Contracts are the single most important part of a credit agreement. Every great customer relationship hinges on communication, and a best way to communicate with customers is to detail your terms and conditions in a customer contract.

In many states, Maine among them, oral contracts are legal. However, oral contracts leave are open to interpretation. In a payment dispute, I can guarantee that your customer’s recollection of your oral contract will be different than yours. Why take the risk? Get it in writing!

Your may feel that your business cannot support getting all customers to complete a long contract, and that may be true, but the point is, your contract does not have to be complex. One of my clients is a commercial cleaning service. They take new orders over the phone and were getting burned by people who thought the cleaning was “too expensive” after the job was finished. The owner of the company began using her iPad to send a quick confirming email to customers confirming basic details of the job: hourly rate, minimum hours and estimated number of hours. She asked customers to agree to the terms in a return email.

Just like my customer did, you have to make sure that your contract is bilateral. Make sure the other party agrees to it. Another of our clients put a large, expensive refuse container at a home. The homeowners were away when the container was delivered, and so never signed the contract. They have not paid for it, and my client cannot enforce the terms of her contract that allow her to charge monthly late fees, interest and cost of collection. It is not enough just to tell customers your terms. They must agree to them in writing. Business owners often tell me that they put their payment terms on the invoice. That is too late. Certainly your invoice can repeat your payment terms, but they must be agreed to by both parties in advance.

To protect yourself, make sure you include the nature and extent of the service/product, price, payment terms and consequences. If you can convince your business customers to sign a personal guarantee, all the better.

Of course, if you can afford a contract drawn up by your attorney, you will use it again and again and it will become your best friend. However, do not let anything stop you from obtaining a basic written agreement.