Many businesses have learned the hard way how writing terms and conditions for trade and sales are vitally important for safekeeping your business. We’ve all heard it – did you read the fine print? Well, this post is to illustrate just how important it is to a) have the fine print, and b) to read it.
Having well-drafted terms and conditions is a critical part of doing business, and should form part of your base documentation template for each new customer. It builds the skeleton of the whole trading relationship, and governs all future trading with a company. From a service level agreement through to designing your website, that fine print outlines who does (and pays) what, when.
Terms and Conditions outline payment terms – due when from invoice, upon acceptance of order or upon delivery, part payment, full payment, etc. Do you pay the freight and charges? Or does the customer? Along with default, GST quantities, who is responsible for the title of goods… You really need to ensure that both you and your customer are aware, and more importantly, agree, to these terms. Terms and conditions also detail what kind of information you can gather regarding your assessment for credit for that company. Documented terms and conditions also encompass IP, warranties on goods and services, liabilities – the entire legal aspect of trading with a company and supplying goods and services. No terms and conditions is your own version of 50 Shades of Grey – it opens you up to grey areas of trade, and can lead to substantial and aggravated loss.
Benefits to having your own terms and conditions:
- Minimise potential conflict – with documented terms and conditions, you have a clear understanding between yourself and the customer with regard to responsibilities and payment. If any issues arise, this is the first port for resolution.
- Effective debt collection – having a clearly stated, simply defined and agreed upon process for payment can streamline your debt collection into an effective, efficient process.
- Protection – terms and conditions provide a disclaimer of liability, warranty, force majeure, etc.
Risks involved when trading without terms and conditions:
- Lost or late payments – if you have no agreed terms, there is no way to enforce payment in the time you want – or may need.
- Loss of customers – nobody likes an unpleasant surprise when it comes to money, especially customers. This can create a negative impact both on the customer relationship and on further sales in the pipeline due to non-payment or cancelled orders.
- Working capital – if your standard terms are 30 days, and your customer’s standard terms are 90 days, this delayed payment can mean your business is lacking vital working capital for an unplanned period.
In essence, Terms and Conditions are your friend. Get to know them intimately, and make sure you introduce them to each new customer.
For further information on drafting or reviewing terms and conditions, contact the Admin Plus team.