Talk to any debt recovery agent, and they’ll tell you terms and conditions are an important part of protecting yourself against late payment.
But you might think you’re already protected by law – and indeed you are, to an extent – so what do T&Cs achieve that isn’t already enshrined in UK and EU law?
The simple answer is that they can spell out the finer details of all kinds of potential points of dispute, so that if your invoice goes unpaid, you have a formal and already agreed list of your rights.
In a sense, it’s not just about what happens if you’re not paid – it’s also about proving that you provided the goods or services to a satisfactory standard in the first place.
So, for example, your T&Cs might set out acceptable deadlines for delivery, a time limit for the customer to raise any disputes, and what happens if anything becomes damaged or is not fit for purpose.
By setting out these and other details, you remove the potential for the customer to use them later as an excuse for non-payment, leaving you free to pursue overdue invoices with total confidence.
It is also normal to set out payment terms (often 30 days, but sometimes 60 days, 120 days or even longer, depending on what you’re supplying) and assert your right to compensation for unpaid invoices.
This makes it clear that overdue invoices will incur penalty fees, statutory interest and a charge for any debt recovery costs – all of which you are entitled to by law.
Again, these are legal entitlements, but your T&Cs act as a kind of contract through which, if your customer agrees upfront, you can vary certain details like payment deadlines.
Once you have your T&Cs written, remember that you must supply them to your customers upfront – don’t simply include them with your invoice, because it’s too late at that point to apply them to the work you have already completed.
Likewise, make sure you have proof that your customer has read and understood your terms, and agrees to be bound by them; some customers may have their own T&Cs which conflict with yours, so be clear on what has been agreed, and which terms prevail.