A mentor or advisor is immensely important to your business’s growth, development and success. The right advice from professionals provides peace of mind that things are covered and the company is on the right track to achieve your goals. Two things I have noticed when talking to local business owners regarding advice are: 

  1. many people don’t consider the extent to which advisors or other professionals are acting on their behalf; and
  2. advisors or other professionals are not directly responsible for the outcome of any advice they provide (or lack of), including any financial loss due to a lack of advice. 

Something that has brought this to my attention is when companies have entered into liquidation in the last few years. Several local business owners have lost money as they were unsecured creditors when Tamarind Taranaki, Navigation Homes and several other businesses entered into liquidation. Losses have collectively totalled well over a million dollars for local operators and the Taranaki business community. How much better would our region be if local operators who work hard for their money got paid over a million dollars, then this flowed onto everyone else like local suppliers, contractors, small businesses and shops? And when you consider these businesses all had advisors and professional advice, it raises the question, who is responsible for getting good terms and conditions of trade and Personal Property Securities Registrations (PPSR) in place to protect local operators?

The answer to many has been Debt Free, with many happy clients and comments like ”where have you been?” and “we need more people like you”. We specialise in terms and conditions of trade, and to add additional value, we offer assistance with credit checking, account monitoring and PPSR services at no expense to help local operators avoid future losses. When you work with us, you will be safer in business with rock solid business documentation that is up to date, know about credit checking services and the PPSR and be utilising these excellent tools when appropriate. Getting the right advice is paramount in business, as is ensuring the extent of any services are clearly understood.

Without exception, a lack of passion is the number one thing I have seen that leads to a lack of success in business, which is a snowball effect. A demanding client, job or financial stress can test your resolve and your passion, making your job even less enjoyable, again decreasing your passion. In contrast, a passionate person’s effort and willingness creates success, reinforcing and igniting their motivation.

Being part of the passionate Debt Free team is unique because we all genuinely care about our clients and understand the enormous value we can provide. The business documentation, credit checking, security interest and debt recovery services we provide make a massive difference. We help business owners focus on the activity they got into business to do and are passionate about. No one thought, “I love building or electrical work, I can’t wait until I can do lots of paperwork and chase debtors”.  

To be passionate about something, you need to believe in it. Whatever it is that you do, you need to see the benefit. If you provide insurance, read articles on families left homeless and penniless after an accident with no insurance. If you help people with tyres, read about stopping distances and the difference that good tyres make in saving lives. Once you see yourself as the holder of the solution to a very serious issue, the passion will ignite, and you will see the results.

People say, “passion isn’t everything, you need skill and knowledge” – yes, that’s true, but how much easier is it to learn a skill or gain knowledge in an area when you are passionate about it. And if my passion ever wavers, all I have to do is call up one of my existing clients and ask, “how has your interaction with Debt Free and myself improved your business?” and I’m back on fire again.

At the start this month, I spoke to a client I had visited in December of the previous year due to a debt issue. The client had weak terms of trade at the time that were rehashed from an old set the previous owners had left behind. They were inadequate and failed to protect the business in critical areas that it had exposure due to dealing with new customers. I quickly ended the policy of extending $5,000-$10,000 credit on a verbal agreement over the phone and helped to implement terms of trade, Personal Property Security Registrations (PPSR) and credit checking processes for the business.

The client decided in December to make his business more professional, make his company a lot more secure and make his job in business a whole lot easier. He took his initiative and saw a chance to add value to his business, and comprehensive terms of trade and being a secured creditor through the PPSR did just that.

I emphasise the decision made in December because that decision made a month prior saved him $25,000. In January, a company had attempted to not pay $10,000, which our implemented terms of trade and effective collection process solved at no expense to our client due to the legal ability to on-charge the debt costs. In the same month, a company had entered into liquidation owing $15,000 to our client, which was paid in full from the liquidator due to being a secured creditor.

Speaking together, we agreed that he needed to put things in place when he did and that being $25,000 better off was much better than losing the money. I am thrilled with this outcome and can’t stress the importance of getting comprehensive, industry-specific terms and conditions of trade in place while things are going well in business.

