What is a Chargeback?
A chargeback is when a customer disputes a charge on their credit or debit card, requesting their bank reverse the payment. This often happens due to unauthorized transactions, billing errors, dissatisfaction with services. For CPAs, chargebacks can arise from disputed fees, misunderstandings about service agreements, or fraudulent claims.
How Chargebacks Impact CPA Firms
Chargebacks not only result in lost revenue, but also incur fees and can damage a firm's reputation. Repeated chargebacks may lead to higher processing fees or restrictions from payment processors.
What is the chargeback process?
Client Disputes the Charge - The issuing bank initiates a chargeback.
Bank Requests Evidence - The merchant (your CPA firm) must respond with proof of a legitimate transaction.
Decision Made - The bank either upholds the chargeback (funds stay with the client) or reverses the transaction (funds are returned to your firm).
How to Respond to a chargeback
To dispute a chargeback, your firm must provide strong evidence proving the transaction was legitimate. This may include:
Engagement Letters and Contracts - Showing signed agreements outlining services and fees.
Invoices and Payment Records - Provide proof of billing and payment authorization.
Client Communications - Emails or messages confirming services rendered.
Work Deliverables - Documentation proving completed services.
Steps to Dispute a Chargeback
Gather Evidence - Collect all relevant documentation related to the transaction including purchase details, customer communication, and any applicable payment policies.
Review the dispute reason - Understand why the customer issued the chargeback to address this directly in your response.
Craft a clear response - Provide a detailed explanation of the transaction, including dates, amounts, and supporting documentation.
Be timely - Respond to the chargeback quickly in order to maximize your chances of winning the dispute.
How to Prevent Chargebacks as a CPA
Clear Engagement Agreements – Ensure clients understand pricing, deliverables, and refund policies before work begins.
Detailed Invoices & Payment Terms – Clearly outline payment expectations to prevent misunderstandings.
Proactive Client Communication – Address disputes early to resolve issues before they escalate into chargebacks.
Fraud Prevention Measures – Verify new clients and use secure payment processing to reduce unauthorized transactions.