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A small business can have hundreds or even thousands of transactions in a month. Some are routine sales or purchases, while others are more complicated, such as buying or leasing a building. Here are some suggestions for documenting your business transactions to protect both yourself and your company.
Avoid Oral Agreements
It’s a common situation for small business owners: a client or customer asks you to do something, and you say, “Sure, I can do that.” Business owners make these sorts of handshake deals all the time, but it’s a risky practice because the parties may have different understandings about what was agreed to. And if there’s a dispute, there’s no written evidence to back up your claim.
At the same time, a formal contract sometimes feels too formal and complex for the situation. There are several ways to deal with this problem:
Always Include the Basic Information
A contract should, at a minimum, contain:
Keep in mind, however, that the more specific you are about the terms of the agreement, the less likely that there will be differences in interpretation later.
Consider Using Terms and Conditions
A standard set of terms and conditions can help you avoid misunderstandings with clients and customers. Terms and conditions are simply your standard policies. For example, if you sell items over the internet, your terms and conditions might include such things as your returns policy. If you perform a service, your terms and conditions might include payment procedures and procedures for acceptance of work. Terms and conditions can also incorporate the type of “boilerplate” language that is typically found at the end of formal contracts.
If you have a set of terms and conditions, you can attach them to letter agreements, emails and estimate forms, noting that by agreeing to your terms, your client or customer is also agreeing to your standard terms and conditions. It’s a wise idea to have your terms and conditions written or reviewed by a business lawyer.
Hire a Lawyer
A contract can seem simple and straightforward, and small business owners on a budget may be tempted to write their own contracts or find a form in a book. While this may save money in the short run, a do-it-yourself contract may be unclear, overlook important terms or contain things that are not in your best interest. If a dispute arises, you may end up paying far more in legal fees than you would have paid to get a solid contract in the first place. Here are some instances where you should consider getting advice from a lawyer:
Some Common Types of Business Contracts
There are many different types of business contracts, but most fall into one of these categories: