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Tips for Creating a Return Policy for Your Business

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By George Khoury, Esq. on December 20, 2016 3:00 PM

If your business is engaged in retail sales, then it is a smart business practice to have a clear return policy. Customers appreciate clarity, and having a clear return policy might even lead to an increase in consumer confidence and thus an increase in sales. However, deciding on what the policy actually provides requires careful thought as returns can be rather detrimental to some businesses' bottom lines. Also, making sure your policy complies with the law is important.

Generally though, you need to make sure that your return policy is crafted with your business's customers in mind. If you choose to not allow any returns, then you may scare off some potential customers, or worse, anger former customers that have encountered a problem with a product they purchased from your business.

If all sales are going to be "final" sales, then this policy should be explicitly made clear before purchase, as customers do not generally expect items to be nonreturnable. But be wary, if you create too liberal of a return policy, you risk losing money due to customers taking advantage of the policy, or trying to scam your business. Striking the right balance may require some trial and error, but the key is being clear with your customers.

Legal Compliance

Some states have rather specific laws regarding refund policies. Additionally, because each transaction is technically a sales contract, there may be state contract law principles that apply to each transaction. However, when crafting your return policy, it is advisable to seek out the assistance of a local business attorney to ensure legal compliance with state and local laws.

For instance, in California, it is not enough to only have your return policy printed on a receipt, it must also be clearly posted in the store.

Clearly Posted, Understandable Policies

While a business may not be legally required to allow returns, many states provide that return policies must be clear and clearly posted in order to be valid. In California, for example, if the policy is not clearly posted, a consumer will have 30 days to make a return, unless the retailer allows for a full refund or exchange within 7 days of the purchase. The California law has a few exceptions, such as not applying to perishable items, or items that have been damaged.

If you have questions about drafting a return policy for your business, speak to a local business lawyer for assistance.

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