Managing your debtors and improving your cash flow is essential to the success of your business. To avoid payment disputes with customers, being proactive will pay dividends. This article explains how to avoid or resolve invoice payment disputes.
Draft Effective Business Terms and Conditions
A customer enters a binding contract each time they buy from you. A written contract setting out the terms of that transaction provides clarity and can reduce the risk of payment disputes arising. Here are four top tips for writing your business terms and conditions:
|Make it clear what products or services you sell||The more detail you provide, the more a customer knows about what they are getting, and so less chance of them making a complaint and not paying you.|
|Dictate the manner in which your client or customer can accept your business terms and conditions||Once accepted, your customer will be bound by your terms and conditions. Common acceptance methods include signing, ticking an acceptance box online, confirming in writing or paying a deposit. Choose the method that best suits your business and your customers.|
|Set out your payment terms and acceptable methods of payment||Payment terms should include the timeframe in which you require the customer to make payment. You should also set out the consequences that will follow if the customer does not pay on time.|
|Include a dispute resolution clause||In the unfortunate event that a dispute does arise, a dispute resolution clause can assist you to resolve the dispute faster and cost-effectively.|
Your business terms and conditions are essential in managing your debtors. Therefore, you (or your lawyer) should draft these terms specifically for your business. They will form the foundation for any future debt recovery proceedings. It is far easier to point to terms and conditions in an agreement than to rely on a verbal agreement or informal email chain.
Avoid Delays and Always Follow Up
Issue invoices promptly while the transaction is still fresh in your customer’s mind. The invoice should contain sufficient detail about the goods or services that you have provided to avoid any possible confusion.
Once an invoice becomes due, be sure to follow up. You may only need to give customers a friendly reminder by email or phone. Additionally, diarising when accounts become due or implementing an automatic notification system into your accounting software are great ways to keep on top of debtors.
It is so important to keep the lines of communication open with a customer who owes you money. If those lines of communication close, it is unlikely that you are going to receive payment without escalating the matter further. Some tips for keeping communication open:
- Resend a copy of your outstanding invoice.
- Remain calm. Disputes tend to escalate quickly (sometimes unnecessarily) when emotions are left unchecked.
- Speak with the person responsible for paying your invoice.
- Confirm in writing the amount outstanding and when payment was due.
- Ask questions and listen. Is there a reason your invoice has not been paid?
- Keep a paper trail. If you later start debt recovery proceedings, you can use a paper trail as evidence.
However, even after doing everything in your power to coerce payment, in some instances escalating your debt recovery to a lawyer may be your best option. In this case, issuing a letter of demand is the next step.
Resolving payment disputes quickly can improve your business’ cash flow by ensuring you receive money owed in time to pay your own debts. You can increase the odds of customers paying on time by having well-drafted terms and conditions, following up promptly and keeping communication open.
If you need further advice, LegalVision’s debt recovery lawyers can advise you on options for recovering your debt. Get in touch by calling us on 1300 544 755 or fill out the form on this page.
Was this article helpful?
We appreciate your feedback – your submission has been successfully received.