What is the best thing you can do to ensure your customers pay you?
Clearly, the best thing that you can do is to deal with long term, reliable customers who pay you on time. However, that is not always possible. Every business needs to generate new customers and even customers who were once reliable may go through their own financial hardship.
So then what is the next best thing? Your terms and conditions of trade.
When was the last time your conditions of sale were reviewed? Are they up to date with changes to the law? Do they still reflect your business? Do you and your staff understand the processes you must follow to make them enforceable. Do you have security for any supplies you make on credit: guarantees; security interests on the Personal Property Security Register; perhaps in some circumstances bank guarantees would be appropriate.
What should you include in you terms and conditions of trade
There is no one size fits all set of terms and conditions of trade. It’s likely that the best thing you can do is to think about how you do business and what terms and conditions you want.
Ultimately, your terms and conditions set out the agreed terms on which you will supply to your customer, and cover things such as what happens when thing go wrong or what happens if the parties no longer wish to do business together. It is far preferable to have clear terms and conditions from the outset than to argue later about what might or might not have been agreed.
Some of the things you might want to include are:
- The payment terms – how much and when is payment due
- The products or services – what is being supplied
- How and when will the products or services be delivered
- What happens if one party or the other breaches the terms or doesn’t deliver
- Your name (particularly when you have more than one entity) – who is supplying
- Your client’s name – who is responsible to pay
- Guarantees or warranties offered on the goods or services (mindful that these are in addition to statutory warranties)
- What happens if payment is not made on time
- Are you giving credit? Are you taking security?
- Specify what happens if one party wants to end the relationship
- How long does the agreement last and what is required to terminate it
You also need to understand the processes that your business needs to follow to ensure that your terms and conditions are enforceable. There’s no point having the perfect terms and conditions if they are not given to your customer before they place an order. The days of printing terms and conditions on the back of an order form are disappearing in this digital world. Make sure your full terms are always attached to the order form.
There is no substitute for doing business with the right people. The next best thing is to ensure that you have robust terms and conditions of trade that suit your business and are properly and consistently implemented by your business.
In these times of uncertainty, we can help you review your terms and conditions, and your processes, to help regulate your legal relationship with your customer so that you can protect your cashflow and minimise your trading risk.