Creating a refund policy for your business can vary based on several factors. However, when working with payment processors like Visa, MasterCard, Amex, or PayPal, they generally require that you offer customers up to 60 days to request a refund. This is the industry standard unless you have a specific agreement with your merchant account provider to offer a shorter or non-refundable policy, such as for high-value items like cars, boats, or services.
If you don’t have such an agreement, you’ll need to comply with the mandatory 60-day refund period required by these credit card companies.
Setting Your Refund Period in DAP
The Refund Period setting in DAP (under Setup > Config > Affiliate Module) determines how long customers can request refunds and when affiliates become eligible for payment.
Key Considerations:
- Refund Period and Affiliates: The refund period is tied to affiliate commissions. If a customer asks for a refund within the refund window, and you’ve already paid out affiliate commissions, you could end up losing money.
- Payout Timing: To avoid such losses, we recommend setting the refund period to 60 days. This matches the standard refund window from credit card companies, ensuring that you are not paying affiliates before this period is up.
Why We Recommend a 60-Day Refund Period
Paying affiliates too early, such as within 15 or 30 days of a purchase, can lead to complications. For example:
- If you’ve paid the affiliate their commission, and the buyer later asks for a refund, you are responsible for both the refund and the affiliate commission.
DAP automatically rolls back commissions for refunded purchases. If you haven’t yet paid your affiliates, DAP will exclude the refunded transaction from the next payout report.
However, if you’ve already paid the affiliate, DAP will add a negative commission in the next payout report to adjust for the refund. This means that the affiliate’s future earnings will be reduced until the overpayment is balanced out.
Handling Over-Paid Commissions
If the affiliate does not make any further referrals and has no future commissions to adjust, you have two options:
- Request a Repayment: Ask the affiliate to return the overpaid commission.
- Absorb the Loss: Write off the overpayment as part of your business expenses and move on.
Summary of Recommendations
- Set the refund period in DAP to 60 days to align with industry standards and protect your affiliate commission payouts.
- Pay affiliates after 60 days to avoid any potential losses from early payouts and subsequent refunds.
- Monitor refunded purchases: DAP will adjust commissions automatically for refunds, and you can decide how to handle overpayments based on your business relationship with affiliates.
By aligning your refund policy and affiliate payments with these guidelines, you can minimize potential financial risks and ensure smoother operations for both you and your affiliates.
This structure balances both customer satisfaction and affiliate management, ensuring that you comply with industry standards while protecting your business from undue financial losses.
