As business owners, we talk about our obligations to clients all the time… like our commitment to creating quality work, doing that work within an agreed-upon timeframe, and providing our services with a smile.
So while we’re on that topic – when is the last time you thought about your obligations to yourself?
They could look like giving yourself learning opportunities to grow your skills, or plenty of rest time to recharge before diving back into work. Those are both definitely important.
But it should ALSO look like making sure you get paid for the work that you do… in the easiest, most painless way possible. After all, you’re not in business out of the goodness of your heart – you’re doing it to make a living, right?!
Unfortunately, I run into far too many business owners who neglect this all-important piece of their business. Many of them just aren’t sure how to go about ensuring they’re paid in full and in a timely fashion.
So today I want to chat about contracts and money, and how using the former helps make sure you get the latter! Ready?
Here are 5 ways a well-written, airtight contract can protect you and your money when working with clients:
States payment terms… and the consequences if you’re not paid
Aside from giving the nitty gritty details of how much your services cost, a contract also outlines what happens if payment(s) aren’t made on time. It explains consequences like late fees and collections upfront, and your client won’t be able to pull the old “I didn’t know!” trick if their signature is at the bottom of the page.
Clearly states what deliverables the client should expect to receive
It’s not just good business practice to let your clients know exactly what to expect – it also protects you if a client claims they haven’t received everything you promised and withholds payment. Clear descriptions of exactly what, how, and when you’ll provide your services or deliverables are harder to argue against.
Creates a paper trail you can refer back to
Email communications can be lost to the digital ether, and recalling verbal conversations (like what was said during a phone call) is an inexact science. With a signed contract, you have a permanent record of what you and your client have agreed to… one that will hold up in court if there’s a problem.
Reduces your liability in the event of customer dissatisfaction
No matter how good we are at what we do, we can’t control everything, and as a result it’s impossible to promise a certain outcome. But that doesn’t stop problem clients from wanting refunds because they didn’t get the “results” they were expecting. Protect yourself by clearly stating the extent of your responsibility and what you’re promising to accomplish in your contract.
Gives you an out in unforeseen circumstances
If (heaven forbid) you experience a major life catastrophe – severe weather, acts of war, a serious accident – a contract can limit your responsibility to complete the project or refund for work already completed. No one likes to think that they’d renege on an agreement for any reason, but catastrophes can and do happen, and it’s best to be prepared for such an emergency.
While we’re on the subject of protecting yourself and your money, it’s also time to consider how your business structure is or isn’t protecting you.
New businesses often start as sole proprietorships, because that’s an easy way to go. But you shouldn’t stop there. Investigate different kinds of business structures and whether they might serve you better.
For example, forming an LLC divides your business assets from your personal assets (like your home, your retirement savings, or your car) and helps protect you and your family in the event that avery unhappy client decides to sue.
The investment you make in a quality contract might seem a little steep at first glance. But is operating with the free franken-contract you cobbled together from multiple sources or copy/pasted from your business “friend” (and who knows whether those contracts will hold up in court) worth the risk of losing everything you’ve worked so hard for?
You rely on the bank to keep the money you have safe. You put your money in investment accounts to protect your money for the future. Don’t risk losing what you’re currently earning – take steps to protect yourself by using a solid contract (one that you can use over and over again).
Need a contract, but not sure where to start? Start here and get some suggestions based on your profession!
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