Invoicing and payment terms

Setting terms and conditions


Terms and conditions - sometimes known as terms of trade - are the terms of the contract between you and your customers. They're designed to protect your rights, limit your liabilities and provide you with some security when you sell your goods or provide a service.

Many businesses supply goods and services on the basis of informal, verbal arrangements. However, if agreements are clearly set out in writing then there is less chance of a dispute.

It's important to get your terms and conditions right - if they're inadequate or incorrect, it can be difficult to pursue or prevent bad debt. You could use different terms and conditions for each order, but it can be beneficial to have standard terms for all transactions. If you decide to draft standard terms, it is a good idea to consult a solicitor. See find a solicitor for your business.

Your terms and conditions should cover information on costs, delivery arrangements, data protection and your right to charge interest on late payments.

You should also incorporate payment terms into your standard contract for all the payment options you offer.

There are other terms and conditions you may want to cover, such as:

  • retention of title - allows you to retain ownership of goods already supplied until they are paid for
  • time limits for raising a dispute
  • circumstances in which the contract might be breached or come to an end
  • contra and offset deals against payables - where the buyer pays you in part or full with their products rather than in cash

You may also want to include a clause in your contract regarding credit limits and credit periods. There is currently an automatic default period of 30 days if you do not account for this in your contract - see ensure customers pay you on time.

Make your terms binding

You need to make your customers aware of, and agree to, your terms and conditions. You can do this by printing them on the back of invoices, delivery notes and other documentation.

Explain your terms and conditions to customers at the start of your relationship, before you raise an invoice.