Who owns the goods?
The goods you sold are in your customer’s warehouse but they haven’t been paid for. Due to the economic slowdown, they’ve now gone bust. What steps could you take to improve your chances of getting paid or recovering the goods?
Going, going, gone
When you’ve fulfilled an order you’d like to think you will actually get paid, but even in “normal” times customers can get into financial difficulty. So now that trading conditions are poor you might expect payment to take longer. That’s bad enough, but it could be worse. Where do you stand if your customer has ceased to trade or has gone into liquidation with your goods in their warehouse?
Good condition
If you have retained legal ownership of goods supplied for which payment has not been received, you will be entitled to recover them. It shouldn’t be too difficult to arrange collection even if a liquidator has been appointed. But don’t delay in informing your customer or the liquidator or you could lose your right to making a claim. If ownership has passed to your customer, as a trade creditor that will probably put you in a long queue with many others, behind the likes of HMRC. So how can you avoid this predicament?
Terms and conditions
Before delivering goods to your customer it’s advisable to send out your “terms and conditions” (T&Cs) of sale in writing (e-mail or fax will suffice).
Tip. Your T&Cs should include a clause stating that you retain legal title for goods supplied until paid for.
Trap. Some of your customers, particularly larger businesses, may issue their own terms and conditions, after they have placed their order with you. If you do nothing you could, without realising it, have accepted their version in substitution of your own. If necessary, re-send your version to the customer.
Timing is important
You cannot impose retrospective T&Cs. Therefore, it’s not sufficient to provide your customer with a copy of these at the time you send them your invoice, unless it’s in advance of delivery.
Tip. Send a copy of your T&Cs to your customer immediately after you receive an order. And ask for their explicit agreement before you supply the goods.
What should T&Cs include?
If you are writing your own T&Cs, the following points are essential and must be included:
1. A payment period, e.g. 30 days.
2. Whether you will charge interest on late payment.
3. If you will offer a discount for early payment.
4. A procedure for notifying queries or complaints.
5. Retention of title (see above).
6. Any relevant law (see below).
The law will affect the T&Cs you can insist on, e.g. Consumer Credit Act 1974, and so you must include any relevant references to this. If in doubt, you should consult a solicitor for advice.
Tip. You can purchase pre-drafted T&Cs suitable for your type of business, e.g. retail (see The next step). These will include references to the appropriate law, and can cost as little as £30.
For where to buy pre-drafted “terms and conditions of sale”, visit http://companydirector.indicator.co.uk (CD 10.10.05).
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