On occasion, your small business might find itself having to decline a cash refund to a customer who believes he is owed one. The approach you take in writing a rejection letter could mean the difference between losing a customer or keeping one. Consider the financial value of your decision before making a final call.

Assess the Situation

Every refund situation is different. You should have a company policy in place that dictates how and when cash refunds are given, and for what purpose. Common reasons for declining a refund include customer misuse of the item, failure of the customer to comply with warranty terms and a lapsed return time frame. Identify which of your refund policy categories the customer is in violation of before writing your refund rejection letter. Your letter should be written on company letterhead and follow traditional business letter formatting guidelines. The introduction should acknowledge receipt of the claim and your regrets that the customer is dissatisfied with his product or service.

Address Damaged Merchandise

If a customer wants a cash refund on a product he clearly abused or damaged, reiterate company policy on return of damaged goods as it applies to the situation. For example, you could write: “You indicate in your refund request that you put your electric blanket in the washing machine and dryer. The packaging and the tag on the blanket and electrical cord clearly state the blanket must be dry-cleaned only. Water damages the internal heating elements, which is why your blanket is no longer heating properly.” This approach outlines company policy for the decision and explains to the customer how his actions invalidate his right to a refund.

Expired Warranty

If a customer wants a cash refund on a product with an expired warranty and you grant the refund, you will probably not be reimbursed by the warranty-issuing company yourself, and will therefore sustain a loss. Explain the issue in your refund rejection letter. Example: “Our records indicate the warranty on this product expired six months ago. Unfortunately, this means we are unable to offer you a cash refund because the company that handles this product warranty will not compensate us for the loss.” This approach lets the customer know your hands are tied, and that the product manufacturer that issues the warranty is denying the claim. This way many customers will not be upset with you personally.

As-Is Sales

If you sell floor models, discontinued products or “bump and dent” merchandise, you likely have an “as-is, no refunds” policy in place. If an individual still requests a cash refund, it’s a valid reason to issue a rejection letter. Example: “If you will note at the bottom of your receipt, it clearly indicates that because of the nature of the merchandise, it is being sold as-is with no warranty, exchange or refund available.” This approach gently reminds the customer that he was aware of the terms of the sale prior to buying the merchandise.

Make Concessions

If you run the risk of losing a valued customer over a refund request, consider making an exception to your rule or offering a concession. Example: “While we typically don’t offer refunds on merchandise without a printed receipt, we value your business and would like to offer you a 20 percent discount on your next purchase.” This approach makes the customer feel he is being placated in some way, which can help encourage repeat business.