For many eCommerce sellers, Shopee has become a trusted platform to expand their business. However, as with any marketplace, the risk of disputes and chargebacks is part of the process. These situations occur when buyers claim they are unsatisfied with the product or service and request a refund, or when the payment is reversed after a successful transaction.
Disputes and chargebacks can cause significant reconciliation headaches for finance teams. When not properly tracked and handled, they lead to financial discrepancies, unclear audit trails, and ultimately an inaccurate picture of your sales and expenses.
This article explains how to manage Shopee disputes and chargebacks effectively while ensuring a clean audit trail. We’ll cover:
- What disputes and chargebacks are
- How these affect your Seller Balance and Payouts
- A step-by-step guide to managing these situations
- How to maintain proper documentation and accounting records
- Best practices for preventing disputes and chargebacks
By following this guide, Malaysian SMEs can safeguard their operations against the chaos that often comes with chargebacks and disputes.
1) What Are Shopee Disputes and Chargebacks?
Disputes
A dispute arises when a buyer is unhappy with the item received or the overall shopping experience and files a complaint with Shopee. Some common reasons for disputes include:
- The item is damaged or defective.
- The wrong item was delivered.
- The item did not match the description or photos.
- There was a delayed delivery.
Disputes can be resolved through Shopee’s platform, where the buyer and seller provide evidence, and Shopee makes the final decision regarding whether the buyer should be refunded.
Chargebacks
A chargeback occurs when a buyer contacts their bank or payment provider to reverse a payment. This happens typically if:
- The buyer feels the product was not delivered as promised.
- The buyer believes they were charged fraudulently or without authorization.
- The buyer disputes the transaction with their bank after receiving the product.
Chargebacks are a serious issue for sellers, as the funds are automatically pulled from their account, which means the money that they expected from the sale is lost.
The Key Difference
- Disputes are handled by Shopee, where both parties can present evidence for the case. Shopee makes the final decision.
- Chargebacks are initiated by the buyer through their bank or payment provider and usually result in an automatic withdrawal of funds from the seller’s account.
Both of these can have a significant financial impact and need to be reconciled carefully in your financial records.
2) The Impact of Disputes and Chargebacks on Your Seller Balance
How They Affect Seller Balance
When a dispute or chargeback occurs, Shopee deducts the corresponding amount from your Seller Balance to temporarily reverse the sale amount. This means that:
- Seller balance drops: The disputed amount is deducted, affecting your overall available balance on Shopee.
- Payouts may be reduced: Shopee withholds payouts until the dispute or chargeback is resolved, meaning the amount deducted won’t be released to you.
For finance teams, this can cause a mismatch between the expected payout and the actual payout received. The refund due to a dispute or chargeback isn’t always reflected in your payout report at the same time the dispute is initiated. This makes it essential to track disputes and chargebacks separately for proper reconciliation.
For Chargebacks:
- The chargeback fee (imposed by Shopee or the bank) may also be deducted from your Seller Balance, making it even harder to reconcile if not tracked properly.
For Disputes:
- Shopee may issue a partial refund depending on the dispute outcome, which would result in a deduction from your seller balance.
This is why it is critical to:
- Keep track of the dispute/chargeback case.
- Adjust the accounting journal entries based on whether the dispute is resolved in your favor or not.
3) Keeping Your Audit Trail Clean: Steps for Proper Dispute & Chargeback Management
To keep your audit trail clean, it’s important to have a structured process for tracking disputes and chargebacks from the moment they occur to their resolution.
Step 1: Identify and Track the Dispute/Chargeback Case
Shopee provides a Dispute and Chargeback Management system where you can track the status of disputes and chargebacks, along with the reason for each claim.
Action Steps:
- Log the case details immediately. Include:
- Order ID
- Buyer’s claim and reason for dispute/chargeback
- Dispute/chargeback case ID
- Status (open, under investigation, resolved)
- Keep all communications with the buyer, Shopee, or the bank in one folder or database for reference.
- Document any evidence: Photos, tracking information, or proof of shipment are necessary to contest the dispute or chargeback.
Step 2: Adjust the General Ledger (GL) Entries
Once the dispute or chargeback is logged, the next step is to adjust your GL entries accordingly. Disputes and chargebacks directly affect sales revenue and payouts.
