02: Drawing up terms and conditions

Ideally, terms and conditions governing how you do business with your customers should be drawn up before you start trading. This will protect your rights and limit your liabilities, as well as providing security if things go wrong.

You may want to get professional advice when drawing up terms, but, in summary, standard payment terms should set out:

• Credit terms You need to include a specific term by which invoices are payable. Otherwise the law sets a default period of 30 days.
• A statement about interest on late payments Your terms need to highlight the fact that you have a statutory right to charge interest on late payments and claim compensation for debt recovery costs.

If possible, you should ask your customers to accept your terms in writing and before any invoices are raised. The law allows you to challenge customers who attempt to impose terms and conditions that remove your rights to claim late payment interest or compensation.