If you are just launching a small business, there are bound to be some urgent tasks that require your attention. Unfortunately, however, many people fail to prioritize the need to incorporate terms and conditions (T&Cs) in their business transactions.
T&C’s are crucial, especially for small business owners and freelancers. If they are in place from the outset, they can help you avoid potential cash flow problems such as delayed customer payments. They may even save you substantial resources in relation to having to collect debts. As small business owners often have to contend with late payments from bad customers, drafting suitable T&Cs can help ensure that invoices are paid promptly.
Shielding your business from risk
Specific terms and conditions are useful as they will enable you to avoid the risk of uncertainty and miscommunication with clients. While a mutual agreement can close a sale, you still need to protect yourself legally so that your customers or partners cannot renege on their promises.
Commercial lawyers advise that all your terms and conditions should be put in writing. Then, if the unthinkable happens, you can produce the written agreement as proof. Both parties should consider the T&Cs to be a vital aspect of the contract as they will set out their:
What should you include in the T&Cs?
Well-drafted terms and conditions function in a similar way to a manual or a recipe book. According to this article, it is essential that you cover every eventuality in your business. For example, you need to establish what will happen if:
- Things go wrong
- One party wants to cancel
- Either party is unwilling to proceed
The T&Cs can also be a money-saver as they will address every possible situation from the outset, thereby protecting you against potential disagreements at a later date.
While the specific terms to include will usually depend on your particular business or industry, there are several elements that should always be present:
- The products and services you provide.
- Your payment terms, such as the due date.
- Your warranties and guarantees.
- Timelines for delivery and other services.
- The consequences if either party does not deliver, fails to pay or wants to end the business relationship.
- The specifics of the agreement and the requirements for disregarding the contract.
- The laws that will govern the contract.
When it comes to invoices, you need to include specific details as required by law. It is essential that you provide your business name and address. However, if you own a limited company, you will also need to add the following information:
- Company name
- Company number
- Place of registration
- Registered business address
While there is no legal requirement for you to include the T&Cs on your invoices, and for them to be binding, they must instead be presented with the quotation or offer, many customers also like to see them there.
Terms and conditions make things clear
Failure to set out the terms of a sale can negatively affect your cash flow. For example, let’s say a customer is thinking of paying you once their project has been completed but you are expecting to be paid at the start or perhaps in installments. This type of misunderstanding could end up with you having to pay for materials before you have received any money from the customer.
If the T&Cs don’t stipulate what is expected, you may not have the legal right to charge interest for late payments. If the customer delays settling their invoice, you will therefore incur additional costs.
Tailor your terms and conditions to your business
It is critical that you draft customized T&Cs for your business. Remember, not all companies have the same requirements, even if they are in the same industry. Before writing your T&Cs, think about obtaining advice from a lawyer or contract consultant. And remember, don’t even attempt to copy another company’s T&Cs because they almost certainly won’t apply to your business.
Practical tips for drafting suitable terms and conditions
- Compile a list of all the commercial terms relating to your business
- Consider all the possible scenarios that could go wrong and how you would want to remedy them
- Picture the most awkward customer you can imagine in these scenarios
- Make sure you write the terms in such a way that all your customers will understand them
- Make the content user-friendly but don’t try to use small print or hide the T&Cs – this is a cheap trick, your customers won’t like it and it may make them unenforceable
- Understand your own T&Cs and make sure your employees understand them too; you should carry out periodic reviews and update them if necessary
- If you need any assistance, seek advice from mentors, experts, other business owners, or freelancers.
Terms and conditions are essential in business transactions because they inform both parties of their rights and responsibilities. Although they are not a legal requirement, the T&Cs are crucial as the clauses you include will enable you to prevent any misunderstandings. They will also protect your business on issues such as delivery and payment. Furthermore, they can limit your liability in case something goes wrong. Remember, you should never copy terms from another company as they may not be applicable and they could even damage your business.
Did you know, terms and conditions can increase your profit and ensure prompt payments from customers?
By Kerry Gibbs