05.12.09

Customer Relationships – what are “terms of trade?”

Posted in Business Tips, Customer relationships, Direct Debit at 2:41 pm by matt

There are a multitude of small business transactions carried out daily without a piece of paper being signed. These are small exchanges where the goods or services are provided and payment is made at the same time. In most cases, these transactions pass without event. There may be instances where the product has a fault or the consumer believes the product does not meet its advertised standard. The Trade Practices Act provides the legislative tool to manage these instances when they arise.

At PeopleHub, most of our clientele are either providing a service at a discounted price in return for the consumer guaranteeing their custom for an extended period of time (for example a gym membership) or alternatively they have provided a physical product and are collecting payment for this product over time (for instance a coffee machine).  These long term customer relationships, while also covered by the Trade Practices Act, generally involve some form of contract or terms of trade.

What are terms of trade you might ask?  It is simply a contract between you and your customer which sets out the rules for the purchase of the goods or services.  It spells out the obligations of each party in the transaction and makes it clear what the implications are if these obligations are not met.  We regularly come across businesses who do not have this fundamental document when trading.  The most common reasons are:

1. “I don’t want to pay a lawyer to develop my contracts”
2. “I don’t need them because I am on friendly terms with my customer”
3. “It is too much paperwork for me and my customers”

While some people feel unconfortable getting contracts signed, they are essential should the relationship between two parties deteriorate.  This may be due to a customer paying late or the standards of the product or service dropping.  In either instance, a contract can provide the basis for moving the relationship back onto a positive footing.

An example of this is, many small businesses expect to be paid within 30 days.  When you notice a client beginning to become a little tardy with their payments, pointing them back to the clauses within your contract can be a simple way to get things back on track.  It does not have to be used as a big stick, but people are sometimes forgetful and paying your invoice may fall somewhat down their priority list.  If your friendly reminders do not get you anywhere, then it may be necessary to refer to the contract.

Remember – speak to your lawyer.  These standard terms and conditions can be written for under $2,000 and are a valuable part of your business.

Does your business have terms of trade? How do you use them?

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