Refunds, failed payments and chargebacks all mean less money reaches your bank than your membership report says you billed. Each one should be recorded on its own, so your revenue is accurate and you can see what's costing you members and money.
Three different things
- A refund is money you chose to give back, like a member who cancels mid-month.
- A failed payment is a charge that never went through, usually an expired card or a declined bank draft. No money moved.
- A chargeback is a member disputing a charge with their card company. The money is pulled back from you, often with a fee, and you may get it back if you win the dispute.
How each one should show up
Refunds reduce revenue. I'd keep them on their own line, like membership refunds, so you can see the total each month instead of having it disappear into net revenue.
Failed payments shouldn't be recorded as revenue at all if you're on cash basis, because the money never arrived. If you invoice and track what members owe, the unpaid charge stays open until it's collected or written off.
Chargebacks reduce revenue when the money is pulled. The dispute fee is an expense, usually with your other payment processing fees. If you win and the money comes back, that's recorded when it arrives.
Why your deposits don't match your report
Most membership platforms deposit a net amount: what was collected, minus fees, refunds and chargebacks. Your membership report may show what was billed. The two won't match line for line, and that's normal. This post explains the gap.
In a made-up example, you bill $40,000 in memberships for the month. $1,100 in payments fail, you refund $600, one member files a $150 chargeback with a $15 fee, and processing fees come to $1,150. Your deposits total $36,985. Your books should show $40,000 billed, the $600 refund and $150 chargeback reducing revenue, the $15 and $1,150 as fees, and the $1,100 as never collected. That's how the $40,000 gets down to $36,985, and each piece tells you something.
What the numbers tell you
- Rising failed payments usually mean expired cards. A simple card-update reminder fixes many of them.
- Rising refunds can point to members leaving early, which is worth a look.
- Chargebacks are rare in DPC. More than one or two can mean a member didn't recognize the charge name on their statement.
What I'd do this week
- Pull last month's failed payments from your membership platform and follow up with each member.
- Check what your practice's name looks like on a member's card statement.
- Send your bookkeeper the platform's monthly payout report along with your bank statement.
Common questions
Should I chase failed payments or let them go?
Chase them. Most are expired cards, and a quick message gets them fixed. Set a point where you pause the membership if it isn't paid.
Can I fight a chargeback?
Usually, yes, through your payment processor. Your signed membership agreement and visit records are your evidence.
Are refunds an expense?
No. They reduce revenue. Keeping them on their own revenue line makes them easy to watch.
Want deposits that tie out every month?
We match your platform payouts to your bank deposits during every monthly close, with refunds, fees and chargebacks each on their own line. If that's what you need, apply to work with us.