Should You Charge for Returns?
- Jacob Curtis
- Nov 10
- 4 min read
Profit First Stewardship in the Age of Rising Shipping Costs
By Jacob Curtis, CPA | Certified Profit First Professional | Curtis Accounting Solutions
The Cost of “Free” Isn’t Free Anymore
If you run a Shopify-based outdoor gear brand, you’ve probably felt the shipping squeeze this year.
Between General Rate Increases (GRIs) from carriers like UPS and FedEx and the surge in customer expectations for “free” shipping and easy returns, your margins are under quiet assault.
In 2025, most carriers increased base rates by 5–7%, with additional surcharges on residential deliveries and fuel. For a $10 shipment, that’s now closer to $10.70 — and that’s before dimensional weight adjustments. Multiply that across hundreds of orders, and “free” shipping quickly turns into subsidized profit.
But as Proverbs 21:5 reminds us, “The plans of the diligent lead surely to profit.”
The key is not to panic — but to plan. Stewardship, not reaction, protects your margins.
What Are You Really Funding?
Before deciding whether to start charging for returns or raising your free-shipping threshold, take the stewardship test:
What are you actually funding with each sale?
If your return rate is 12% and your shipping costs have risen 7%, you could see a 2–3% margin drop overnight. For a business running on 10–15% net profit, that’s massive.
Many outdoor brands hide shipping costs under marketing — but that’s dangerous. Under Profit First, shipping belongs in your Inventory or COGS account, not OpEx. It’s a cost directly tied to getting your product into your customer’s hands.
Once you classify it correctly, you’ll finally see what’s really happening to your profit. That clarity — not guesswork — is stewardship.
The Profit First Move: Adjust, Don’t React
When logistics costs rise, most owners do one of two things:
Panic and cut marketing.
Ignore the problem and “hope it evens out.”
Neither is stewardship.
Instead, make a Profit First allocation shift:
Move 1–2% of your Operating Expense allocation into your Inventory account.
Treat it as a temporary GRI (General Rate Increase) adjustment.
Test it for two allocation cycles (usually one month).
This creates space in your financial system for rising logistics costs without hurting profit or owner’s pay.
When you manage proactively, you stay ahead of the squeeze instead of reacting to it.
Case Study: The $12 Return That Killed the Margin
One of our clients sold an $80 softshell jacket. Shipping it out cost $12. The customer returned it — another $12 back.
That’s $24 gone before restocking.
On paper, their gross margin was 40%.
In reality? After shipping both ways, it dropped to 8%.
But because they were running Profit First, they saw it immediately.
Within two weeks, they implemented two small but smart policy changes:
Added a $5 restocking fee
Raised their free shipping threshold from $75 to $85
Profit rebounded that same quarter.
The takeaway? You can’t change what you don’t measure.
Counting the Cost Before You Change the Policy
If you’re considering switching from free returns to paid, or increasing your free-shipping threshold, run the math first.
Ask yourself:
What’s my average return rate?
What’s my average shipping cost per order?
How would a 5–7% GRI impact that?
If your returns average 15% and your shipping costs go up 6%, your net margin could shrink by 3–4%.
You have three levers to restore profitability:
Price — Raise it strategically (bundle or premium model).
Policy — Charge partial or conditional return fees.
Threshold — Increase your free shipping minimum.
Peace comes not from guessing — but from forecasting.
Your 4-Step Action Plan: Profit First for Shipping Stewardship
Here’s a simple plan to protect your margins without losing your peace of mind:
1️⃣ Move Shipping & Returns to Inventory
Classify them correctly in your Profit First accounts.
This makes the real cost of fulfillment visible.
2️⃣ Reforecast Margins Quarterly
Compare current GRIs, return rates, and conversion data every quarter.
3️⃣ Adjust Allocations Annually
Update your Profit First percentages to reflect logistics trends.
4️⃣ Educate Your Customers
Stewardship isn’t greed — it’s sustainability.
Explain that small fees help maintain responsible, eco-friendly shipping policies.
When your cash has a purpose, your business gains peace.
FAQ: Managing Shipping and Return Costs
Should I start charging for returns?
Maybe — but only if your margin data supports it. Start by tracking how returns impact profit per SKU. If it’s consistently under 10%, a small return fee or tighter window can restore balance.
How often should I re-evaluate my shipping thresholds?
At least annually — or after any major GRI from carriers like UPS or FedEx.
Where do I track shipping costs in Profit First?
In your Inventory account (COGS), not OpEx. It’s a direct cost of delivering your product.
What if customers complain about return fees?
Communicate your “why.” Outdoor brands can frame it as stewardship — maintaining fair prices and sustainable operations instead of hiding costs.
Mini Stewardship Checklist
✅ Reclassify all shipping and return costs under Inventory/COGS.
✅ Track return rates monthly and link them to margin per SKU.
✅ Test allocation shifts (1–2%) for two cycles.
✅ Reforecast logistics every quarter.
✅ Communicate clearly with customers about policy changes.
The Heart of Stewardship
At Curtis Accounting Solutions, stewardship means clarity — knowing where every dollar goes and ensuring it serves your mission, not just your margins.
“Plan diligently. Steward faithfully. Profit intentionally.”
That’s how you build a business that provides freedom and peace — even when shipping costs rise.
Call to Action
If your logistics costs are quietly eating your profit, it’s time to take back control.
Let’s create a custom Profit First plan to fund your shipping, protect your margins, and restore your peace of mind.
👉 Book a Free Profit & Cash Flow Analysis
Visit jacobcurtiscpa.com/#book-a-call to schedule your session.
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