Refund Processing

Workflow for processing customer refunds, from request through approval, execution, and financial recording

Flow

Refund Processing Flow

This flow documents how customer refunds are handled, from initial request through approval, execution, and financial recording.

Flow Overview

The refund process balances customer service with financial controls. It ensures legitimate refunds are processed quickly while maintaining appropriate approval gates.

Refund Types

Full Refund

  • Complete reversal of original transaction
  • All charges returned to customer
  • Invoice voided or fully credited

Partial Refund

  • Portion of transaction amount returned
  • Common for partial returns or service adjustments
  • Credit note issued for refund amount

Approval Process

Automatic Approval (Conditions)

  • Refund requested within 30 days
  • Amount < $100
  • Customer in good standing

Manual Review Required

  • Refund amount > $100
  • Outside standard return window
  • Customer has multiple refund requests
  • Fraud risk indicators

Common Refund Reasons

  1. Product Returns

    • Item damaged in shipping
    • Wrong item sent
    • Customer changed mind (within return window)

  2. Service Issues

    • Service not delivered as promised
    • Quality did not meet expectations
    • Technical issues prevented use

  3. Billing Errors

    • Duplicate charge
    • Incorrect amount
    • Promotional code not applied

Financial Impact

Accounting Treatment

  • Cash Account: Decreased (cash out)
  • Revenue Account: Reversed (or Refunds expense account)
  • AR Account: Adjusted if invoice-based

Metrics Affected

  • Refund Rate: Tracked by product/service
  • Net Revenue: Reduced by refund amount
  • Customer Lifetime Value: May be impacted

Timelines

  • Approval Decision: Within 24 hours
  • Refund Processing: 1-2 business days
  • Funds Available to Customer: 5-10 business days
  • Alternative Methods: 7-14 business days

Edge Cases

Refund Failure

  • Original payment method no longer valid
  • Gateway technical issues
  • Manual intervention required

Partial Refunds

  • Multiple partial refunds allowed
  • Cannot exceed original payment amount
  • Each refund generates separate credit note

Customer Communication

Customers are notified at each stage:

  1. Refund request received
  2. Approval decision
  3. Refund processed
  4. Estimated arrival date
  5. Completion confirmation
  • Payment Processing Flow
  • Invoice to Payment Flow
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