Why Your Business Needs to Consider Having Written Contracts
Now that you’re in business, you’re probably wondering whether you should use written contracts. You may think that having written contracts between you and your clients makes business more difficult than it needs to be. However, that’s not true. There are several benefits to having a written contract with each of your clients.
Explains Your Role
A written contract is beneficial for both you and your client because it can be used to explain exactly what you will do for them. This is important because often when a breach of contract lawsuit is filed, it is because one party thinks that the other party should have done something. While this generally originates out of a miscommunication, it’s important to note that having a written contract that expressly lists what you will do and what you will not do can prevent a lot of misunderstandings.
Written Contracts Explain Billing and Late Fees
How often have you heard from a client who had a question about a late fee or said that they didn’t know they owed you so much money? Written contracts should include a section that discusses billing. This includes hourly rates, flat rates, late fees, and other fees that may be assessed. It should explain when late fees are incurred and how much they are. It should also explain when certain other fees apply and list the amount. For instance, if you accept checks and credit cards and the bank either sends you a notice of insufficient funds or if the credit card charges are stopped or frozen, you will likely want to charge a fee. Make sure that the clients know that you will charge a fee for these issues and the amount of the fee. Having it in a written contract that is signed means that both you and your client have a document you can read if there is a question about billing or fee matters.
Verification of Debt
In the instance that your client doesn’t pay, you may attempt to collect it on your own or send it over to a collection agency. When contact begins, the debtor has the right under the Fair Debt Collection Practices Act to request verification of the debt. A copy of the signed written contract along with the amount past due and the last time a payment was received may act as verification of the debt.
Personal Guaranty on Business Accounts
If you work with businesses, a written contract may be able to prove that a personal guaranty was provided in the case of default. Having a clause and getting the signature of the business owner may give you more collection options in the future.
Need Help with Past Due Accounts?
If you need help with past due accounts, give Clients ARM a call. We have more than 30 years of accounts receivable and collections experience. In addition to helping you with your past due accounts, we can also assist you by developing written policies and procedures for your company. Give us a call! If you have even one past due account haunting your accounts receivable, you qualify for a free process review. Contact us now to find out how you can put our experience to work for you!