0800 9774848

Blog

5 tips for effective terms and conditions of sale

02/02/2021

Many businesses could be missing a trick when it comes to their terms and conditions.

Not only can your T&Cs help to keep your business competitive, they can also be fundamental to maintaining a healthy cash flow and making sure you’re protected.

Ineffective or badly managed terms and conditions can leave you vulnerable to issues such as late payment or bad debt, and can increase the chance of disputes with your customers.

It’s important to strike the right balance so terms enable you to win business whilst being stringent enough to prevent these issues.

To help you achieve this balance here are 5 top tips to make sure your T&Cs are working effectively for your business:

1. Regularly review and update

Business owners often invest a lot of thought and research into setting prices for products and services. But when it comes to considering terms and conditions, the level of investment is often much lower. With markets constantly changing and evolving, failing to review and update your T&Cs to reflect this could be holding your business back.

By spending some time to review how your T&Cs are working, you might be able to spot some trends and try adjusting your processes in order to improve your cash position.

There are two key considerations here: Are your competitors offering more favourable terms than you are? And how are your terms impacting your cash flow and credit management performance?

The important thing to remember is that no two businesses are the same and you need to take the time and effort to find out what works best for your company.

Likewise, all customers aren’t equal. The vast majority of businesses offer their standard credit terms to all customers. However, with a little flexibility, there are ways that tailoring terms could work.

Take this scenario: a new order has been made by an existing customer who historically always pays, but usually a couple of weeks late. In the past it has caused a few cash flow issues, but this order is quite valuable to the company and worth the risk. Businesses can scrutinise their customers’ payment history to calculate their average payment delay, and then adjust their credit terms accordingly for individual customers or orders so to reduce the impact any similar delay would have.

Similarly, a large order might have been made by a new customer whose credit score isn’t perfect. In this instance, requesting a deposit up front will help to cover the initial costs of satisfying the order, and the remainder can be offered on terms.

If commerciality is a concern, and offering shorter credit terms than competitors could result in customers looking elsewhere, then early settlement discounts can be a useful tool. They don’t need to be excessive, but enough of a draw to convince customers to make the most of it. Discounts can therefore be particularly suitable when longer credit terms must be offered to customers.


For more information on how to improve your credit control procedures take a look at our tips section.


2. Explain procedures

Failing to specify terms could have a serious impact on your cash flow. So, think of all the scenarios of what could possibly go wrong with a sale and then set out what you would do in each case. This should include late payment, cancellations, returns and disputes.

Late payment has the potential to cause significant strain on cash flow so it’s vital to include your business’s procedure in the event that this happens. This could include charging interest, taking legal action or referring the debt to a specialist commercial debt collection agency.

By demonstrating from the outset that your business doesn’t condone late payment and the specific actions that will be taken if payment becomes overdue, the chances of getting paid within terms will be improved considerably.

Use our late payment calculator to discover how much you’re legally entitled to charge on overdue invoices.

3. Think about your customer

When writing your terms and conditions you should put yourself in the shoes of your customers and make sure that the language is appropriate for them. It’s also important to make sure your T&Cs are user friendly. Hiding everything on one page in a small font may deter customers from doing business with you.

4. Consult an expert

It’s important to make sure your terms are specifically written for your business – you can’t assume another business will have the same needs as yours. So, avoid the temptation to simply copy another business’s terms as their company is different and this is potentially dangerous as they may not have consulted an expert themselves. By talking to an expert you can ensure your terms and conditions are as effective as possible and ultimately maximise the protection for your business.

5. Train staff

Once you have established your T&Cs it’s essential to introduce them to your staff members and ensure that the necessary levels of training are provided. Failing to train your staff properly could mean you have nothing to fall back on when you take enforcement action against customers in breach.

Common areas of difficulty include staff failing to keep copies of the documentation or neglecting to respond to a customer rejecting your T&Cs. These kinds of issues cause a substantial number of disputes between businesses and their customers but can easily be avoided with robust processes and regular staff training.

Managing disputes

Even when you’re completely satisfied that the terms and conditions of a sale are correct, issues may still crop up. If a customer is disputing an invoice, or generally just avoiding payment, your first step should be to refer them back to the terms and conditions that were made clear to them at the point of sale.

If they continue to avoid payment, reaching out to a professional debt collection agency is a good next step, and being able to provide them with evidence of the terms and conditions that were set out can help them act quickly and achieve the best results for your business.

If you need help collecting a debt, get an instant quote or give us a call on 0800 9774848 to explore your options.


Have you found this article useful? As a next step, why not take a look at these 6 KPI’s to help you measure your credit control.

Comments

Just some of our clients

  • Royal Bank of Scotland
  • Smith & Williamson
  • Custom Glass
  • Mazars
  • Harrisons Business Recovery
  • Midland Rock
  • Kreston Reeves
  • Quantuma
  • Close Brothers Invoice Finance
  • Barclays
  • Leumi ABL
  • Leonard Curtis
  • Wupwoo
  • Construction Recruitment Services
  • Santander Corporate & Commercial
  • PNC Business Credit
  • Eazipay
  • BNP Paribas
  • SER Contractor
  • Duff & Phelps
  • Wote Street People
  • FRP Advisory

Authorised and Regulated by the Financial Conduct Authority

Our website uses cookies. For more information about managing cookies, visit our Privacy and Cookie Policy. Continue