Late payments are sometimes inevitable for small businesses. With the right business and payment terms in place, however, you can ensure that you get paid first. Get your terms clear and concise and there will be no excuse for slow payers and non-payers.
Contractual agreements are serious documents for any party – these are legally binding, and the content must protect your business interests, even if things go wrong. You need to carefully consider exactly what goes into contracts you sign, whether with suppliers, clients or other third parties.
When setting your terms, this is the thought process that will help you understand where you and your customers stand.
- Think of all the scenarios of things that could possibly go wrong and then set out what you would do in each case.
- Imagine the most awkward customer possible in doing this exercise
- Put yourself in the shoes of your customers and make sure the language is at their level and user-friendly. Hiding everything on one page in the smallest font possible will not endear you to your customers
- Don’t forget about the terms of trade – this should be something that you revisit and update, as and when required.
- When in doubt, seek help. Ask for advice from a solicitor, or fellow business owners.
We’ve put together a list of essential details that your business or payment terms need to include:
- payment terms – how many days do your clients have to pay your invoice(s) or accounts.
- How you will deliver products or services
- Your position on defective goods or services
- Your liability
- A description of the goods or services
- The price
- Any other terms specific to the transaction
It is good practice to include an address for customers to contact you. As a sole trader, you will need to provide the address where the business is located or registered. If the business address is a home address and you do not want to list your home address it is easy to set up a PO Box.
Failing to specify terms could have a serious impact on your cashflow. For example, customers could think they will pay at the end of the project and you think you are being paid at the beginning or in stages, which never bodes well for cash flow when materials need to be purchased and to pay your staff. Equally, if you do not specify interest charges for late payments in your terms, you have no right to charge interest, leaving your business in further financial strain.
For a free review of your terms and conditions and assistance with debt recovery, give us a call on our freephone number 0808 145 1886 or e-mail: firstname.lastname@example.org