has been a trend where a general refund policy of 30 days after the sale is enforced upon businesses who do not have a written refund policy. There’s nothing like being strong-armed into accepting tarnished goods from a customer when you know they purchased in fine-working order.
Protect your business with a refund policy
Be very specific in your policy and clearly outline the circumstances of a refund versus an exchange. For example, the product has its original tags attached, is unused, or a receipt must be present. As well, be sure to state acceptable timelines such as a full refund within 14 days of purchase and exchanges are accepted within 30 days of purchase. Finally, always leave yourself an out, so that final considerations on whether goods are suitable for return/exchange are at the discretion of the company.
Many companies choose to put their return and exchange policy directly on their receipt and encourage employees to highlight this policy with customers at the time of purchase and circle it. Others who invoice clients include the refund/exchange policy on the invoice. The most important place to post this, however, is on the contract itself, which you should go through, point by point with your client.
To receive a Refund Policy Template, contact your CFIB Business Resources team at 1-888-234-2232 or email@example.com.