Could your business terms and conditions help resolve cash-flow problems?

Do you aimlessly send out your T&C’s with every sale or booking? Have you become complacent about their content? It’s easy to think that your terms and conditions are just a formality, and they may not have been changed in years, but it is important to remember that Terms and Conditions can play a vital role in your business, and its cash-flow.

Why should a Business send out Terms and Conditions?

Terms and Conditions set out the level of responsibility that applies to you and your customers when you begin any kind of relationship together, be it long or short term. You should ask yourself what is important to your business, and then set your T&C’s to match this, not the other way around. Thinking about what’s important to the business will ensure that your document covers the main areas of trading that you need to protect.

For example, cash-flow is very important to any business, so, Terms and Conditions regarding payment and what happens if payments become overdue must be included in even the most basic of T&C’s. The monetary value of your individual sales will dictate the level of detail required in your terms. For example, companies providing a service worth thousands of pounds will need to think how they might recover those funds if a Limited Company was dissolved and had no additional assets, but the service has already been provided.  In this scenario, adding an undertaking and indemnity from the Director of each company that becomes a client will help to reduce the risk of bad debt and loss.  If you are providing stock rather than a service, it goes without saying that you should include a clause that allows you to recover stock in the event that it remains unpaid for.

You should also consider mentioning how you will administer Late Payment Charges too, so that if debts do fall overdue, you can start your credit control procedures without hesitation.

Don’t just cover yourself for bad debt, cover your business for disrupted trade too

Looking at things the other way around, do your T&C’s cover what would happen if your business can't provide a service? If something were to go wrong (think fire, theft, illness, delays with stock, late payments etc.) can your business continue trading? Your terms and conditions should include a paragraph about your obligations in this situation, and whether you will be indemnified against any claims for loss of earnings from other businesses. State in your terms the amount of time you need to find a resolution if things do go wrong, i.e. “Should the company be unable to deliver the goods on the due date, we will contact you within 2 working days to arrange a new delivery date, which will be no later than 10 working days after the original date”.

Think about how you might need to balance your cash-flow in the event that you might need to provide a full refund. Allowing a 30-day window will help if you need to fund 4 or 5 figure refunds. You may also want to consider taking out insurance for these kinds of scenarios. 

Include a notice period

If you are dealing with long-term clients and are in a contract and things don’t work out, you’ll need to consider what the most viable way to end the contract will be, and how this might affect your cash-flow. Enforcing a notice period will ensure that you don’t suddenly have the plug pulled on a regular income stream, particularly if it happens to be a key client who is responsible for a large percentage of your annual revenue.

Getting help with your Terms and Conditions, or if things go wrong

Writing solid Terms and Conditions is part of your wider business strategy and should be done correctly first time to protect you for many years. If in doubt, consult an expert for help writing the document. If your terms and conditions have failed you and your business is suffering as a result and you are worried about insolvency, do contact our team for a free consultation. We may be able to help you out of a tough spot by looking at ways to stabilise your cashflow following a bad debt, loss of a key client or disruption to trade.