7 Reasons why Terms & Conditions are important to your business
By Kerry Gibbs
Terms and Conditions are often seen as an afterthought, or if ever thought of at all when starting a new business. If they are thought about, a very high percentage will steal from competitors or use templated documents instead of getting their own documents drafted. I cannot stress this enough, no two businesses are the same, the way you invoice, the term of the contract, what is expected from the other party can all be very different and it is important to mirror all these processes in your terms.
1. Cashflow – Late payment is unfortunately a fact of life for small businesses, as there is often no urgency from your customers to pay you. With the right terms in place, you can ensure that you get paid first with no excuses for slow payment. Furthermore there is no question over the work that has been completed and whether the money is due at all as the terms consolidate everything that has been agreed.
2. Transparency & Trust – I often hear that businesses are concerned about ‘scaring customers off’ with terms and conditions. It is quite the opposite, having a clear, direct and understandable document attached with any proposal will show you off in a professional light not a daunting one. They should be clear and easy to understand and of course make sense. You do not need to even attach the document you just need to make it available upon request, (making sure your proposal states they are there) and customers can then read the document in their own time.
3. Certainty – By being transparent with how you work and your business processes this promotes customer confidence. It reduces the likelihood of long-winded drawn out arguments about what was promised during the negotiation process. You must also speculate what your customers obligations are, they can be in breach too. Put bluntly if you do not specify this in your terms and conditions you put yourself at risk of uncertainty and misunderstandings
4. Variations – Now this is a biggy. The amount of money that is lost in businesses because this is not considered or made clear is insane. Whether your business provides a service or a product it can often change as the relationship progresses and can be very different from what was originally quoted. It is down to you to put those boundaries in place, if you originally quoted 10 hours but then the job has become more like 12 hours, charge for that. Rely on your terms and ensure you are being paid for ALL the work you have done and not just what you have quoted for.
5. Cost Saving – Many clients will come to us once something bad has happened. Anything from £100 – £1000s worth of revenue lost and with little or no backing in regard to terms and conditions it makes it more difficult to recover those costs. A lawyer can present your case much simpler if the contract is clear which means less money spent on dispute resolution.
6. Limitation of Liability – All contracts, in particular business to business contracts, carry a risk of liability. Legal liability can arise from breach of contract, negligence, misrepresentation and infringement of IP rights. A limitation of liability clause is essential as it serves to limit the amount and types of compensation one party can recover from the other party should any of these things occur. If you do not cap the amount of your monetary liability you have to customers, you will be liable for an unlimited amount which could wipe out your whole business. You also want to think about what you are warranting when delivering your product or service. If you are building a website do you warrant that website will make that business money? Will those words you are writing as a copywriter win huge contracts? You’d be surprised at what the other party may try when disputing an invoice.
7. To follow the law – This is obviously dependent on your industry. If you are selling to consumers you must be compliant with consumer law, there are different things to consider here. Cooling of periods for example and contract terms must be less harsh. Different industries also have different regulations you must adhere to, your terms must be clear on what these are and not be outdated.
This is only a snippet of how terms and conditions can benefit your business, I am always willing to have a conversation about terms and how they can streamline your business processes. Feel free to contact me at firstname.lastname@example.org