Do I need to put terms and conditions in place? Five reasons why you should.
In my 20 years assisting businesses with credit control, one of the key things that companies who get paid in full and on time share in common are having terms and conditions in place.
You set up in business because you are passionate about what you do. You know and understand your product and service, you love providing it to others and seeing the finished result. Without payment, you have a hobby not a business. So how do you ensure you get paid?
1 – Terms and conditions make clear what your expectations are for payment.
What is a finished result anyway? When you get the job completed or when the customer says they are happy with it? Actually it is neither of those, it is when you get paid. Without payment, you have a hobby not a business. So how do you ensure you get paid?
By having your terms and conditions in place, when you speak to a potential customer they will be fully aware of your expectations with regards to payment. It doesn’t matter if you take payment upfront, staged payments or payment a set number of days after you’ve invoiced.
2 – If you don’t have terms and conditions, you don’t have an agreement for when payment will be received.
If you don’t have an agreement on when you will get paid, how do you know when you will be paid and how does the customer know when you expect to be paid?
3 – The impact on your cash flow of having no agreed terms and conditions is huge.
If you don’t have a contract or terms and conditions of sale in place, then you could be setting yourself up with potential issues. If you don’t get an agreement in place as to the product or service you will be providing, how will you know when you will be paid?
If the customer changes their mind, or if they change the specification after you have done some work on the project will, you be able to invoice for the time you have already spent?
You think payment will be made 14 days after completion, the customer thinks they have 30 days, when will you receive payment and who is right? You need to have this information in order to forecast your cashflow.
4 – You’ve agreed a speaking gig with another company and the week before they decide to cancel as they haven’t sold enough tickets, will you still get paid?
If you have terms and conditions of sale or a contract in place, you will know the answer to this question and if payment due hasn’t been received you could remind them it is due. However without any written agreement you can not prove that they said they would pay you in full or 50% of your fee etc even if it was cancelled.
5 – Terms and conditions of sale cover you in the event of non payment and prove to the courts that an agreement was in place that you weren’t doing the work for free, you were expecting payment and when that payment was going to be paid.
Believe me, I would love to live in a world where if someone said, “Yes go ahead, do the work and I’ll pay you £500” was all that you needed to be guaranteed that payment. BUT IT ISN’T A PERFECT WORLD. You need to act before the situation arises and you don’t get paid, before you spend hours on a project agreed by a gentleman’s agreement, or a handshake only to receive no payment.
You need to get your terms and conditions of sale in place before you need to enforce them.