Two important things happen when you say to your client I need you to sign or agree to our terms and conditions of trade:

  1. you are viewed as professional: your clients now see you as a business owner who has gone to the effort of setting up business documentation with correct legislation to protect clients and yourself. Your clients respect you, and they are clear on what you expect;
  2. a commitment is formed: when someone signs Your terms of trade, they are committing to the project, payment and agreeing upon your terms, including any outcomes that may arise.

Beyond these two benefits, commitment on paper to your business documentation has a ‘superman and kryptonite’ effect on problematic clients. Bringing out your terms of trade is a great way to avoid issues in the first place, as most people who are going to cause you problems, dispute or be slow on payment will know what business documentation is and why all major companies use this – because you can’t escape paying the bill. 

Due to the psychology involved with signing a Terms of Trade (knowing there will be consequences), problematic clients will look elsewhere to greener pastures or the unsuspecting local competitor who will do the job on a handshake and deal with the problems at the other end when payment is due.

If you are a business owner who wants to take control and have a smart, secure and smoothly run business, contact Debt Free to talk about getting the correct documentation in place for your business, as when someone signs your terms of trade, they are then fully committed, just like you are.

The Personal Property Securities Register (PPSR) of 2002 brought a whole new opportunity for business owners or creditors. A chance to be paid in full before other creditors, which is an amazing benefit, however, there is a downside if you do not utilise this opportunity and sit as a default unsecured creditor.

Something that is not widely known is a liquidator’s right to challenge money back off businesses who sit as default unsecured creditors (voidable transactions) when they are paid from a client up to 6 months before they enter into liquidation (sometimes two years). That’s right, a client can pay you and then months later, you can receive a letter from a liquidator asking you to pay the money back. This is because of the chance that the unsecured creditor would receive more money than they would in the normal liquidation process, therefore making it unfair for other creditors who are secured and have utilised the PPSR. There is a valid and just cause; to stop businesses from paying out associates, friends or companies that have a personal guarantee before insolvency and to allow funds to be distributed among creditors more fairly when liquidations happen.

Like all things, there are positives and negatives to this situation. Liquidations are now handled far more ethically as there is no way for creditors to get lucky and get payment due to the timing of the invoice. However, if you are an unsecured creditor, you will most likely not get paid much, if at all, and are exposed to having the money you have already been paid challenged.

It is about having up-to-date business documentation and PPS Registrations in place with your commercial clients to ensure you get paid for your work but also aren’t open to having recently paid invoices challenged by a liquidator. Never before the introduction of the PPSR have business owners had this opportunity. Beforehand there was no way to secure your invoice value in the event of insolvency, so this should be approached as a positive, and it comes down to a simple saying with the PPSR, “use it or lose it”.

In today’s modern age, a well-drafted Terms and Conditions document is essential for any business offering services or products on credit. Often also referred to as Terms, Terms of Service, Conditions of Sale, or General Conditions, this document sets the foundation for the contractual relationship between a service provider and its clients. At Debt Free, we emphasise the importance of having robust Terms and Conditions to protect your business, manage risks, and ensure smooth operations.

What are Terms and Conditions?

Terms and Conditions are legally binding agreements that outline the rules and guidelines clients must follow when using your service or acquiring a product from you. They serve multiple purposes, including protecting intellectual property, limiting liability, and clarifying the responsibilities of both parties, including payment obligations.

Benefits of Terms and Conditions

When are Terms and Conditions Needed?

Terms and Conditions are particularly crucial for:

Your business’s Terms and Conditions are the foundation for all contractual relationships between you and your clients. Clearly outlining these terms helps address key issues in your business dealings and reduces potential risks.

If your business operates on informal agreements, like a handshake deal, without clearly defined terms and conditions, you rely on your clients’ fairness. This also means you risk operating under their terms, which could lead to unfavourable outcomes. In situations where you need to enforce the agreement, certain terms might be implied without your knowledge, creating unintended consequences.

