Not every customer is satisfied with the product they purchase. The old saying of ‘You can’t please everyone all the time’ is true. This is reality and business management must accept this basic principle. What is important is the trend involved with returns. If they continue to increase from one period to the next, something is amiss.
Returns & Allowances
Returns and allowances are a group of offsetting entries to sales. Returns reflect customer choices and a physical return of an item. Allowances on the other hand relate to business to business relationship issues. Often allowances are given to business based customers for some form of improper delivery (timing or location) or for the incorrect number of units or types of units. An example is providing a dollar offset to the sale of paint from a supplier to a painter because the tint of the white is slightly off. The painter will use the existing white as the base coat and get the correct tint for the final coat.