A guide to writing your terms of business

Terms of business (also known as terms and conditions) are vital, as they establish levels of responsibility for companies and their customers.

They can go some way towards ensuring you are paid early or on time, but more importantly, they can help you set up an internal structure for chasing up late payments.

James Knight, managing director and founder of Lawyers Direct, which provides businesses with legal services, advises that the terms should be crafted to your actual business.

No two businesses are the same

Every business has its own areas of risk, or areas they know from previous experience that have caused difficulties. Your terms should try and establish as far as possible who does what, when and for how much.”

It’s also important to decide from the outset how long the agreement will be for, and to have a termination policy in place.

Depending on the nature of your business, you could also consider including information on restriction of liability, whereby you can put a cap on your liability in case something goes wrong.

“Confidentiality can also be a useful area to include in your terms.

Whatever you choose to include, remember that having a document that someone else has seen in advance, even if they haven’t read it, can save a lot of time and cost if a problem does develop,” affirms Knight.

Having one set of terms of business from the outset can also simplify the process. If there are particular changes unique to an individual deal, such as dates or payment instalments, these can be worded in a separate letter.

“One measure that works well is to ensure that your client signs any terms of business that you send out, and sends this back, or confirms that he has read and accepted them. It doesn’t have to be the original copy,” advises Knight.

He offers the following pointers when it comes to setting them out.

  • Keep them generic – your terms of business should be written in a way that deals with most situations and clients
  • Keep them simple and short – ideally, your terms of business should be no longer than three pages and written in a style that is easy to understand
  • The terms are written for the benefit of the client, so bear this in mind when setting them out
  • Make sure the document has been received and accepted

There are other measures you can take to try and speed up the payment process. You could ask for some or all of the money in advance of the work being conducted, or ask for at least 50%, as a test of good faith.

Not only will this cut out a lot of time wasters, but it will send out a clear signal that if a client is not prepared to put in 50% of the risk themselves, then neither are you.

If you find yourself chasing up payments, Knight suggests you follow a three-stage process.

“Firstly, send a polite reminder, or put a phone call in. If you get no response to this, send a more forceful reminder, and finally a warning.”

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