Ask yourself, Are you a business or a bank?
In 90 days that money you are owed is worth 80% of what it is worth now.
Cash is the lifeblood of the business. No cash – No business.
The lack of cash has been cited as one of the main causes of small business failure.
At a Rightway Accountants Seminar at The BNZ in Motueka last week, Rightway accountant Olivia Van Vugt stated that “There are an estimated 460,000 small businesses operating in New Zealand, 97% of these businesses have between 1-20 employees. Of all businesses started up in 2010 25% died in three years and 50% are no longer around”.
Often small business failure is due to neglecting the less sexy part of the business. “Terms and Conditions of Trade”. Sure there is a never-ending list of tasks to complete, getting your product ready, finding customers but ignoring Terms of Trade could impact your cash flow through delayed payments and having to pay for materials before taking payments.
In a worst case scenario, you could end up spending lots of money and wasting time on debt recovery. Late payment is a fact of life for small businesses, as customer often give lower priority to invoices from small firms. With the right terms in place, however, you can ensure you get paid first.
Get your terms right and there’s no excuse for slow payments.
Simply, if you don’t specify terms and conditions you put yourself at risk of uncertainty and misunderstandings – it is vital to establish the actual arrangement between the two parties involved in any deal. You need to cover yourself, so clients or partners have no opportunity to go back on their word.
Well drafted terms should act like a manual or recipe book for doing business and having absolute clarity on what should happen in a given situation. It’s important your “Terms of Trade” are specifically written for your business – you can’t assume another business will have the same needs as yours.
Don’t wing it! Get your “Terms of Trade” sorted. It should be something that you revisit and update,
as and when required.
Area Manager – Nelson Marlborough and West Coast