For Disputes:
- When the dispute is opened, you will need to reverse the sale temporarily from your sales revenue. This means adjusting your sales account:
- Dr Sales Returns & Refunds (expense account)
- Cr Shopee Clearing / Seller Balance (liability account)
- When the dispute is resolved in your favor (Shopee rules in your favor and funds are returned), you reverse the original journal entry:
- Dr Shopee Clearing / Seller Balance
- Cr Sales Returns & Refunds
For Chargebacks:
Chargebacks are a bit more complicated because they often involve bank fees:
- Dr Chargeback Expense (if applicable)
- Cr Shopee Clearing / Bank (if money is directly withdrawn from your bank account)
Note: If Shopee settles a chargeback in your favor, you’ll reverse the chargeback journal entries accordingly.
Step 3: Reconcile with Shopee Payouts
After you’ve adjusted the GL entries, the next step is to reconcile your Shopee payouts. Since chargebacks and disputes can affect payouts, it’s important to compare:
- Disputed amount
- Payout adjustment (the amount deducted by Shopee)
- Bank deposit
Create a detailed report that includes:
- Date of sale
- Dispute or chargeback status
- Amount deducted or returned by Shopee
- Bank transfer details
By maintaining this reconciliation, you can track if any pending disputes or chargebacks have affected your payout.
Step 4: Document Timing Differences
Disputes and chargebacks often cause timing differences because the refund amount might not show up in your bank until weeks after the transaction.
Key Tip:
- Keep a timing differences register: Log the date the dispute or chargeback occurred and note when the funds were eventually deducted from your Seller Balance and returned to the buyer or withheld by Shopee.
This step ensures you aren’t caught off guard at month-end and that the adjustments made during the month are appropriately accounted for in the next period.
4) Best Practices for Preventing and Managing Shopee Disputes & Chargebacks
1. Respond Quickly to Disputes
Shopee allows sellers to respond to disputes by providing evidence such as product photos, delivery tracking information, and correspondence with the buyer. The quicker you respond, the better the chance of a favorable outcome.
Best Practice: Create a clear procedure for handling disputes, with pre-prepared evidence like product photos and return policy details. Respond within the required timeframe to avoid losing out on the case.
2. Maintain Clear Product Listings and Accurate Descriptions
Most disputes arise due to misunderstandings between buyers and sellers. Ensure your product descriptions, pricing, and photos are accurate to prevent complaints regarding item quality, size, or color.
Best Practice: Regularly review your listings for accuracy, and update them when necessary.
3. Improve Packaging & Delivery Processes
Many chargebacks happen due to items arriving damaged or not at all. Pay attention to proper packaging and shipping methods to prevent delivery-related disputes.
Best Practice: Always choose reliable couriers and ensure your packaging can handle the item’s fragility. Consider offering insurance or tracking for more expensive items.
4. Enable Payment & Refund Dispute Alerts
Shopee provides notifications and alerts about disputes and chargebacks. Stay informed by setting up automated alerts to quickly take action.
Best Practice: Enable all relevant notifications to stay on top of disputes and chargebacks in real-time.
5) A Practical Dispute & Chargeback Reconciliation Workflow
Weekly:
- Review any disputes or chargebacks opened during the week.
- Track any disputed amounts in your Shopee Clearing or bank account.
Monthly:
- Download Shopee Dispute/Chargeback Report.
- Update your GL for disputes/chargebacks.
- Reconcile any deducted amounts from your bank deposit with the Shopee payout for that period.
- Review timing differences for ongoing disputes and chargebacks.
- Post the necessary journal entries to reflect any adjustments.
Yearly:
- Audit all disputes and chargebacks that have occurred during the year to spot any trends (e.g., common product-related disputes).
- Analyze refund reasons and chargeback frequency to improve business operations.
6) Conclusion: Keep Your Shopee Disputes and Chargebacks Under Control
Managing Shopee disputes and chargebacks doesn’t have to be overwhelming if you establish the right processes from the start. By:
- Tracking disputes and chargebacks properly
- Adjusting your GL entries
- Reconciled regularly with your payouts
- Preventing common issues with good practices
You’ll ensure that your audit trail remains clean, your financial reports stay accurate, and your business can thrive despite these challenges.
By following these steps and maintaining an organized approach, you can effectively handle disputes and chargebacks with confidence.