Written by: Kevin Gardner
As a small business owner, you know that customer service is critically important. Focusing on meeting and exceeding expectations is the best way to keep your current customers and cultivate new ones. One of the best ways to build a sterling reputation is by entering into fair and transparent contracts with your customers. Here are some of the types of contracts and tips for using them effectively.
Sales Contracts
A sales contract is an agreement between you and your customer about what they are purchasing from you. The contract should specify what items are being sold, how much each one costs, the total purchase price including any taxes or fees, along with payment terms. Knowing how and when you will be paid is especially important for your revenue recognition accounting process, which is key to understanding your business' cash flow and profitability. The sales contract should also detail your return and refund processes for various situations, including if the product is faulty or the customer simply no longer wants it.
Service Contracts
Similar to a sales contract in many ways, a service contract is an agreement between you and your customer about the parameters of your business relationship. It should outline not only what services you will provide but also the agreed-upon price and terms of payment. Especially important when you are providing a service rather than tangible goods is to make sure the contract specifies what is and is not included in the quoted price. If additional work becomes necessary in the course of the job, your contract should outline how it will be addressed. You'll also want to include a clause that releases you from the contract in the event of unforeseen circumstances that make it impossible to deliver the services in the agreed-upon manner, including natural disasters and interruptions in the supply chain that delay delivery of materials needed to complete the work.
Release of Liability
If there is a reasonable possibility that a person could be injured in some way in the course of doing business with you, you may want to require that your customer sign a release of liability. This type of legal agreement releases you and your business from responsibility in the event of damages resulting from the normal activities associated with the product or service you are providing. Note that this type of contract does not protect you if the damages are the result of your negligence. For example, if you rent out canoes at a lake, the release of liability should protect you if your customer twists their ankle while attempting to launch the boat but not if their cell phone is ruined after the canoe sinks due to poor maintenance. Also known as a hold harmless agreement, this document isn't guaranteed to protect you in the event of a lawsuit but it's often wise to obtain one, as it could at least limit your liability.
Solidify your reputation as a trustworthy business owner by entering into clear and equitable contracts. You'll not only protect yourself and your business but also your customers. They'll likely repay you with loyalty and continued business.