How Can My Contract Help Me Get Paid On Time?

Customers failing to pay on time can be very difficult for both large and small businesses, as cash flow is critical for every business. However, it is always best to take proactive steps to prevent non-payment in the first place. There are various ways in which a robust contract can help you get paid on time. This article will outline key clauses to include in your customer contract to help you get paid on time. 

Importance of Having a Contract With Customers

A customer contract is a valuable and vital legal document. A well-drafted contract not only sets out the terms of the working relationship but can assist if issues arise.

Although there are legal options that a business can pursue in the event of non-payment (such as taking the customer to court), robust contract terms can help avoid this. Bringing legal action and taking a non-paying customer to court should always be the last resort.

How a Contract Can Help You Get Paid On Time

The following are some of the key terms your contract can cover to help you get paid on time.

1. Clear Payment Terms 

Clear and robust payment terms in your customer contract are crucial to avoid issues with non-payment. Your contract should set out precise invoicing and payment dates so customers know when they need to make payments.

Ensure you set out the trigger for payment so the customer knows when they need to pay and how much. If you are going to charge for additional expenses you have incurred, make sure you have documented this in your terms so the customer does not receive a shock invoice.

You can also include commercial terms to further protect your business, such as requiring customers to pay you upfront or pay a deposit for your products or services. This could also help reduce the risk of non-payment after you have delivered your products or services.

2. Details if Payment is Late

A contract can protect your business in several ways if a customer pays late. For example, you might include provisions stating that interest will accrue for late payments. These clauses can be very effective, as reminding customers that interest is accruing can prompt them to settle the sums they owe.

You can also include a clause stating that time for payment is ‘of the essence’. This means that the customer failing to pay will usually give you the right to end the contract. Including this right will likely prompt customers to pay your business on time.

Another alternative is a clause allowing you to terminate the contract if the customer fails to pay or stop delivering the services until payment is made. Again, this may worry the customer and encourage them to settle their invoices as per the contract terms.

3. Dispute Resolution Methods 

Unfortunately, problems and disputes do arise from time to time. For example, a customer might withhold payment if they think there is a problem with the products or services. To help in this situation, you can include a specific invoice dispute resolution clause in your contract to set out a procedure to informally resolve invoice disputes with customers.

It is also critical to include contact details of your business within your contract. These details will inform your customers of who to contact about invoice queries. Pointing your customers to the most appropriate phone number or email address will assist in resolving the issue swiftly. Otherwise, you risk frustrating your customers and potentially losing future business if they have to jump through hoops to raise a complaint.

By including ways to resolve problems over disputes, you can informally address concerns to encourage resolution.

Guide to Resolving UK Business Disputes

This guide outlines how to resolve commercial disputes.

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Understand and Comply With Your Contract Terms

Having robust terms in your contract is valuable for your customer, but you should make sure you follow them, too. In particular:

• ensure that you invoice your customer in accordance with your terms; and 
• when invoicing, provide clear information on how the customer can pay.

Importantly, you should understand the terms of your contract and what the payment provisions say. Having confidence in your terms and what you have agreed will help when having difficult conversations with customers – you can point to the relevant contractual provisions they have signed up to help prompt them to pay.

Key Takeaways

No business wants to experience problems with customers failing to pay on time, as this could seriously impact cash flow and business operations. It is always better to be prepared, so you should be proactive by including robust contractual terms to help you get paid on time.

If you need help drafting a contract to help you get paid on time, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.