The Importance of Customised Terms and Conditions

Often, businesses use terms and conditions that have been pieced together from other sources or downloaded online. This approach is risky because the terms may not be tailored to your business needs. When someone without specific expertise alters these documents, they may become unenforceable or invalid legally.

Our process involves working closely with you to create terms and conditions specifically designed for your business. Drawing on our experience in commercial disputes and debt collection across various industries, we ensure your terms are aligned with your business requirements, minimise risks, and enable you to enforce contracts effectively.

Key Elements of Terms and Conditions

When developing or reviewing your terms and conditions, it’s essential to address the following factors:

  1. Acceptance: At what point is the agreement binding and enforceable?
  2. Title and Risk: When do the goods legally transfer from your business to the client? Who is responsible for insuring the goods, and when does this responsibility start? What about goods in transit?
  3. Obligations: What obligations does your client have once the agreement is in place? What are your business’s obligations, and when must they be fulfilled?
  4. Price and Payment: How is the price determined, and under what conditions can it be changed? When and how should payment be made?
  5. Warranties: Does your business offer any warranties, or are they limited to third-party warranties?
  6. Liabilities and Indemnities: Are there any limits to the liabilities of each party? Are there situations where one party must compensate the other?
  7. Default and Consequences: What constitutes a default, and what are the repercussions if either party fails to meet their obligations?
  8. Termination: Under what circumstances can the contract be terminated, and by whom? Are there any provisions that remain in effect after termination?
  9. Confidentiality and Intellectual Property: How is confidentiality maintained, and who owns any intellectual property created under the agreement?
  10. Disputes: What process will be followed if the parties cannot resolve a disagreement?
  11. Privacy: How is the client’s personal information handled in compliance with the Privacy Act 2020?
  12. Security: If you offer credit terms, can you secure the money owed by claiming your client’s property?
  13. Non-solicitation and Restraint: Can your business prevent clients from soliciting your employees or other clients?
  14. Legislation and Governing Law: What laws govern the agreement, and which courts have jurisdiction if disputes arise? If you operate internationally, can foreign courts enforce the contract?

Crafting Effective Terms and Conditions

Tailoring your Terms and Conditions to your specific business needs is essential. Consult a Professional like Debt Free to ensure your Terms and Conditions are comprehensive and legally compliant. After all, we are the only business in New Zealand that guarantees our terms and conditions, which were created using the most respected law firms in New Zealand.

Determining When Terms and Conditions Take Effect

The effectiveness of terms and conditions largely depends on the clarity of the language used. Courts tend to favour clear, unambiguous terms that ensure all parties are fully aware of their obligations. Ambiguous language can lead to disputes, so businesses must communicate in a way that’s easily understandable by the average consumer.

Acceptance

A critical factor in the enforceability of terms and conditions is understanding when a client accepts them. Once accepted, both parties are legally bound to fulfill their obligations as outlined. Without clear acceptance, the contract may not be legally binding, and the terms cannot be enforced.

There are two main types of acceptance:

Businesses often rely on implied consent through website usage, but this approach is riskier. Explicit acceptance, such as a client clicking “I Agree,” is more legally secure.

Timing of Terms and Conditions

The timing of when terms and conditions take effect depends on the context of the transaction. Here’s how timing may work in different scenarios:

  1. Pre-Contract Negotiations: Before a contract is formalised, businesses and clients often engage in negotiations. During this stage, terms are not yet binding. The distinction between an “invitation to treat” (an invitation to negotiate) and an “offer” (a proposal to form a contract) is essential. Only once the offer is accepted do the terms become legally binding.
  2. Online Transactions: In online transactions, there are two common mechanisms for accepting terms and conditions.

Other Key Considerations

In New Zealand, businesses must be mindful of the Consumer Guarantees Act 1993, which protects consumer rights. This legislation ensures that businesses provide fair and reasonable terms, adding an additional layer of protection in consumer transactions. To avoid penalties and disputes, businesses must ensure their terms and conditions comply with these legal requirements.

Common Misconceptions and Tips

Key Takeaways

If you have any questions then please feel free to reach out to us at Debt Free and the team will be happy to help.