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Unclear terms and conditions ignite payment disputes

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Unclear terms and conditions ignite payment disputes

SMEs have been warned of their vulnerability to payment disputes over unclear terms and conditions.


Debt collection agency Daniels Silverman warns that many small and medium sized enterprises are vulnerable to payment disputes because of ineffective terms and conditions.

Terms and conditions are currently ineffective at protecting SMEs, and the loopholes in the system are exposing them to increased risk.

By setting out clear cut terms and conditions, the business provides protection not only for the consumer but also for the enterprise itself. Clearly defined terms and conditions make it easier for the business to collect unpaid invoices and to resolve disputes.

Carole Hughes, Managing Director, of Daniels Silverman, said: “Many SMEs are conducting business without clear terms and conditions leaving them open to dispute and increasing the risk of debt. A solid set of terms and conditions can help to protect businesses and makes it much easier to collect unpaid invoices and to resolve disputed accounts. Should debt recovery action become necessary, appropriate terms and conditions also allow businesses to act quickly and to recover any associated collection costs.”

Terms and conditions are currently ineffective at protecting SME’s, and the loopholes in the system are exposing them to increased risk. There are many things that can be done to reduce the risks associated with debt collection costs.

Carole Hughes, Managing Director of Daniels Silverman, advises consumers to take the following steps to ensure they are protected should disputes arise,  helping SMEs to obtain payment quickly and effectively:


1. Include the right to recover interest (and charges if you are a business selling to another business under The Late Payment of Commercial Debts Act 1998) and all debt collection charges incurred in securing payment, should payment not be made according to your terms.


2. Add a clause covering how long your customers have to query the goods/services after the date of supply and how those queries should be sent to you i.e. in writing to a nominated place or person in your business.


3. Ensure terms and conditions are included with any pre-contractual quote or estimate. Many businesses make the common mistake of believing that they are protected if they have their terms printed on the reverse of invoices. This is normally considered too late in the transaction to be legally binding on your customer.


4. Get acceptance in writing, this offers greater protection than implied or verbal acceptance of terms and conditions.


5. Watch out for customers who send in their own order confirmation that refers to their own terms and conditions regarding payment. If you accept their order and do not challenge their terms, you will be bound by them.


6. Ensure any follow up communication such as order acknowledgement forms make reference to your terms and conditions.


7. Stipulate the right to refer disputes to a specific County Court (nominate your local County Court so it is more convenient for you to attend to give evidence).


By paying more attention to the terms and conditions they set out, SMEs can reduce their vulnerability, thus reducing the chances of them getting caught in a spiral of debt as a result of payment disputes.

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