Skip to content
Go to GoCardless homepage
PricingDeveloper API
LoginSign up
BreadcrumbResources

How to fix the 10 biggest mistakes with your terms and conditions of sale

What are terms and conditions of sale?

The terms and conditions of sale is a statement written by your business to inform your customers of the rights, roles, and responsibilities each of you has when you provide goods or services to them.

They typically include (but aren’t limited to):

  • When and how the terms and conditions apply

  • When and how payment should be made by the customer

  • What happens when things go wrong

  • How each party can terminate the relationship

  • Which country or state’s law governs the contract

Providing your customers clear terms and conditions of sale is an essential business practice, and one that can be under-prioritised in resource-strapped small businesses. However, without these, you expose your business to:

  • Unnecessary disputes from customers

  • Delayed payments

  • Time and money wasted on debt collection

  • Poor cash flow

  • Bad debt

With the Federation of Small Businesses in the UK discovering that on-time payments would have saved 50,000 UK businesses from failing, risking poor cash flow and bad debt could be to risk the solvency of your business.

Common mistakes in terms and conditions of sale, and how to fix them

1. Not having them written out and signed

If you run an early stage business or startup, or perhaps a family-run business that has previously worked with clients you have close personal relationships with, formalising your terms and conditions of sale in writing may not have been prioritised yet. Instead, you might be operating off of verbal contracts and good will.

This isn’t likely to work in your favour forever. Emma Jones, founder of Enterprise Nation, says “having terms and conditions protects you as a business.” If there’s ever a dispute between you and a customer - and you’re in the right - you’ll be glad you had the terms and conditions of sale formalised. Particularly if your customer is refusing to pay and your business is in desperate need of the cash to stay afloat. Joanna Tall, founder of Off To See My Lawyer, says “if the terms are in writing, it is evidence you can produce before a court if you need to.”

How to fix: Start writing them today. Consult a legal professional prior to issuing them to your customers, to ensure they meet the appropriate standard. When you do send them to customers, ensure they provide written agreement with a name, date, and signature. (With today’s accounting and documentation software, you don’t necessarily need to get a physical “wet” signature, and you’ll be making things easier for your customer if you offer them a simple, digital option.)

2. Agreeing them with your customer after work has already begun

Discussing your terms and conditions of sale for the first time with your customer after work has already begun puts a lot of risk on your business. Until your customer has explicitly agreed to those terms and conditions, they cannot reasonably be held to them. By waiting until work is underway - or worse, completed - you are both doing your customer a disservice (by not making your expectations of the relationship clear in advance) and opening yourself up to disputes and late (or even non-) payment.

How to fix: Email your terms and conditions to customers you’re currently providing goods or services to, and follow up with a call to confirm they have received them. Apologise for not providing them sooner, and politely request that they confirm their agreement in writing.

3. Only providing them once

Much like there are countless priorities within your business, the same is likely true for your customer. If you only provide your terms and conditions of sale to them once, you risk them forgetting them and accidentally breaching them.

How to fix: Send polite reminder emails throughout the process of completing works and collecting payment. Attached a copy invoice to each of these emails, with the terms and conditions of sale included in the same document.

4. Providing them to the wrong person

If your terms and conditions of sale aren’t provided to:

  • The person in your customer’s company responsible for approving the delivery of goods or completion of works, and

  • The person responsible for making payment

you’re opening yourself up to the risk of your customer having misaligned expectations, and you being paid late or not at all.

How to fix: Before undertaking any work for your customer, confirm the names, job titles, email addresses, and phone numbers of these two people in their business. Ensure they each receive and understand the terms and conditions of sale by politely requesting they provide written confirmation stating so.

5. Including insufficient or incorrect information

It’s easy to accidentally overlook some of the information that is necessary or helpful to include in your terms and conditions of sale. As well as make an unfortunate typo. Not only can this cause your customer confusion or frustration, it may leave you with little recourse if your customer has a dispute.

