Getting Paid (Part 3)

November 25, 2009

The missing link in most new businesses administration system is the failure to draw up comprehensive ‘Terms and conditions of sale’. These are the terms under which the customer agrees to buy and pay for the good or service you are providing them. Regretfully, many businesses simply do not write up terms and conditions of sale and the customers are given the wriggle room to enable late payment.

Your terms and conditions of sale should be clearly stated:
• In contracts
• On the back of delivery dockets
• On the back of invoices
• On the back of statements
• And importantly, make sure it is legible and use same font, font colour & size as you use in the rest of your documentation.

The terms and conditions of sale should state:
• Who has authority to sign for goods/services
• What is the credit limit if any
• When exactly is payment required, either after the delivery of goods or issue of invoice
• The consequences of late payment – interest payable on late payments, repossession of goods, denial of support etc.
• Will there be exchange of goods or credit notes
• What are the terms with regard to return of goods/credit notes or repayment
• It should also note that the customer’s statutory rights are not affected by the terms and conditions.

When you are drawing up your terms and conditions of sale you can also draw up your payment procedures internally. For example, when you are doing business with clients:
• How do you get the client to accept of terms and conditions of sale in contracts
• Have delivery dockets (with acceptance of T&C on back) and make the person receiving the goods sign and print their name. This should be a carbon duplicate with the customer getting the top copy and you keeping the bottom copy.
• Immediately send invoice when goods are delivered
• At end of month send statement
• With regular customers send statement – even if zero
• At end of credit term send letter of overdue account (with copy of delivery docket, invoice and statement)
• Follow up with phone calls
• If over a month overdue – personal call and do no further business until late payments are cleared.

With new clients
• Do credit checks on potential new customers
• Get them to Sign a contract or terms and conditions acceptance
• Cash up front initially
• Credit terms are earned by new customers at specific milestones
• They must prove their reliability
• If they don’t pay early – do not do further business with them
• There are more fish in the sea

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