JCLM Solicitors Limited specialise in assisting SME owners- especially start-ups facing problems from non-payers, difficult suppliers and HR and employee issues. As a start-up ourselves we are more than familiar with all of these problems.
So what have we found is the most common problem afflicting SME start-ups?
Frankly: it’s having no Terms of Business in place when trading starts. Not even the back of a fag packet ones or those you find on the internet. This is far more common than you think: and you do need them. Everyone is friendly at the first business meeting but the smiles and can turn to frowns when monies are owed. You think that boiler will get you through another winter right? It might not- you probably need insurance cover the same as you need proper Terms of Business.
So without Terms of Business what are you supposed to do if things go wrong? Who do you complain to? And if they refuse to play ball where do you go then? Do you really want to go to Court?
One of the main problems in having no terms of business is the lack of clarity as to when you are due to be paid for your services. Is it 30 days, 60? 90? It hardly helps your cash flow and business planning- nor will it impress your Bank Manager or investors.
Proper Terms of Business can deal with this: we would always recommend for commercial debts that payment is due from presentation of the invoice (when you have done the work) and if payment is not made within 30 days you can reserve the right to charge interest in invoices not paid at the rate applicable under the Late Payment of Commercial Debts (Interest) Act 1988.
Terms of Business can help you in many other ways too: a Dispute Resolution Clause may require the parties to resolve the dispute through mediation or informally between themselves before anything gets to Court: a clause as straightforward as requiring the parties to resolve their dispute by “friendly discussions” has been held to be effective by the High Court- JCLM have extensive experience of acting in these matters and resolving them before the matter goes to litigation.
Of course, it may be that you are on the wrong end of unfavourable Terms and Conditions. Sadly, the 2013 Late Payment Regulations do enable customers to specify any length of payment period so long as it is not “grossly unfair.” So what if you have to wait 60 days or 90? In our experience you are far more valuable to clients than you think: they are quite likely to agree to a more favourable payment period than risk going elsewhere- especially when trust has been established. Besides, you are not their Bank- you have bills to pay every 30 days so why should you wait? JCLM can carry out these negotiations for you- hopefully there will be a variation clause that will allow the Terms and Conditions to be altered: if not we can use a side-letter or just start again.
JCLM offers a monthly service for SMEs we advise on day-to-day matters (such as Terms of Business) plus risk, compliance and litigation for a monthly fee.
More details can be found at www.jclmsolicitors.co.ukhttp://www.jclmsolicitors.co.uk