Communicate it to your customers

Contracts protect the legal interests of the parties involved. However, the value of a contract as a communication tool is frequently overlooked. You can use a written contract to establish a solid relationship and create a clear agreement with your customer. When such an agreement is made explicitly, you’ll have a better chance of getting paid on time.

Establish an effective credit policy, and put it in writing. Make the terms and language clear—you may even want to run it by a few regular customers to make sure it’s easy to understand. When you start making sales under your new credit policy, get your customer’s agreement up front. Ensuring that the customer understands and agrees to your terms can avert future misunderstandings. A signed, written agreement made prior to the sale also extends the time to legally collect debt from three years to five.

If you make changes to your credit policy, notify current customers in advance of the next sale. Unexpected deviations from the old policy can surprise and possibly alienate some customers. Send an e-mail or a letter stating how the new policy will affect them.

Invoices should display credit terms prominently. You can speed up collection of money due to you by displaying payment terms directly on your invoices. You can also add a custom message on the footer of the invoice stating what your recourse is for late or non-payment of invoices.

Some businesses, like construction or consulting, benefit from having a more detailed contract prior to sending an invoice. Below is a list of basics to include in a contract. For legal advice, consult your attorney.

• business name and address
• customer name and address
• a description of the goods or services, including quantity and price
• amount of payment and when due
• what your recourse is for late or non-payment
• what the customer’s recourse is for unsatisfactory delivery
• duration of agreement, including how it can be extended or terminated early
• a provision for mediation or attorney’s fees in case of a dispute