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In the year 2021, nothing is certain.
Having an effective Cancellation Policy can provide protection for your business in the event of short-term cancellations and uncertainties such as border closures.
Cancellation Policies provide security for your business and clarity for your customers.
Although Cancellation Policies are not required by law, they can provide significant benefit for you and your business.
When implementing a Cancellation Policy it is important to ensure it’s terms and conditions are fair.
What Is A Cancellation Policy and Why Do I Need One?
According to the ACCC, a customer generally has a right to cancel when:
- A reasonable level of skill and care has not been provided
- The service or product is unfit for the purpose the customer requested it for
- The service or product was not delivered within a reasonable time when there was no end date agreed upon.
Consumers do not have a right to cancel when:
- They change their mind
- They insist on a service, contrary to your business’ advice
- The customer failed to explain their needs to you.
A Cancellation Policy provides security to your business in the event that your customer cancels on your business engagement.
A Cancellation Policy should also aim to clearly set out to your customers what will happen if they decide to cancel whatever their arrangement was with your business.
Cancellation Policies can be utilised in a number of situations, let’s consider the example below:
| Example Your business provides a service to customers. Customers are required to book in advance for this service. 2 hours before your business is to provide this service to your customer, the customer calls to inform you that they can no longer make their appointment to receive the service. Your business has already purchased materials, organised staff and denied other business for this particular service. As a result of the customer cancelling with such short-notice, your business is now out of pocket. |
If the business in the above example had an effective and fair Cancellation Policy in place, they would likely be far less out of pocket.
Considering the above example, an effective Cancellation Policy in this instance would likely detail that customers must advise the business of the need for cancellation at least 48 hours prior to the appointment. It would further detail how they can communicate this cancellation and if there is or is not a cancellation fee associated.
This way, the business would likely no longer be out of pocket.
In essence, your business’s Cancellation Policy can be whatever you would like it to be, so long as it is fair.
Cancellation Policies are not required by law, however, they can significantly benefit your business specifically when considering time and cost.
Where Should My Cancellation Policy Go?
Your Cancellation Policy is generally set out in your business’s terms and conditions.
It may also be available on your business’s website as well as anywhere else that may be easily accessible for your customers.
For example, it may be visible at your place of business, in the reception or up on your business’s notice board.
Equally, it may be attached or placed at the bottom of an email confirming your customers engagement with your business.
Whatever your Cancellation Policy may be, it is important to ensure that it is easily accessible and effectively communicated to your customers.
This way your customers will be aware of your Cancellation Policy and know what to do in the event that they have to cancel their engagement with your business.
What To Include In Your Cancellation Policy
As already stated, your Cancellation Policy can be uniquely tailored to your business, so long as it is fair.
For example, this may mean adjusting your ‘cancellation timeline’ from 48 hours to 2 days, it depends on your business and what works best for you.
Whatever the case, ensure you keep in mind your ability to tailor your Cancellation Policy to uniquely fit your business when considering the below.
1. The Cancellation Process
To have an effective Cancellation Policy, it is important to detail exactly how your customers should go about cancelling their engagement with your business.
This means ensuring that this process is available wherever your Cancellation Policy is mentioned.
It is insufficient to state ‘cancellation fees will apply if you fail to cancel before your appointment.’
Rather, your Cancellation Policy should include steps on how to cancel their engagement with your business including time frames and what fees may apply (if any).
2. Cancellation Timeframes
Your Cancellation Policy must indicate exactly when you expect your customers to cancel, without a cancellation fee applying.
This timeframe will likely be uniquely tailored to your business and the circumstances of your services.
You are likely to tailor your cancellation timeframe to before your business goes and organises the resources required for your customers appointment.
For example, if your business provides a food service, you would likely require at least a 48 hour notice period of cancellation to ensure that your business doesn’t end up out of pocket.
3. Cancellation Fees
Whether or not your business’s Cancellation Policy contains a cancellation fee, it is important to detail this.
Your business may have a cancellation fee in place for when customers fail to cancel within the cancellation timeframe set out in your Cancellation Policy.
If your business has a cancellation fee, it must be reasonable and reflect the actual costs your business has suffered as a result of the cancellation.
Let’s consider the below example to ascertain when a cancellation fee may be appropriate.
| Example Your business is a hairdressing business. You engage business on the basis of individual appointments. You have a Cancellation Policy in place that details: If customers wish to cancel their appointment they must:
This cancellation fee will be whatever the minimum cost of your services are. |
You’re probably thinking, how did you work that cancellation fee out?
In the above example’s circumstances, it would be most reasonable and reflective of the cost incurred as a result of the cancellation to charge a cancellation fee that reflects the minimum cost of a haircut.
This is reasonable in the circumstances because, had that person not booked and cancelled, the hairdressing business would have likely gained another appointment, that would not have cancelled.
When working out what is the most reasonable cancellation fee for your business, it is important to remember:
- You cannot charge a customer’s credit card without notice
- You cannot charge a cancellation fee for something outside of a customer’s control such as extreme weather.
How To Ensure Your Cancellation Policy Is Fair
Australian Consumer Law prevents businesses from implementing policies that contain unfair terms.
Terms can be deemed unfair if they:
- Cause an imbalance in the rights of either party
- Fail to be reasonable in the circumstances
- Cause a detriment (delay or financial) to a small business.
If terms are considered ‘unfair’ they will be deemed ‘void’ meaning neither your business or the customer can rely upon them.
This is why it is vital your Cancellation Policy incorporates fair terms that considers both your business and your customers equally.
The best way to ensure this is by incorporating terms into your Cancellation Policy that are:
- Reasonable and
- Relevant to your unique business
Need More Help?
Having an effective Cancellation Policy can help your business gain greater security in the event that your customer cancels on your business engagement.
Getting a lawyer involved to help establish your Cancellation Policy can be a massive help in ensuring your terms are fair in accordance with Australian Consumer Law.
We are here to help! Reach out to our team for a free, no-obligations chat at team@sprintlaw.com.au or 1800 730 617.
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