Terms and conditions should form the basis of any contract between you and your customers, enabling you to protect your rights and help recover debts.
The main late payment protective provisions that all T & Cs should contain are clauses allowing for interest to be charged and title to be retained when goods have been sold but payment has not yet been received. Remember, the right to claim interest is not compulsory even if included in your terms, but will prove to be a useful bargainning tool should you need to extract payment from a customer.
Many SMEs don’t realise that even if they do not provide provisions within their terms that the law allows them to claim interest at 8% above the Bank of England reference rate on business to business debts. The Late Payment of Commercial Debts (Interest) Act 1998 (as amended) gives the right to add this interest as soon as payment is overdue. A default period for payment of 30 days from invoice is set unless a different period has been agreed.
Having a well drafted set of T & Cs provides a business with a better chance of maintaining good cash flow through limiting your liability, whilst also giving you the contractual force to pursue customers who fail to meet obligations.