How to design your business refunds

Shaun H. Ruff

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Since the pandemic, many businesses have been hit with the sting of event cancellations, refunds and cash flow issues. 

Despite being two years in, the refund wave is showing no signs of stopping. In fact, many Australians are still chasing tens of thousands in refunds from cancelled trips mid-pandemic. 

Recent global staff shortages, fuel price increases and the Ukraine war have again put the travel and events industry under pressure. However, consumer patience is wearing thin with poor processes, delayed payment times and last-minute cancellations. Customers now expect their money to be returned quickly and with ease, however not all businesses have the infrastructure in place to do this. 

For instance, the Australian online sports management platform revolutionseSPORT was forced to reinvent its refund payments system due to the demand which saw the organisation process $4 million dollars in refunds in the last 12 months. 

Managing Director Alex Mednis of the Australian online sports management platform revolutionseSPORT said, despite believing things would return to normal, the numbers indicated otherwise. 

“The whole refund space has been heavily shaken these last six months because every time you think you’ve solved the problem, a new one occurs. We started thinking, will things ever go back to normal? But the wave just got bigger and a year on it seems this new world of refunds is here to stay,” said Alex. 

“Despite consumer confidence being up, in terms of spending, businesses and organisations in the events, services, sports and travel industries have experienced a bit of trauma after being hit so many times,” Alex said. 

Co-CEO of Australian online payments platform Chris Dahl said that most people don’t realise that processing mass refunds is a complex financial process for businesses, often involving other parties or multiple payment systems. 

“There’s a lot of complexity scheduling refunds in a clean, efficient and fast manner. We’ve been assisting some of our customers with this throughout the pandemic, and seeing first-hand that processing regular refunds is a new-normal business practice,” said Chris.

“Businesses now need to design their financial processes and tech in anticipation of refunds. Ensuring that refund policies are in place and transparent to their customers and having a single source of truth for managing refunds are good starting points for businesses to review their operations,” said Chris. 

Deposits over full funds vs cash-flow issues 

Alex Mednis explained many of their sports clubs and organisations suffered after taking total funds from members which they had to refund in full. 

“Once this happened, we realised we had to change our process for our clubs, organisations and businesses. We redesigned our tech to schedule refunds in a more efficient way and provided advice to sports clubs with regards to their management of refunds,” said Alex. 

“The biggest change has been that organisations and businesses are less likely now to take full funds, opting for deposits instead. Businesses need to think ahead and move away from using the money as they get it and instead use past refunds, cancellations and non-attendance numbers to work out how much money you need,”. 

“It is a complex problem that organisations are not able to always adopt overnight, especially if their business is geared to require the full payment up front,” explained Alex. 

Chris Dahl said, across the board, many industries have been impacted by changes to their online payments and processes, but businesses who’ve adapted have fared best. 

“We have a lot of travel and events customers who rely on bookings paid in advance, and they’ve been impacted quite significantly by the refund waves. However, interestingly with Europe now open for summer, we’re seeing a lot of the same cancellation issues that happened throughout the pandemic due to staff shortages, COVID-19 and the Ukraine war,” said Chris. 

“What that shows us is that businesses need to consider the way payments are taken with regards to travel and events which could be impacted by unforeseen circumstances. Customers have a legal right to a refund if something is cancelled, but at the same time, this puts a lot of pressure on small to medium-sized businesses that have been heavily impacted by the pandemic. Taking partial payments in the form of deposits over full funds and access to an efficient payments platform will definitely help the process,” said Chris.

With hundreds of flights recently cancelled across Australia and Europe, and thousands left stranded, it’s clear that bulk refunds are here to stay. With that in mind, businesses should re-examine their processes and tech to avoid any potential financial and operational risks.

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