In Focus Risk


Setting out your stall


How can you use your terms and conditions to improve your collections?


Gareth Fawke Director, Inksmoor Finance Group gfawke@inksmoor.co.uk


Any company can sell its products and services, but how do we maximise collections when the going gets tough? If a company provides its products or


services by giving its clients credit terms, then they must supply them on robust, bespoke terms and conditions. Why? When a debtor cannot or will not pay their due debt, the supplier needs recourse. Setting out, and agreeing with the client,


from the very outset, the terms the product or service is supplied under makes all the difference in the event of a dispute or non- payment. The terms and conditions can then be used to recover the outstanding debt.


Five reasons The main five reasons for having terms and conditions are to keep the following within a contract of supply between the two firms: l Certainty. l Clarity. l Management of expectations. l Legal rights and obligations. l Management of risk.


Key payment clauses Presuming all elements of supply of the product or service have been fulfilled, the key payment clauses that will help when collecting are: when and to whom the payments should be made, and clearly setting out the company’s payment terms. This should state the details of who the client should pay and the number of days credit you are giving the customer to pay. It is also important to be clear about what happens in the event of non-payment,


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If the title of ownership does not pass on to the client from the supplier until payment, the supplier will still own the goods, allowing them to seize their assets


the jurisdiction that the terms are regulated under, and any interest and late-payment fees that will be added. Your terms should notify under what law – such as that of England & Wales – is relevant, and the payment penalties that will be put in place, allowing suppliers the ability to add interest and late-payment fees to the debt; whether these are statutory fees or higher.


Retention of title They should state who owns the goods or service, and at what point title of ownership is passed to the client – is this on delivery or is the retention of title only passed over at full payment? This is key to the type of recourse and action suppliers can take when collecting monies due. If the title of ownership does not pass


on to the client from the supplier until payment, the supplier will still own the goods, allowing them to seize their assets. One of the most important parts of the


terms and conditions that is not payment related, rather it is to get the customer to acknowledge, by way of signature on the terms and conditions, that they agree to what is set out. A solicitor’s advice is critical when


looking at new terms. Finance companies will look at how robust the company’s terms are in order to fund debts and the recourse they might have in the event of non-payment. This proves how important it is to have


agreed with a client the terms and conditions of supply in advance of supplying goods and services. CCR


July 2017


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