How to fix: Include the following in your terms and conditions of sale:

  • Your company details

    • Company name (including trading name, if applicable)

    • Registered company address (and postal and trading addresses, if applicable)

    • Registered company number

    • Jurisdiction company is registered in

    • Note: Your country or state laws may place certain obligations on you to display certain information - make sure you check these

  • Your customer’s company details

  • The term of the agreement

  • The scope of works, or goods, being delivered - so your customer knows exactly what they’re paying for, and the timeline to which it will be delivered

  • Itemised costs - so your customer understands what they need to pay you, and how you arrived at the total cost

  • Payment terms - when you send them the invoice, and how long they have to pay you

  • Late payment penalties - what happens in the event of late payment, including any additional fees or interest that will be added

  • Cross-border considerations - the currency or currencies you accept, who is responsible for any applicable international taxes, duties, or other regulations

  • Payment methods - which methods you accept, and steps for each for the customer to follow to make payment

  • Warranties or guarantees - specifying whether you offer your own returns or refunds, or if it is only the manufacturer’s warranty that applies, how the process is initiated, expected timelines, as well as notifying the customer that your agreement doesn’t affect any applicable statutory rights they have

  • Process for queries and disputes - including who to contact and the timelines within which each party must raise and respond to communications

  • How each party may terminate the agreement

  • The governing law of the agreement

And ensure at least one other person in your business reviews and proofreads the terms and conditions of sale before they are sent to customers.

 6. Writing them in a way that isn’t reader-friendly

Given the number of digital services we all commonly use on a frequent basis - email, social media, video streaming - how often do we actually read the terms of service? And how often are they succinct, clear, and easy to understand? The same issues that plague these are likely to make their way into your terms and conditions of sale. And if you’ve employed a lawyer to produce or approve them (as you should), they’re likely to be written in difficult-to-understand “legalese.”

By using wording that is difficult for your customer to understand, or content that is too lengthy or poorly formatted, you risk causing your customer confusion or frustration, and failing to establish clear expectations. This may result in unnecessary disputes, and late or non- payment.

How to fix: Read through your terms and conditions of sale with the mindset of a layperson, who may not have the same knowledge or experience as yourself. Better yet, have a layperson read through them and address any points of confusion that arise.

7. Having generous payment terms

According to accounting software provider Xero, common payment terms like 30-days or longer are “a throwback to the days of snail mail and payment by cheque.” With increasing adoption of electronic invoicing, continuing to offer lengthy payment terms puts your cash flow at a disadvantage, in favour of giving your customer’s an advantage.

Analysing millions of invoices sent through their own software, Xero discovered that the shorter you set your payment terms, the sooner you’re likely to be paid. However, they do note that “some customers may expect longer payment terms for bigger bills.”

How to fix: With almost 75% of invoices sent through Xero setting payment terms at 2 weeks, it’s a sign that industry expectations are changing, with payment terms shorter than 30 days being appropriate. Try negotiating shorter payment terms with some customers, to see what they find acceptable. You may be able to incentivise earlier payment by offering a small discount.

8. Not offering multiple payment methods

Consumer payment preferences impact their likelihood to make a purchase. By not offering your customer their preferred method of payment, you may harm the strength of your customer’s relationship with you, their inclination to pay on time, and their likelihood to continue to do business with you.

How to fix: Offer your customers a variety of payment methods, such as Direct Debit, bank transfer, and card payments.

9. Having someone inexperienced write them

In the very early stages of your startup or small business, your priorities will likely lie outside consulting a legal professional to produce terms and conditions of sale. But by hobbling together your own best guess at them, or simply copying an existing business’, you expose yourself to the risk of producing insufficient or unreasonable terms.

How to fix: Consult a lawyer experienced in producing terms and conditions of sale for businesses in your industry. You may also be able to find reputable services which produce generic terms and conditions of sale, and guide you on how to customise them for your business or industry.

10. Sending them physically

You might be used to sending or receiving terms and conditions of sale on paper, through the post. With the abundance of affordable accounting, payments, and billing software available to businesses today, continuing this practice only disadvantages you. Sending paper terms and conditions takes longer, is at increased risk of getting lost, and can be more expensive. Ultimately, you only increase your risk of late or non-payment.

How to fix: Ideally, adopt accounting, payments, or billing software that enables you to email your terms and conditions of sale to your customers with just a few clicks. At the very least, ditch the post and email them to your customer.

Key takeaways

  1. Have your T&Cs written out, and ensure your customer explicitly signs them off

  2. Agree them with your customer before work begins

  3. Send regular reminder emails to your customer about payment, including a copy invoice with the T&Cs attached

  4. Ensure you know who in your customer’s business is responsible for approving delivery of goods or completion of works, and who is responsible for making payment, and make sure they accept the T&Cs

  5. Make sure you have all the appropriate information in the T&Cs, and double-check they’re error-free

  6. Ensure they’re reader-friendly

  7. Shorten your payment terms as much as is acceptable for your customers

  8. Offer multiple payment methods

  9. Have an experience legal professional approve your T&Cs

  10. Send your T&Cs to customers digitally

Learn how to improve your cash flow even further

Check out the GoCardless Cash Flow Academy

View now

Interested in automating the way you get paid? GoCardless can help

Contact sales