Here’s the thing about running a lead gen business – shit happens. APIs break, leads go bad, and clients want refunds.
Simple enough, right? Just credit the client and move on?
Not so fast.
What looks like a straightforward refund process on the surface is actually trickier than most lead gen operators realize.
There’s a critical timing aspect that most people get wrong, and it’s messing with their numbers in ways they don’t even see.
I’m going to break down exactly how to track your refunds and bad leads the right way.
No BS, no fancy corporate speak – just straight-up practical advice from someone who’s been in the trenches.
Whether you’re using LeadsHook or any other lead capture system, this will help you understand your true profitability and get your tracking system tight.
Real-Time Tracking Fundamentals
The only way to get this right is to track your numbers in real-time.
But here’s where most people screw up – they’re tracking on a cash flow basis instead of an accrual or profit basis.
And trust me, this distinction matters way more than you might think.
The Problem with Bad Leads: A Real World Example
Let’s break this down with a real scenario that happens all the time:
It’s March 3rd.
Your client calls up: “Hey man, your API’s been broken and you’ve been sending us garbage leads for the past few weeks. We need a refund or replacement for these.”
Fair enough. You ask which leads, they send over the IDs, and now you’ve got to handle it.
But here’s where most people make a crucial mistake in their tracking.
The Right Way to Track Refunds
When you’re adjusting your numbers, you don’t dump all those refunds into March 3rd – the day you found out about the problem.
Instead, you need to go back and adjust the numbers for the weeks when those leads were actually generated.
Let’s say you’re looking at:
- 10 leads from week ending February 17th
- Another 10 from week ending February 24th
You need to go back and adjust those specific weeks.
Why?
Because that’s when the revenue was supposedly generated.
That’s when your metrics were initially recorded.
Why This Matters
If you just dump all your refunds into the current week, you’re essentially lying to yourself.
Those previous weeks look way more profitable than they actually were, while your current week takes an artificial hit.
It’s like cooking the books, but you’re only fooling yourself.
The Long-Term Payoff
When you track this way consistently, stuff starts making a lot more sense.
After 6 to 12 months of data, you’ve got a crystal-clear picture of:
- Your actual gross profits (not that inflated BS)
- Real impression numbers
- Accurate CPRs
- True CTRs across the board
This isn’t just some theoretical accounting exercise – this is about knowing your real numbers so you can make better decisions.
Getting Granular
The beauty of this system is you can slice and dice it however you need:
- Break it down by client
- Split it by vertical
- Segment it by country
I’m just showing you the generic format here, but you can adapt this to whatever makes sense for your business.
Real World Application
Take Jos’s situation (one of our users). He’s running multiple verticals across different countries.
In his case, I told him straight up: “Make one of these tracking sheets for each vertical in each country.”
Why?
Because when you’re dealing with that kind of scale, you need to know exactly where your problems are coming from.
Are your Australian finance leads solid but your UK insurance leads going to shit? You’ll know, and you can fix it before it becomes a bigger problem.
Pro Tip: Don’t wait for clients to tell you about bad leads. Use this tracking system to spot trends early.
If you notice refund rates climbing in a particular vertical or country, you can get ahead of the problem before your clients start calling.
The Real Stakes (And Why This Actually Matters)
Look, I get it. Reading about accrual versus cash flow accounting for lead refunds probably isn’t what you were hoping to learn today.
Maybe you’re thinking, “It’s just refunds, who gives a damn?”
But here’s the real talk: This isn’t just about keeping clean books or knowing your true profitability – though that should be enough of a reason.
Here’s what keeps me up at night: I’ve seen too many lead gen businesses get absolutely destroyed because they didn’t have their accounting dialed in.
We’re talking:
- Lead gen fraud that went undetected for months
- Overinflated Google invoices that bankrupted otherwise solid businesses
- Profit margins that looked great until they suddenly weren’t
By the time most people realize they need a specialized accounting system for lead gen, they’re already in deep shit.
The refund tracking system I just showed you?
That’s your early warning system. It’s your canary in the coal mine.
And if you think I’m being dramatic, you probably haven’t been in this game long enough to see a business implode because they didn’t catch problems early enough.
Want to Dive Deeper?
If this was an eye-opener for you, you might want to check out our comprehensive guide on lead gen accounting.
Because refunds are just the tip of the iceberg. Remember: The best time to set up proper tracking was when you started your business. The second best time is right now.
