Entitled to a Shipping Refund? Get Help Collecting It.
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As a small business owner, you have enough on your plate getting a product ready for shipment to be too concerned about a package that arrived a few hours, or even just a few minutes, late. But it might be worth your while to pay attention.
Major carriers offer a money-back guarantee for on-time deliveries and provide a refund if they don't fulfill that promise. The catch is a claim must be filed within 15 calendar days of the late delivery and most small companies simply don't have the time or resources to pursue their refunds.
Though on-time rates are improving, these refunds can add up. Paul Cronin, chief executive officer at shipping refund recovery firm MTC Recovery Consultants in North Attleboro, Mass, estimates that 2 to 10 percent of domestic and international shipments are late. "Most shippers don't even realize a package is late," notes Cronin. "They don't realize they're missing out on a refund." According to most carriers' guarantees, a delivery that arrives even one minute late can entitle the shipper to a refund.
Small businesses looking to take advantage of the guarantee can monitor their packages themselves, a time-consuming process that involves confirming the arrival of each package shipped and handling any paperwork, or hire a refund recovery firm to do it for them. Cronin says MTC helps clients recoup 3 to 10 percent of their shipping costs. In turn, recovery firms receive a portion of the refund.
A small online retailer generating $1 million a year could recoup $4,000 to $6,000 a year in refunds working with a refund recovery firm, estimates Jose Li, founder and chief executive officer of refund recovery firm 71lbs.com. "It's a right that you have as a shipper," he says.
These firms analyze clients' shipping information, says Cronin, and when shipments are late, the refund recovery firmprocesses late shipments on behalf of the small business to recoup the refund. Depending on the carrier, it can take anywhere from 24 hours to 30 days to approve a claim, he says.
There are refund exceptions, Li cautions, such as "acts of God," or weather delays. Other exceptions include mechanical failures and closed delivery locations that can't receive shipments. Exceptions can be up for interpretation, however, and refund recovery firms can fight for refunds on occasion.
When vetting a refund recovery firm, Li recommends looking for a company that has an automated monitoring system and security controls in place to ensure that any shipping data clients provide is kept confidential. Sensitive information, such as customer lists with names and addresses, should be kept in a secure system, Cronin says.
Shippers should also evaluate additional services offered to get the most bang for their buck. Such services may also include monitoring to ensure the client is receiving the correct rate and is not paying any unnecessary surcharges, says Li. 71lbs.com takes its name from the surcharge big carriers levy for packages weighing more than 70 pounds, one of many extra fees that can drive up shipping costs.
As you evaulate firms, Joseph J. Sudar, executive vice president and co-owner of SmartTran in Pittsburgh, advises obtaining two or three competitive bids and taking advantage of the one-time no-risk analysis that many firms offer to assess the need for outside refund recovery assistance. Many can work month-to-month or on a contingency basis.
You should also ask how the company will be compensated. Some charge a flat rate per transaction while others split the refund with the client, a model that can benefit shippers with few refunds, according to Sudar.
While every company's needs are different, Sudar says businesses generating more than $100,000 a year in revenue are likely to be doing enough shipping that they will have a difficult time monitoring their shipping invoices for late deliveries and pursuing refunds with the carriers on their own.
But ultimately, it's up to the shipper. "It depends on your pain threshold, the amount of feedback from customers, and the amount of follow-up you need to do with your carriers," Sudar says.