“Ask CashFlo” is a credit and collections advice column for small businesses. Questions may be submitted via email to flo@askcashflo.com. Follow Ask CashFlo on Twitter @AskCashFlo. CashFlo reminds readers that she is not an attorney and nothing in this column should be construed as legal advice. As CashFlo always says, “When in doubt, consult your attorney”.
Dear CashFlo,
I recently took a delinquent customer to court and I lost the case because the customer argued that they did not have to pay because they had no contract with me. Even though I had invoices showing all the work I did, the judge ruled against me. It is so much work to have all customers sign a contract, but I am considering it after this experience. Would a contract have helped me?
Signed,
Angry in Augusta
Dear Angry,
I love this question, and my answer is a resounding YES! A good customer contract allows you to:
- Memorialize all details about your service (scope of project, costs) and enables a customer relationship based on good communication.
- Collect customer information you may need at a later date.
- Detail all payment terms.
- List consequences of late payments, and non-payment. (Interest rate, recovery of collection costs)
- Can include a personal guarantee, which makes an individual responsible for a business debt if the business is unable to pay.
- Assist with and document bad debt collection.
- Serve as proof in a court of law that services were requested.
Ask your attorney to draft a contract today. It will not cost you a great deal and will be best money you have ever spent, as you can use it again and again, and it will save you money in the long run.
Sincerely yours,
Cash Flo
PS Want more ideas to minimize bad debt in your business? Here you go!
