It had to happen sooner or later, because I use PayPal a lot. I got an order for CRS Gold DFM, a horse probiotic, $60 for a 10 lb. pail. The order was paid by charge card and it was an instant payment, so we shipped out immediately. Four or five days later I got a notice from PayPal that the funds were being held because the issuing Bank had denied the charge.
The email from PayPal included a warning not to ship the item but it was already long gone. They asked for detailed information about the transaction, a description of the item, the name and address of the buyer, any emails that we had exchanged, a phone number where I could be reached and all of the shipping information if the item had already been shipped.
It was shipped out by UPS and we did have a tracking number, that is what saved us. After around five days I received a notice that it had been an unauthorized purchase but that it was covered under PayPal's Seller Protection Policy and that because I provided a tracking number and it was valid, my funds had been released from the hold.
The moral of this story is: If you sell online and use PayPal, make sure that you have a tracking number for each shipment.