Refund Processing SOP

# Refund Processing SOP

## Purpose
Implement to handle refund requests consistently, comply with Australian Consumer Law, and maintain accurate financial records.

## When to Use
A refund procedure covering eligibility criteria, approval authority, processing steps, customer communication, and accounting reconciliation.

## Instructions
1. Review the template below and familiarise yourself with the structure
2. Replace all [bracketed placeholders] with your business details
3. Customise the tone and formatting to match your brand
4. Save in your preferred tool (Xero or Stripe)

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## Refund Processing Standard Operating Procedure

### 1. Purpose and Scope
This SOP establishes the standard process for handling refund requests. It ensures compliance with Australian Consumer Law (ACL), provides a consistent customer experience, maintains accurate financial records, and protects the business from fraudulent claims. This procedure applies to all refund requests, whether for products, services, or subscriptions.

### 2. Roles and Responsibilities
- **Customer Service Representative (CSR):** Receives refund requests, verifies eligibility, and processes approved refunds.
- **Customer Service Lead:** Approves refunds between $200 and $1,000, handles escalated cases.
- **Finance Manager:** Approves refunds over $1,000, ensures correct accounting treatment, and performs monthly reconciliation.

### 3. Prerequisites
- Refund policy published on the website and included at point of sale
- Stripe and Shopify configured for refund processing
- Xero chart of accounts includes a "Refunds Issued" tracking category
- CSR team trained on Australian Consumer Law obligations

### 4. Australian Consumer Law Requirements
Under the ACL, customers are entitled to a refund, repair, or replacement when:
- The product has a major fault
- The product does not match the description
- The service was not delivered with due care and skill
- The product is not fit for a purpose the customer made known

You must not refuse a refund by directing the customer to the manufacturer. You cannot impose a "no refund" policy that overrides ACL consumer guarantees.

### 5. Procedure

**Step 1: Receive the Refund Request**
Log the refund request in the support system with: customer name, order number, date of purchase, item(s) in question, reason for the refund request, and any supporting evidence (photos, description of fault).

**Step 2: Verify Purchase**
Confirm the purchase in Shopify: order exists, payment was received, and the item matches what was ordered. Check whether the item has previously been refunded, returned, or replaced. Note the original payment method.

**Step 3: Assess Eligibility**
Evaluate the refund request against the following criteria:

**Automatic approval (CSR can process directly):**
- Change of mind within 30 days (unworn, original packaging, tags attached)
- Item received damaged or faulty (with photo evidence)
- Wrong item received
- Order not delivered (tracking confirms non-delivery)

**Requires CS Lead approval:**
- Change of mind after 30 days but within 60 days
- Partial refund requests
- Items that have been used or worn
- Requests between $200 and $1,000

**Requires Finance Manager approval:**
- Refunds over $1,000
- Requests outside the standard policy
- Suspected fraudulent claims

**Step 4: Communicate the Decision**
Contact the customer within 2 business days of the request:
- **If approved:** Confirm the refund amount, method (original payment method), and expected processing time (3-5 business days for card refunds)
- **If declined:** Explain the reason clearly and reference the relevant policy. Offer alternative resolutions where possible (exchange, store credit, repair)
- **If more information is needed:** Specify exactly what is required

**Step 5: Process the Refund**
For approved refunds:
1. Process the refund in Shopify, which triggers the Stripe refund to the original payment method
2. If the original payment method is unavailable, arrange an alternative (bank transfer via Xero)
3. Update the order status in Shopify to "Refunded" or "Partially Refunded"
4. Send the customer a refund confirmation with the reference number

**Step 6: Handle Returns (if applicable)**
If the customer is returning a product:
1. Provide the return shipping address and any prepaid label (if faulty item, postage is at the business's expense per ACL)
2. Upon receiving the returned item, inspect and classify: restock, refurbish, or write off
3. Update inventory in Shopify

**Step 7: Accounting Reconciliation**
1. Create a credit note in Xero linked to the original invoice
2. Categorise the refund under the "Refunds Issued" tracking category
3. Reconcile the Stripe refund transaction against the Xero credit note
4. At month end, review all refunds for accuracy and completeness

### 6. Quality Checks
- Refund processing time target: completed within 2 business days of approval
- All refunds over $200 have documented approval
- Monthly refund rate reviewed by Finance (investigate if above 5% of orders)
- Spot-check 10% of processed refunds for policy compliance

### 7. Revision History
| Version | Date | Author | Changes |
|---------|------|--------|---------|
| 1.0 | [Date] | [Author] | Initial release |

### 8. Related Documents
- Refund and Returns Policy (customer-facing)
- Australian Consumer Law Summary
- Customer Complaint Workflow
- Inventory Management SOP

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**Complexity:** intermediate | **Setup time:** 15 minutes | **Tools:** Xero, Stripe, Shopify