Return to sender — a guide to return merchandise authorization

Unfortunately, accidents happen, and customers need to return products. That’s why it’s important to have a Return Merchandise Authorization system in place to be ready to handle returns and, in some cases, identify fraudulent activities.

A return merchandise authorization (RMA) is a document provided by a company to a customer authorizing the return of a product. 
Published: 13.07.2022

When a customer returns the product they bought from you and gives reasons for the return, do you have a system to handle such a situation?  

The entire sales and customer relations process is not always smooth. Your business needs a management process that helps when a situation arises, such as products mistakenly being sold with defects. The purpose of this guide is to provide you with all the information you need regarding the return merchandise authorization process or the return of material authorization process by answering two essential questions:  

  • What is return merchandise authorization? 
  • How does an RMA work? 

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Customers must obtain an RMA return merchandise authorization number from the company before returning any product. 

What is return merchandise authorization (RMA)?

Return Merchandise Authorization (RMA) management is a system that guides the return of products considered defective. Return merchandise authorization is also known as return materials authorization RMA.  

This is the first part of the reverse logistics process.   

During this process, you have to engage with the customer to determine the defects in the product and the necessary steps to take forward.  

Sometimes, the defects are not so bad that an RMA should be drawn up and issued. A series of questions should establish the state of the goods. When properly implemented, the return merchandise authorization system helps to refund or replace defective goods for customers and helps you resolve issues with the purchased product while deepening customer loyalty.   

RMAs are vital for the reverse order fulfillment cycle.  

What is return merchandise authorization? It's a policy for products that are covered by a warranty or guarantee.

What is an RMA management form? 

A return merchandise form should be issued to the customer before the official return process. This document would generally state the product information including what defects the product has and what next steps would be taken to rectify or replace the product. These are essential parts of an RMA document:  

  • Customer Information 
  • Product Data 
  • The Reason for Return 
  • A Return or Refund option 

Why is an RMA system important? 

Being here means you understand that RMAs are important for your business, but why are they so important?   

A complete RMA system requires management, and the truth remains that your business does not always benefit from returning goods. Here are four reasons you should have a return merchandise authorization management system.   

1. To collect proper information from the customer

In collecting information from the client, you can identify why the product is being returned:   

  • Is it a problem with product color?  
  • Was the product broken?  
  • Was the wrong product delivered?  

With an RMA system, you can present the customers with a selection of valid return reasons from which to choose. The finest RMA systems also permit custom fields and Image uploads, allowing you to seek additional information from the customer as necessary.   

2. To provide a reliable way to refund customers and replace the defective product

As soon as your business assumes responsibility for repairs or replacements, you would need an RMA.  

With an organized RMA system, you would be better able to track the product and identify what needs to be addressed. The process allows customers to fill in the needed information, and you can decide if the product lies in the return and refundable class.  

3. To better assess the condition of the returned item 

A good return merchandise authorization management system is important as it helps you assess the condition of the goods before return.   

While some companies are willing to replace or refund any defective product, small business owners might not have that capacity. You should have specific conditions for return and ways of assessing the product before return. This could be done through image verification. 

4. To work on your product and improve your services 

When you work with an RMA management system, you will be able to notice repeat complaints. Paying attention to these complaints would help you determine how to improve your products and provide better customer service.  

RMA management helps companies keep track of returned products and ensure that they are properly handled. 

How does an RMA work?

Now that you know how important an RMA is, how does one work?   

The return merchandise authorization process can seem daunting at the beginning. Understanding that it is an important part of the reverse logistics process does not make it any easier. To ensure the entire process is running smothly, quality management is a must, and with the right ERP and RMA software, you would get quality management that could influence the whole process.   

This is how an RMA works.   

When customers return the product they bought from you, they use a return merchandise authorization (RMA). The customer completes the RMA form, attaches an RMA slip to the merchandise, and delivers it to the business. Depending on the seller’s return policy, the customer may receive an RMA number, which indicates that the business owner is authorizing the return of the goods.   

