Telling the truth about SME life today

Debt collection: get your terms and conditions right

Many SMEs are conducting business without clear terms and conditions, leaving them open to dispute and increasing the risk of debt.

A solid set of terms and conditions can help to protect businesses and makes it much easier to collect unpaid invoices and to resolve disputed accounts.

Should debt recovery action become necessary, appropriate terms and conditions also allow businesses to act quickly and to recover any associated collection costs.

Here are my top tips to help ensure your terms and conditions are enforceable, and that you can obtain payment quickly and effectively should any disputes arise:

  • Include the right to recover interest (and charges if you are a business selling to another business under the Late Payment of Commercial Debts Act 1998) and all debt collection charges incurred in securing payment, should payment not be made according to your terms.
  • Add a clause covering how long your customers have to query the goods/services after the date of supply, and how those queries should be sent to you – ie in writing to a nominated place or person in your business.
  • Ensure terms and conditions are included with any pre-contractual quote or estimate. Many businesses make the common mistake of believing that they are protected if they have their terms printed on the reverse of invoices. This is normally considered too late in the transaction to be legally binding on your customer.
  • Get acceptance in writing: this offers greater protection than implied or verbal acceptance of terms and conditions. 
  • Watch out for customers who send in their own order confirmation that refers to their own terms and conditions regarding payment. If you accept their order and do not challenge their terms, you will be bound by them.
  • Ensure any follow up communication such as order acknowledgement forms make reference to your terms and conditions.
  • Stipulate the right to refer disputes to a specific County Court (nominate your local County Court so it is more convenient for you to attend to give evidence).

Carole Hughes is the managing director of debt collection agency Daniels Silverman.


Related Stories

More From


If you enjoyed this article,
why not join our newsletter?

We promise only quality content, tailored to suit what our readers like to see!