Return Merchandise Authorization

Customers change their minds, products break, things get lost. It happens. But do you know what should happen next? The poorly lit James Shores outlines how to use a RMA with the help of a terrible Elvis analogy. Or is it a metaphor?


Hi, welcome to Whiteboard Wednesday, I’m James Shores, and I like to wear my shirts in a junior.

Today we’re going to talk about Return Merchandise Authorization. This is for those times when you have customers that need to return something because it’s broken, it wasn’t what they thought it would be, needs repairs, etc. Like our good buddy Elvis here, he’s going to “return to sender”.

And so with Return Merchandise Authorization, or RMA for short, there’s typically a few different ways we can go about it.

We can go, on your end obviously as the company, we can go through credit, where you have to create credit and a return sales order for your customer. We got our receiving; customer’s returned item. You’re going to mark that return for your own inventory, for you own records. Refund purchase price. Your RMA is fulfilled.

Now this other side, this is to replace, substitute, or repair a returned item that your customer is sending back to you. Some of the same processes, where you’re going to create the credit, return sales order, and then the other question of are you going to cross-ship? Are you going to wait for them to return the item that they need to send back, or are you just going to go ahead and send out that product that they are trying to substitute, or replace, or repair.

In either case, if you’re “yes” cross-shipping, you’re going to send out that new item, not wait on your customer. You’re going to receive their item, mark it in your inventory, or mark it wherever you’re going to send it, and then mark it as resolved, so that all your records are open and shut. Again, RMA fulfilled.

Or if you are “not” cross-shipping, you need to make sure that you wait for that returned item to come to you from your customer, mark it as resolved so that that end’s closed, and then you ship out the new item, the repaired item, or the substitution.

So it’s a pretty basic overview, it pretty helpful with those businesses, especially on the distribution end, but also manufacturing, because you are going to have times when customers aren’t happy, it’s not what they thought, something gets broken. These things are very common, and the faster you can streamline this process, the faster you can get back to work: making products, selling to more customers, and keeping your customers happy. We don’t want Elvis mad.

But, what if you’re “all shook up”?

So what’s the whole point of a good RMA? Well, it should be able to maintain an accurate count. If you’re waiting on a customer to send an item, but you went ahead and marked it as returned, and then someone else also receives that item later on and marks it in your inventory, you’re really going to mess up your numbers. This is where human error becomes a problem.

With this, you want to be able to manage restocking fees. For different items, and within your own company—this will be set by you—you may have different percentages based on what those returned items are, and you need a quick way to keep track of them. Again, RMA.

You want to be able to track your warranties with any items that are attached to what you sell to your customers so that you’re not trying to track those down.

You also need it most of all for your record keeping, so that when all of this is closed out, when your RMA is fulfilled, that can show up in your books, that can show up in your inventory, everything matches. You’re not running around trying to figure out what happened to that returned item that supposedly was sent to you and you can’t find it. You don’t want to make an angry customer.

But most of all, we want to be able to track our customer’s habits and behaviors. This is one that often gets overlooked with a RMA because we’re just looking at the hard numbers, whereas underneath all of that there’s also kind of this history of what are customers buying and returning often. This could be because of a defaulty [edit: of course that is a real word!] product, maybe you carry something from another manufacturer or another supplier that is becoming a problem and you can see that pop up within your customer return histories.

So again, the whole point of this is to keep good data. Any good inventory management system should have a built in RMA that makes use of good data, so you can make good business decisions.

Because again, like “the King” said: “there’s no job too immense, when you got confidence”

I’m James Shores, that’s Whiteboard Wednesday, see you again next time.

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