Setting out your stall; using terms and conditions to improve your collections.
Any company can sell its products and services, but how do we maximise collections when the going gets tough? If a company provides its products / services by giving its clients credit terms, then they must supply them on robust, bespoke T’s & C’s. Why? When a debtor can’t or won’t pay their due debt, the supplier needs recourse. Setting out and agreeing with the customer from the outset the terms the product / service is supplied under makes all the difference in the event of a dispute or non-payment. The terms and conditions can then be used to recover the outstanding debt.
The main five reasons for having terms and conditions are to keep the following within a contract of supply between the two businesses; certainty, clarity, manage expectations, legal rights & obligations and to manage risk.
Presuming all elements of supply of the product have been fulfilled the key payment clauses that will help when collecting are; when and to whom the payments should be made, clearly setting out the company’s payment terms. This should state the details of whom the client should pay and the number of days credit they are giving the customer to pay.
What happens in the event of non-payment, the jurisdiction the terms are regulated under and any interest and late payment fees that will be added? This should notify under what law i.e. England & Wales and the payment penalties that will be put in place allowing suppliers the ability to add interest and late payment fees to the debt; whether these are statutory fees or higher.
Who owns the goods / service and at what point title of ownership is passed to the client (is this on delivery or is the retention of title only passed over at full payment). This is key to the type of recourse and action suppliers can take when collecting monies due. If the title of ownership does not pass on to the client from the supplier until payment, the supplier will still own the goods, allowing them to seize their assets.
One of the most important parts of a terms and conditions that is not payment related is to get the customer to acknowledge by way of signature on the T’s & C’s they agree to what is set out.
A solicitor’s advice is critical when looking at new terms. Finance companies will look to how robust the company’s terms are in order to fund debts and the recourse they might have in the event of non-payment. This proves how important it is to have agreed with a client the terms and conditions of supply in advance of supplying goods and services.
This article was published in the July 2017 CCR Magazine on page 42. Please click here to read.
Gareth Fawke – Director
Inksmoor Finance Group Limited