As a small business owner you’re never short on lists of tasks that require your attention. Especially when starting out it can be hard to know what are the most important things to work on first.
Crucial tasks like finding customers and developing and delivering your product or service will be first and foremost on your mind. But there are also some less talked about items that if not addressed early on could leave your business very vulnerable.
One of these important tasks is setting up trading terms and conditions.
“Your trading terms and conditions are a written binding agreement between you and the customer that details the duties, rights, roles and responsibilities of each party.”
One of the most important things your trading terms and conditions is to protect your business from late or non-payment and give you written proof that can be used as evidence in court should a customer refuse to pay for products or services that you deliver.
But careful written trading terms and conditions will also cover many other important transaction details, which we will look at now.
What Should Your Trading Terms and Conditions Include?
Well written Trading Terms and Condition should be easy to understand, clearly explain what each parties rights and responsibilities are and abide by any rules or regulations that may apply to your industry. They must also cover what will happen should one of the parties not fulfill their part of the bargain.
This list may vary depending on your specific type of business but is a good reference guide to help you get started.
- A complete and detailed descriptions of what products and services will be provided as part of the transaction. This is especially important in letting customers what extra or add-on are or are not included in the purchase price.
- Your payment terms, such as when payment is due, how payment should be made.
- What will happen if the customer pays late, or does not make payment at all. This will include:
- Any interest or extra charges that will be applied to late payments
- Explaining the customer will be liable for any costs related to the recovery of an overdue invoice, like hiring a debt collector or court fees.
- Your policy on refunds, exchanges, warranties and guarantees. Make it very clear if and how long a customer has to return or exchange a product and what is covered under your warranty.
- A timeline for the delivery of your product it service and what will happen if for some reason you are unable to meet that timeline.
- Any rules regulations or laws that govern the contract.
- Explain what your cancellation policy is, and what what obligations you and the buyer must meet if a cancellation occurs.
Covering all of the above topics in your terms and conditions and ensuring both parties agreed and sign them prior to any business transaction helps to avoid confusion or disputes which can end up costing everyone a lot of time and money.
Professionally Written Terms and Conditions
It is wise to have a solicitor or debt collection agency write your terms and conditions, to ensure they are legal and worded correctly to protect your interests under all possible circumstances.
Trying to do it yourself can lead to problems, just like copying others businesses terms and conditions, which some people do. The problem comes from the fact that no two business is exactly the same and you need to draft Terms and Conditions that align with the way your business is run.
For example a competitor in the exact same industry may offers customers 30 Day Net Payment Term because they have 45 Days Net Payment Term with their suppliers. But if for instance you only have 14 Days Net Payment Terms with your suppliers you will run out of cash flow very quickly and go out of business.
“That’s how important one little item in your Terms and Conditions can be to your business’s survival.”
So while it is a good idea to review the Trading Terms and Conditions of other businesses in your industry to ensure you have covered everything, don’t ever use them word for word.
The seemingly small decisions to get your Terms and conditions professionally written could save you many thousands of dollars in the future.