The importance of preparing a document outlining the terms and conditions for using your products
Preparing a document outlining the terms and conditions for using the products of their business is the last step that entrepreneurs take. Often, they do not give it sufficient attention, especially in the early stages of starting their own businesses, prioritizing other tasks need to be completed first, such as equipping the business place, attracting customers, marketing products and services, etc.
However, neglecting this step can adversely affect your business’ liquidity and cash flow by delaying due payments and sometimes paying for products and materials before receiving the necessary payments. Even worse, you may sometimes waste considerable time and significant sums of money repaying debts.
On the other hand, the delay in making payments is a common challenges for all small businesses, as customers give lower priority to invoices issued by small businesses. Therefore, entrepreneurs should be aware of this challenge and should set terms and conditions for using their services and products to ensure that they will receive regular payments and avoid justifications for late payments.
Protecting your business activity
If you did not set the terms and conditions for your business, you will be exposed to misunderstandings and uncertainty by other parties. Therefore, it is necessary to set the terms between the parties involved in any commercial transaction. As a result, you’ll be able to protect your business activity, and both your customers and partners will not have the opportunity to back track on their promises.
Experts stress that setting the terms and conditions plays an important role when it comes to both parties (customer / supplier and joint venture partners). These conditions help both parties understand their duties, rights, roles and responsibilities.
Terms and conditions document and its content
According to experts, well-formulated terms and conditions serve as a guide for doing business and outline procedures under certain circumstances. Accordingly, the document should precisely specify the terms agreed upon by the concerned parties and, most importantly, how to proceed if things didn’t go as planned and one of the parties wanted to terminate the partnership because of his lack of ability to continue.
Also, the terms and conditions document can save entrepreneurs money by addressing all issues from the onset of a project, which, in turn, results in fewer future disagreements on over has been agreed upon.
The specific elements to be included in the document depend on the type of business . However, generally, you should take the following information into account when drafting the document:
- A clear definition of the company’s products or services.
- Specifying payment terms – when payment is due.
- Any submitted guarantees or bonds.
- Delivery schedules and other inquiries.
- Clarifying what happens if the other party fails to meet the delivery date or make payments or even if you want to terminate the contract.
- The term of the agreement and termination notice.
- The law governing the contract.
On the other hand, some details should be included in invoices. In this regard, experts say the invoice should legally include the company’s name and address. If the company is a limited liability company, the invoice should include the name of the company, its number, the place where it was registered, and the address of the registered office, which may be different from the address mentioned in the correspondence. If you wish, you can also include the names of all company managers, not just some of them. If the company is registered for VAT, then the VAT number should be mentioned.
When things are not clear
Failing to set the terms and conditions from the beginning will pose a risk to your cash flow and will lead to misunderstandings because the client will assume he will be paying the money at the end of the project, while you believe you will be receiving payments at the beginning of the project or in its early stages. This will force you to pay for the products and the employees’ wages before you receive payments from the customer. Also, you will not be entitled to impose a late payment fee if it is not specified in the terms and conditions document. Hence, you will again have to incur all expenses as a result of the customer’s late payment.
One size does not fit all business activities!
Experts stress that it is important to ensure that the terms are written and formulated to fit your business. You cannot assume that another business will have the same requirements as your business. Accordingly, you should consult with a specialized lawyer and avoid copying the terms and conditions of other businesses, because the latter may differ from your own, and its owners may have drafted the terms and conditions without consulting a lawyer.
Experts also advise entrepreneurs to pay adequate attention to the process of preparing the terms and conditions document, including conditions published on their websites, and to set the approval terms for payments received from customers, as well as funds paid to suppliers. Once these standard terms and conditions are successfully implemented, entrepreneurs will avoid wasting time and incurring huge expenses.
Best tips when preparing the terms and conditions document:
- Prepare a list of the terms of the basic business services that you provide to your customers.
- Consider all the damaging possibilities that may occur, and then decide what to do in each case.
- Put yourself in the customer’s place, make sure the language you use is relevant to them. Remember that squeezing all the information in one page using a small font will deter customers who will shy away from your services.
- Do not forget the commercial terms section. Give it priority and make sure to update it whenever necessary.
- When you are confused, feel free to ask for help by consulting a specialist or similar business owner.