Depends on how it's posted.

Without tracking I would refund because if they open a paypal dispute, Paypal will refund anyway. And that's the chance I take by not utilising seller protection.

With tracking, I would check the tracking and probably not refund. Mainly because I use the option in C&S to have tracking updates sent to the buyer. If it sits at their PO for a week after that, that is their issue, not mine. If it really has gone missing, I would refund and fight AP over it.