This could lead to a product refund, replacement, or repair.   

This can be further broken down into three actionable steps for your business that would benefit both you and your customers.  

1. Create your return policies and processes 

As a seller, you should understand that not all products can be returned.  

You should clearly define the reasons for returns for those that can and cannot be returned while stipulating the time frame for return. This would reduce false products return. Your business should also state whether there are product repairs, refunds, or a replacement of returned goods depending on the extent of the defect.  

Sorting these details out would help clear confusion between your customers and workers involved in reverse logistics.  

2. Create an RMA form

You should have a return merchandise form created and issued when the customer requests it. 

This form should be prepared beforehand and have the details already stated above. You can inform clients of these forms at the point of purchase. This RMA slip or form should be attached to the product when the company receives it from the customer.  

3. Put shipping and handling into consideration 

In return requests, this is often overlooked, but as a small expanding business, you must consider shipping and handling.   

If your products are being shipped out of your country, the shipping process could be tedious, but with a shipping label printer, this process would be easier. Understand that your goal is to make your customers comfortable and give them the best return experience through the entire reverse logistics process. You should also make sure the customer attaches an RMA slip to whatever shipment is being made for verification. 

Return merchandise authorization can also be used to request replacements for defective or damaged products. 

Return merchandise authorization types 

There are various types of return merchandise authorization, and these RMA types have different effects on the RMA process: 

  • Credit only: In this case, a refund is given, and the product is not returned. This could happen when the cost of the return is more expensive than the product itself. 
  • Repair and invoice: In this case, the seller will accept the return, repair, and return back the product, and the customer has to pay for the repairs.  
  • Repair: The seller will accept the return, repair it, and return it to the customer.  
  • Replacement: Here, the seller accepts the product’s return, and a new one without defects is returned. This could be done when a wrong product was initially sent out. 
  • Receipt and credit: The seller accepts the product’s return, and a refund is given back to the customer.  
  • Receipt and no credit: The product, in this case, the returns management process, is followed, but no refund is given. This could be because such products had not been paid for before they were returned. 
  • Reject and ship back: First, the product is collected and inspected, and if the customer is found responsible for the damage, the product is returned. 
  • Outright rejection: There are cases where the product would be rejected outright. This can occur due to suspicion of fraud.   
Some companies offer free replacement of defective products as a part of their RMA return merchandise authorization, while others charge a restocking fee for returned items.

Some problems with RMA systems

There are a couple of problems that could plague the RMA system. 

False reasons for returns

There have been multiple false returns, where products are returned after use, such as books or dresses only used once.  

There are also situations where the goods returned are not the goods sold. An example of such fraudulent activity is a case where a box of potatoes was returned after the original product was removed from the box. All of these makes returns management a tedious task.  

A proper RMA management process can help to forestall this. Books, for example, could be listed under goods that cannot be returned after purchase, or any product whose tags have been removed will not be collected. A time frame could also be a limiting factor for false products return. 

Nation’s legislations

Besides return fraud, one other problem with customer return systems is the legislation of various nations. Some countries’ laws might force businesses to comply with their return policies even if it does not favor the business. 

Using ERP software for RMA

While manually setting up an RMA management system is a good idea, a better idea would be to automate the entire process.  

A good ERP would be an idle solution to ensure quality management of the RMA system in your business. Katana is a cloud-based ERP system with the tools to keep track of the vital information you would need for tracking your product, quality management, and real-time information on the movement of your product. 

With its end-to-end traceability, products can be monitored and returned safely.  

Your company can also use Katana to customize its workflow, including the return merchandise authorization process. 

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What is return merchandise authorization? Typically they are valid for a specific period, usually 30 days from the date of purchase.

Perfecting your return merchandise authorization

A proper return merchandise authorization management system is essential for retaining customer loyalty.

It is easier to implement quality management processes when you understand the intricacies of the entire process. In conjunction with effective ERP software, reverse logistics should not be a hassle at all. An RMA or return merchandise authorization is necessary for every thriving business to ensure customer satisfaction.

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