Customer contracts are essential to debt collection. Contracts can make a difference between collection and walking away with nothing. In a dispute, a signed contract can prove your case. Contracts can reduce the cost of collection if your customer agreed to them (in writing) in advance. Taking time at the start of a relationship or transaction to set details in writing will avoid problems down the road.
I have been writing and speaking to my clients for years on the importance of customer contracts and debt collection. Yet, every month I receive more large debts that are not documented, and I have to give my client the bad news that I cannot add collection costs, or that a certain dispute may not fare up in court.
What reasons could there be for NOT having a customer contract? Here are some of the worst I have heard.
“We have an understanding and do not need anything formal”
The days of the handshake deal are gone. Movie mogul Sam Goldwyn once praised the trustworthiness of a colleague claiming that his, “verbal contract was worth more than the paper it is written on”. Well, oral contracts are admissible as evidence in most courts, oral contracts leave you open to interpretation. In a dispute, how many of your customers are going to remember the deal the same way you do? Get contracts in writing.
“It is too much work and not worth the effort to get a contract on each customer”
What if I told you that getting the basic terms of your payment arrangements would assist you in the event of a customer dispute? How about if a customer contract could reduce your cost of collection? Would those factors make it worth your while/
In addition, in most instances, you do not need a lengthy document. You simply need to put the basic payment expectations and the consequences for non-payment in writing. If a new customer calls and orders your service, obtain an email address and send customer an email with your terms. Ask customer to confirm back to you. Voila, a simple contract!
“We’re a mom and pop business, and we do not want to scare new customers away by discussing payment (or non-payment)”
Every business, especially a small business benefits from great communication. If you start off a relationship with all parties in agreement, you are much more likely to succeed.