Making Deals on a Handshake is Risky
In the excitement of landing a new account do you always remember to sign a contract with your customer? Every business requires a clear set of terms succinctly laid out prior to providing any type of product or service. We are not just talking about paving the foundation for prompt payment here, we are referring to the complete sales and deliverable process.
Why is a written contract so important? I know my customer, we have conducted business before, and he has referred me to a reliable new lead. I don't need to burden any of them with anything as formal as a written contract, do I?
Absolutely you do, every time. The written contract defines the terms of your on-going relationship. There is nothing more important than that. Once the details are agreed upon in a written document, you can then go ahead with exemplary customer service and attention to detail. It is simply not possible to cover every detail with a verbal agreement.
So what are some of the reasons you may consider for bypassing a written contract?
It takes time and the customer wants the product or service in a hurry
If we suggest a written contract the customer may look elsewhere
This customer would never sue if we have a minor setback
We are sure they pay their bills in a timely fashion, they would not let us down
Our legal department can delay the process and we will lose the deal
If you are a small business owner, I am sure some of these points resonate with you. Any new account or business deal needs to be entered into with a feeling of confidence. If you are not absolutely sure of how or when you will get paid, how can you feel confident and provide your best work? You wanted that account so badly, but now they are refusing to pay. Contemplate that emotion for a minute, and you will wish you had everything in writing.
Remember, writing and signing a contract or agreement does not have to be complicated. There should be no assumption that one side is taking advantage - that is more likely to happen if there is no written contract in place.
A verbal agreement may feel comfortable, but the infinite interpretations of a handshake can be markedly different should a problem arise.
Make sure the contract is clearly understood by both parties. If either side is not clear on the implications, blame will be apportioned and bad feeling generated.
Keep track of emails and correspondence so you always have something in writing to refer to in the event of any issue or disagreement, or even minor point of clarification.
How can you be sure you have covered all the important points? Consider these useful links to start the process should you not yet have a written contract in place.
One final reminder; specify clearly how payment is to be made, even if you have to negotiate on terms, do not feel intimidated about discussing invoices and expectations for your accounts receivable. Most disputes end up centering around money issues. A clear understanding from the outset can certainly help resolve any potential misunderstanding.
One of the ways that many businesses are overcoming the challenges of slow paying customers is with invoice factoring — the sale of approved invoices to a third party in exchange for immediate cash to meet operating expenses.
Invoice factoring helps you pay your bills on time, every time.