Reverse credit card transactions, or chargebacks, can severely disrupt accounts payable processes and negatively impact companies' bottom lines.
Small businesses are particularly susceptible to the negative effects of chargebacks, which often occur if a consumer disputes a charge, if the card is lost or stolen, or if there is a processing error. In order to recover the loss, companies must provide proof that the transaction was in fact valid.
It is important for business owners to keep accurate and well-organized financial records so that they can offer evidence to credit card companies. Automating financial operations is a key step to keeping good records, as technology reduces errors and improves visibility. Using electronic invoices not only helps in the event of a chargeback, it can also minimize other sources of lost funds such as duplicate payments.
Dean Thompson, owner of a small firm based in Austin, Texas, told the news source that one chargeback his company faced constituted 10 percent of its growth revenue for that month. Thompson had to spend 12 hours in phone calls and paperwork to prove the charge was valid – time that could have been spent with other customers.