If you’re a start-up, terms of service should be a priority for your business. They can be the bones of your business as much as your business plan. They impact on cash flow, profitability and your relationship with clients and suppliers. Also, it is a legally binding document that addresses all aspects of the business right at the outset. You need to serve your clients with terms of service as soon as the relationship starts.
Billing is likely the most problematic area in business. Pricing decisions, invoicing, timely or untimely payments and everything noted in a ledger. The hardest part of the finance department is managing delayed payments and non-payments. Discrepancies in cash flow can bring disorder and even sink a business. The problem with small and medium sized businesses is that customers prioritise larger companies for payments. Corporate businesses invariably penalise customers for late payment, which in turn affects their credit score.
Flexibility can be introduced in the fees section of a business’s terms of service. Customers can be allowed to pay invoices in 30, 60 or 90 days. However, this impacts on daily expenditure, so you have to give careful consideration when it comes to payment terms. How flexible can you afford to be? How about late payments? Talk to your lawyer about what penalties for late payment you’d like to introduce.
Invoice content should reflect terms of service. Invoices should include the business name, address, payment total including vat, expenses and any taxes. They should also include payment terms and when payment is to be expected. Think about the bare bones of your business, right down a list of everything you can think of, that might affect your relationship with your customers, as well as your cash flow.
What is included in the the terms of service depends on the business, its size, what kind of relationship you want to have with your customers and what you want to protect. For instance, a pet care company might use the same terms of service for all animals except for dogs. They might insert a special clause for powerful dogs. You can discuss with your lawyer what direction you want the business to go. Having a concise definition of services your business provides, means that you’re protecting your business and it’s also bringing clarity to your customers.
Get in touch with us and show us your business plan. We can discuss that first draft of your plan and advise you on how to best protect your business. SG
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