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Contracts – Worried about the wrong thing?

I was chatting to Sarah Fox (500-Word lawyer and a member of our editorial board) about the mismatch between contract clauses people query and what actually causes problems down the road.

Contract worries

Pre-contract people worry about limits on indemnity

Corporate clients tend to come back wanting promises of massive liability cover (indemnity) and insurance. They seem to do this regardless of whether you have got a £50 gig or a multi-million-pound contract. For a small business VA or web designer, the whole thing can seem terrifying – particularly if you are not running a limited company since everything you own is on the line if something goes wrong.

Because our contracts are written with the micropreneur in mind, we set a limit on the amount of money you can be liable for. But this can sometimes fall on stony ground with lawyers who are used to working with big suppliers.

There are many ways to solve this problem, from professional indemnity insurance to negotiations and it is rare this is not sorted out amicably with a bit of help from KoffeeKlatch if your client’s team know what they are doing.

Post-contract worries are entirely different

In reality, the vast majority of work is carried out without anyone being liable for anything because nothing damaging (or nothing that can’t be fixed) goes wrong. All that worry and negotiation is often wasted.

The real small business contract issue is getting paid

Annabel Kaye – KoffeeKlatch

Your contract should focus on getting you paid

For all the negotiations about limits of indemnity the real day to day problem micropreneurs have is getting paid on time – or even getting paid at all.

We often get new business owners saying to us “Why is there all that stuff about late payment – why will I need that?” The sad reality is that no one asks that after a year in business. Creating a business and contractual model that means you don’t just get the work, but you also get the money is one of the biggest challenges for any small business.

This is doubly so if you provide services since you can’t get your time back if the client does not pay you.

Your contract should be clear about payment from the start

contract clear money

Your contracts should be crystal clear from the start about what exactly you are doing, at what cost and what is extra. Sending a client an unexpectedly large bill is a sure-fire way to trigger slow payment, even non-payment. And of course, you will have a dissatisfied client.

Make sure how much you are very clear about your charges AND your payment terms. And don’t forget to set out what happens if you don’t get paid on the right day.

So many small businesses are working for free by providing services to clients who ultimately never pay.

Good contracts reduce the miscommunication

A contract that works the way you work will reduce the chance of a client misunderstanding the price and payment terms. When you reduce the change of genuine misunderstanding you have fewer payment issues to deal with.

And if you are unlucky enough to work with someone who never intended to pay you, keeping yourself in check and not doing too much work before you get paid and holding onto the rights in your work until you are paid, will give you lots of options on how to handle the odd dodgy one.

Contracts are there to help you both get along

So many startups think a contract is a nasty thing that you only issue when you have a big business. People often tell us

“I trust my clients and that is all I need”.

Business Owner

A good contract adds to the trust you both have in each other – it does not take it away. And these days there are some things you have to have in writing anyway however much you trust each other.

If you are just starting out, it is worth getting on top of all this before you go too far. And if you have been working for a while without contracts (or ones you copied from some other business) it’s a great idea to review yours and make sure they really do what you need them to do.

Contracts should reflect the way you work

Contracts are not there to fill some paper with jargon that no one can understand. They are a powerful tool to help you work clearly and seamlessly with your client in a way that reflects your business model and the industry you are working within.

Check out our contracts for your sector – and see what we can do for you today.

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