How to Avoid Cash Flow Challenges
Cash flow challenges are a growing concern for many businesses, often due to unclear payment agreements and poor Terms of Trade. Without well-defined terms, businesses may struggle to collect outstanding invoices, leading to unnecessary financial strain.
Terms of Trade (TOT) set the foundation for a successful business relationship—they establish clear payment commitments, protect both parties, and provide enforceable guidelines to prevent disputes. In today’s environment, having strong, well-documented TOT is more important than ever.
What Are Terms of Trade?
Terms of Trade define the rights and obligations of both a business and its customers. These should be introduced early in the agreement process, before any formal contracts are signed, to prevent misunderstandings and disputes.
A well-structured TOT typically includes:
✅ Pricing and payment terms (including recourse arrangements)
✅ Delivery timelines and service expectations
✅ Product/service specifications
✅ Legal protections for both parties
By setting clear expectations, businesses build credibility and trust, reducing the risk of unpaid invoices. Additionally, if a potential client refuses to accept or negotiate TOT, it could be a red flag—highlighting potential payment risks before you commit to the work.
How Can Your Clients Develop Effective Terms of Trade?
If Terms of Trade are included in signed agreements, they become legally binding. That’s why businesses should seek professional guidance to ensure every detail is covered.
🔹 Work with legal experts – Many law firms have a commercial arm that specializes in drafting Terms of Trade. While costs vary, a well-structured TOT can save businesses thousands in the long run.
🔹 Avoid common SME mistakes – Small business owners often invoice a client’s trading name instead of their registered business name, making debt collection more difficult. Helping clients identify and fix these small but critical errors can make a big difference.
Encouraging clients to establish strong, clear Terms of Trade not only safeguards their revenue but also strengthens long-term business relationships.
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