What to do when a customer seeks a fraudulent refund

Dear Karen: A buyer kept merchandise but then requested that her credit card company cancel the transaction and reimburse her. What can I do?

Answer: If you can document that your customer authorized a credit card transaction and received a non-defective product, your credit card processor should be able to dispute the fraudulent refund, said Lance Rich, vice president at ProPay, a credit-processing service based in Utah.

Make sure that you get a detailed invoice for every transaction and ship only to verified addresses. Ideally, you should also require the cardholder’s signature at delivery, Rich said.

An EIN cuts risk of identity theft

Dear Karen: Many of my insurance industry clients require my Social Security number on contracts. Is this safe?

Answer: Business owners should use an Employer ID Number (EIN) rather than a Social Security number. This reduces the risk of identity theft.

Apply at www.irs.gov and you will immediately be assigned an EIN, said Gene Fairbrother, lead small-business consultant for the National Assn. for the Self-Employed. You can also mail or fax form SS-4 to the Internal Revenue Service or call the agency at (800) 829-4933.

Customers who always pay late

Dear Karen: Should I sue customers who constantly pay their bills late -- or not?

Answer: Many entrepreneurs are eager to take late-paying customers to court, but the process can be costly and lengthy.

“It is much easier to appeal to a person’s sense of doing the right thing than to threaten a lawsuit,” said Douglas R. Palmer, founder of Palmer Financial, a firm in Bethesda, Md., that provides accounting and financial services to small and mid-size businesses.

“Send invoices in advance, follow up with regular statements and befriend the accounts payable person” at your client’s firm, Palmer said.

“If the client is now a former client and simply doesn’t return calls, engage a lawyer to write a threatening letter,” he said. “Do the minimum at first.”

Questions? E-mail Karen Klein at inbox.business @latimes.com or write to In Box, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012.