Protecting Your Business

Many businesses end up in a dispute which may have been avoided, or the extent of it limited, if there was a little investment of time and money reviewing the trading operations, particularly the terms, and taking advice.  Whilst a lot of business disputes are resolved without recourse to legal proceedings, having sound terms and conditions and effective processes strengthens the businesses bargaining position, and assists in getting the right result.  This is now even more important as we are in a period of economic uncertainty. 

Paddle and Cocks helping you through insolvency and bankruptcy

So here are our top ten tips…….                                                                          

1. Review your trading documentation. What does it say? Purchase orders, acknowledgement of orders, delivery notes, invoices, records of conversations and correspondence should all be kept in order.  As most businesses are trading on the internet, as well, have you kept and backed up electronic records such as these.  If a dispute arises these documents may be invaluable.

2. Do you have terms and conditions of business? Where are these contained?  To be effectively incorporated into the trading relationship they need to be contained in a contractual document and/or brought to the other party’s attention before the contract is concluded.  A signed agreement is optimum but not always pragmatic. Invoices and delivery notes containing terms may not be sufficient to incorporate them, as these are considered post contractual documents, unless you have a previous consistent course of dealings. 

3. If it’s online trading the same principles on incorporation apply.  The most common method to establish incorporation is to make the buyer click or tick acceptance of terms before they can complete the order.  If your customers are mainly consumers as opposed to other businesses avoid references to any declaration that the consumer has “read and understood” as this is consider to be an unfair term. Rather instruct the customer to read them carefully before accepting them.

4. Useful terms in a business to business relationship, (as opposed to business to consumer),  include an effective retention of title clause which may allow retrieval of your goods should your customer become insolvent.  Other terms limiting liability for defective goods or services in relation to description, quality and negligence (other than death and personal injury), should be considered.

5. What are your terms of payment? Do you have a clause stating your statutory right to interest on late payments? Whilst this right arises automatically in commercial contracts, setting it out in your terms shows your awareness and can act as a deterrent.  Incentivise early payment with a discount. 

6. Are you clear as to the identity of your customers; are they sole traders, partnerships or limited companies.  If it’s the latter and cash flow is an issue think about asking the directors for a personal guarantee. If your customers are consumers review your terms carefully because some may be considered automatically unfair and unenforceable. The Competition and Markets Authority (“CMA”) has issued guidance to businesses on its website particularly following the coming into force of the Consumer Rights Act 2015 (“CRA”).

7. Check your customers’ credit worthiness and monitor it particularly where there are issues arising. Introduce credit limits for new customers and look at reducing credit and / or terms of payment for slow payers.

8. Look after your existing customers by talking to them, building a relationship and making a gratuitous gesture where you can, however small.  A large proportion of customers are lost because they no longer feel valued.  A competitor who has been able to drop their prices may look more attractive in such circumstances.

9. Invest in good customer service and effective credit control procedures.  Talking to debtors at an early stage may facilitate a payment plan and ultimately strengthen the business relationship.  A reputation for fair dealings can only enhance your business but don’t be afraid to take action to recover sums where it’s cost effective to do so.

10. Last but not least if you are experiencing difficulties with your customer of whatever nature, or financial difficulties yourself speak to your solicitor as soon as possible, it saves time and money in the long run.

For further information contact A. E. Verona Cocks, Joint Managing Partner and Head of Commercial Dispute Resolution & Insolvency at Paddle & Cocks LLP Solicitors, offering specialist advice on all forms of business disputes, insolvency and alternative dispute resolution. Contact on 01872 672072 or verona.cocks@paddleandcocks.co.uk

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