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Handling Product Returns

red brush mark
Jasmine Simon

It takes more than top-notch customer service and maintaining great business operations and products to ensure your company has a competitive edge. Many times, customers will return to a company online due to a smooth, quick, and easy return policy. Many times, companies can get so caught up with running their companies and chasing profits but tend to neglect their return policy. And as a result, many customers do not return to the company due to the hassle they undergone for a refund, an exchange, or even getting credit for their return.

To avoid this type of situation, there are various things you should do to ensure you are properly handling product returns. These tips are as follows:

1. Organize According to the Returned Item and More

Pile of organized boxes inside a warehouse

As with everything, it is vital to organize before implementing a system to make sure you are on the right track managing returned products. One thing you should do is to have separate pallets available in an area away from other inventory. A pallet or two should be for damaged items, one or more pallets for redundant inventory, one or more for damaged items, and others for reprocessing returns. It is also important to have a software system to ensure all your records are intact for returns that are reprocessed, disposed of, and written off for tax purposes.

2. Use Quality Assurance (QA) for Quality Control

Man doing Quality Assurance of a returned product

Quality assurance (QA) is indicative of what these words suggest. This is when a person will ensure the product meets the expected product quality or dismiss the product if it doesn't meet quality standards. So, when it comes to returned products, products that do not meet expectations or are returned due to damaged packaging, administrative/commercial aspects, or an investigation of customer complaints and action thereof.

Once returned items will be received, these items will be identified and placed on separate pallets in the warehouse supervisor's designated location with an identification label, such as "Returned Items". Also, these products will be stored according to the respective product's appropriate storage condition. These products will have batch identification numbers, the authenticity of labels, total quantities, and products' identifications.

The QA employee will confirm the returned consignment against the following specifications but not limited to:

  1. Meeting the expectations of the physical specifications
  2. The seal is intact or broken.
  3. The label number and seal number are matching packing details.
  4. Whether the product was maintained or not under specific storage condition upon being returned
  5. Sampling and analysis of the item are mandated if the seal was broken by the customer.
  6. If the returned product meets satisfaction evaluation of parameters, staff can release and send the product out for re-sale.
  7. If the returned item is borderline or does not meet specifications, the item is rejected, and investigation will begin.
  8. For items that are about to expire, the same analysis for the identification test is done and will be reprocessed appropriately.
  9. Items found to be contaminated will be sent for disposal/destruction.
  10. Returned products' manufacturing and expiration will remain the same.
  11. QA must retain records for returned items and their complete set of documents.

3. Make Sure your Software for Inventory Management is Intact

Barcode scanner warehouse management

Not only do your physical inventory must be in order, but also it is vital to have software along with paperwork in order to ensure your company won't eventually encounter a mishap. So, you must use appropriate top-notch software to log and update returns for reprocessing and disposing of returned products.

Having all your inventory, financials, and order processing in the same system is highly recommended to ensure you are completely on-track with your products as well as tax purposes and auditing. If your operation is not thoroughly organized, your company will be at great risk of having detrimental mishaps.

Thus, you should have a central omnichannel retail system where returns are processed as inventory transfers back in stock for selling and transfers in and out of your company. All these processes can occur automatically as they occur in real-time with a high-quality back-office platform.

There will be credits and debits throughout the accounting and various workflows needed for streamlining and efficiency. Thus, using such a system will ensure an automatic and seamless operation even as your company grows. Your financials will be maintained as well with such a system in the following ways:

  1. The inventory asset will be added to the balance sheet.
  2. Your income statement will record the write-off.
  3. The customer's refund will be reconciled and recorded from your company's bank to him/her.
  4. Your balance sheet will track a liability of a credit balance for the customer who receives credit for his/her return to your company.
  5. The income statement will credit the original sale.
  6. Your income statement will reverse the cost of sale.
  7. There will be a reversal of the tax liability and sales tax collected.


For more than 20 years, Pallet Market, Inc. has been providing quality pallets in Fontana, CA, and throughout Southern California.