If you’re running a tradie business, you know that client relationships can be tricky. Knowing how and when to follow up non-paying clients can be a minefield. Too often you will have a list of people on hand who owe you money, but for whatever reason, haven’t come through with the payment. What you might not know is this:
The most effective and scalable way to ensure you maximise your cash flow is to set professional, relevant terms of trade. These terms don’t just work for you – but they also help set expectations and provide peace of mind for your customers as well.
When we say ‘terms of trade’, what exactly do we mean?
When you sell anything as a business – whether that’s a physical product or a service such as a tradie skillset – a sales contract process occurs. As we all know, sometimes sales don’t run completely smoothly, and this can bring about misunderstandings or even conflicts. Unless you have the means (and time!) to deal with lawyers, there’s a murky grey area where small tradie businesses need to deal with these issues themselves.
Terms Of Trade work to resolve a lot of that murkiness. They are simply the legal framework for both parties: you as the service provider (or ‘seller’), and your client (or ‘purchaser’). They outline both the rights of the business, and the obligations of the client. It can help set clients expectations early on, through making the overall sales process clear.
You need to give each client the opportunity to review and accept your terms before you start any work for them.
Yes, there are laws and regulations in both Australia and New Zealand that outline consumer rights, but these don’t cover everything you need to protect yourself in business. Plus, they protect the consumer: not you. Nor do they protect your business and commercial clients.
This is a good thing: it means businesses can work within the law to set their own policies for things like payment terms and dispute resolution, in a way that best works for them.
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Why are Terms of Trade different for every trades business?
Because every business is different! Your terms need to fit with the way you like to work, and how you expect to get paid for that work. They change depending on the type of business you run and the clients you typically trade with.
For example, an electrician that works in residential homes and deals directly with the public will have different terms to another electrician who subcontracts for large building companies. For big corporates, complicated jobs or other tricky situations, you might have long and detailed trade terms; others may find that only a few pages works best.
No matter how they are structured, it is important that you make these terms available to your clients at the time of signing the contract and before you start any work for them; once the terms are accepted they are legally binding on both you as the seller and your client as the buyer.
If you don’t give your client the opportunity to access or view your trading terms, then you won’t be able to enforce them. You can change the terms after you start work, but only if both parties agree.
How do I make my terms of trade available to potential clients?
All potential clients need to be able to read your terms. Consider having them on service contracts, account application forms, quotes, invoices and even physically displayed if you have an office or premises that clients can visit. You should also have them available on your website, or at least include a link to access them. You need to show that clients have agreed to your terms, so they either need to physically sign a copy or click ‘I agree’ (or similar action button) online.
How does all of this help my business?
When done well and tailored for your specific business needs, your terms of trade protect and ensure your incoming revenue. It can provide clear steps to resolve any issues that might come about on the job, such as:
Remember, well set-out terms of trade helps minimise unforeseen costs for your tradie business and most importantly, they help ensure you Get You Paid Faster.
Want to know your business is protected by custom terms of trade?
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