An article picked up and presented on various social media networks published by Flag Media News & Features news@flagmedia.co.uk, written by Sean Murphy, Flag Media. December 2009.
A lack of properly written terms and conditions can make the difference between failure and survival for thousands of businesses struggling with cash flow, claim business experts.
Recent figures from Bacs Payment Schemes Limited (Bacs) revealed that more than a million SMEs are owed over £30.4 billion in late payments, a rise of over £11 billion in the last 24 months.
Cash flow, always the single biggest problem facing any small to medium sized enterprise (SME), is now tighter than ever and experts have warned that failure to have specific terms and conditions can help or leave firms seriously out of pocket if a deal goes bad.
“Terms and conditions simply represent the formality of business relationships,” said David Reilly, commercial director of Create Ts and Cs, a company specialising in tailor made fixed-price terms and conditions for SMEs.
“If you want to buy or sell a service or a product it’s advisable to cut the risks of not being paid with a contract which sets out legal parameters. Properly drawn up Ts & Cs will cut the risk of an expensive legal battle”.
Last year more than 4,000 businesses failed because of late payment and, according to the Federation of Small Businesses (FSB) many small companies have to wait up to four months or more for their cash from customers.
In dramatic circumstances firms can try and argue their case in court or seek some sort of arbitration but without properly defined Terms & Conditions it can be an expensive uphill struggle.
“If a business finds itself in a dispute over an unpaid bill and there are no properly defined terms and conditions it means there is no formality to the contract and as a result there is no lawful communication about when they are going to get paid – there is only an assumption and an assumption isn’t enough.” said Mr Reilly.
“Unfortunately, when it comes to cash flow morality or fairness isn’t going to put food on the table but a set of clearly defined Ts&Cs spelling out payment terms is much more likely to win a court case and ensure debtors pay up.”
Over the years numerous surveys and academic research have identified cash flow as among the top three worries for small businesses with more than half believing their very survival is threatened by non-payments from customers.
”The biggest problem any small or medium sized business faces is late payments. You can end up employing somebody on a full-time a salary just to chase up invoices and they nearly always get the same response – the cheque’s in the post,” said Gordon Mowat CA of Aspire Management Services.
”The stress involved in trying to chase overdue payments can be crippling to a business and many owners or managers get so involved they often fail to recognise many of the solutions which can help solve the problem.
“You don’t always have to use a sledgehammer to crack a nut, Sometimes a minor change in procedures or the Terms & Conditions can make a huge difference.”