- Last Updated on:   Feb 7th, 2020
- Posted by: Pro Accountant Advisor
- Category: Bookkeeping
QuickBooks is one of the best bookkeeping and accounting software available in the market. Shrewd businessmen know that when we set-up a contract is important to maximize the chances of getting paid in a timely manner.
A well-structured contract will get over a large range of set expectations, variables, and keep you encrypted in the event of the disagreement in your business relationships.
When a contract is in and of itself, it does not guarantee that your invoice will be paid or breach of contract happens. It can help you in better legal protection if in case your client does not pay an invoice.
In this post, we are going to discuss how a contract can protect you and keep your project in an absolute direction. To speak with a certified ProAdvisor related to this topic please dial toll-free .i.e. 1(800)880-6389.
8 Things Every Contract Must Include
If something is important to your success in business then include it as a provision in your contracts. Below we have discussed 8 things every contract should have:
- The exact work to be delivered
- Important deadlines
- Rules for revisions
- Contact information
- Termination Clauses
- Intellectual rights & release information
- Payment terms
- Shipping terms
We know that every business is unique and it’s better to ask for assistance from your contract lawyer to lock down the specifics of your contract to ensure that it will hold up in court in the worst scenario.
1. The Exact Work to Be Delivered
- If you also provide digital services then specify the wanted length of an eBook or article, the total number of Web-pages have to be designed or the number of a tease for a logo.
- As a landscape designer, keep in detail how many plans you will finish and whether the gets client gets to keep them.
- Interior designer may indicate which rooms will be taken out and how many furniture options will be provided for each.
2. Important Deadlines
- Make a deadline for the completed work product but also include milestones on the way to keep the team under the thumb.
- Do not overlook adding in dates for deliverable which client will provide like background documents, brand guides and samples.
3. Rules for Revision and Edits
Sometimes, even with your best efforts, you cannot hit the mark on some products. If you are a service provider who wants to ask changes, this part of the contract will detail how many revisions will be included in the genuine scope of the task and how will you manage additional requirements, should they arise.
4. Contact Information
Confirm your chosen method of contract and ensure that you have a day-to-day contact on the client side and the information on other team members who will be approving/reviewing your work.
5. Termination Clauses
- Describe how much attention which party needs to give if one of you decides to suspend the task.
- This protects both sides: It neglects to leave the client in the lurch and then provides them more than enough time to find another provider if you do not want to continue work with them and safeguards your income so that they do not disappear without prior notice.
6. Intellectual Right & Release Information
- Mention copyrights, details on who owns any intellectual property which is created.
- An indemnity clause is dependent on whether you may quote completed work in your personal portfolio plus other relevant issues related to legal rights.
7. Payment Terms
Answer the questions mentioned below when you are preparing payments terms for your contracts:
- How swiftly do you need to get paid to make sure plenty cash flow or working funds?
- Does getting salaried early justify offering an early pay concession?
- What will happen if you don’t get paid on time?
- Will you be charge interest?
- Will you withhold the past due balance from future orders?
- Will you take the product back?
- Will you decline future shipment until payment is made?
Payment terms can be both simple and complex. Prepare payment terms in such a manner that you will get paid on the terms which can best protect your business and be crystal clear about what steps should be taken in the situation when you are not going to get paid.
8. Shipping Terms
If in case your services indulge logistics which is the situation with a large range of businesses from retailers to builders, it’s mandatory to address such shipping terms in your contract:
- When is the product going to be delivering?
- Who is accountable for paying for shipping costs?
- Who is responsible for any damage that occurs when the products are in shipment?
- When does the being paid party take title to the goods?
- Should the receiving party have a chance to examine the goods for conformance upon receipt? How long should that examination phase be?
Now, let’s discuss what these contracts are, their benefits and things to take care of when using each variety of contract.
3 Types of Contracts to Robust Your Business Goals
When it comes to contract then one size does not fit all. That is why you will want to set up your contract which works best for your business and fulfills the needs of your client.
The 3 most common contract constructs are:
- Retailer Contracts
- Hourly Contracts
- Project Based Contracts
Let us understand what are the types of contracts mentioned above, their benefits and the things to be taken care of in each type of contract?
1. Retainer Contract:
What it is: A retainer is a large sum paid to a provider which basically serves “rent” for your services for a specific amount of time each month. Your client will pay a fee upfront, assume $3,000, and you’ll bill against that amount for your services, depending on an hourly rate. This agreement works well if you regularly do a variety of work for a client that requires a different skill set.
Benefits: This type of agreement allows both the service provider and client to budget without surprises and without having to devote time every month to make a scope of work. Plus, it means that you as a service provider will know that you need to be left to that single client for some period of time every month so there’s no need to fill up your calendar just when they need you.
Things to be taken care of: You will want to line out what happens when you’re deadline goes over and under, with a retainer agreement. Let’s take an example, your client is on vacation and ignores 2 calls and 1 release. Should you apply that amount to the coming month or make additional work to make up the difference? Ensure that your contract includes clear expectations for how to handle this situation and a plan for when you will alert the client which you are nearing the limit of the retainer.
You will want to watch for “scope creep”,which mainly happens when projects expand. Lets us understand with an example, sometimes a client may come to a builder with a variety of change orders once they see their home materializing, or decide that they don’t like the cabinets after all, which can lead to costly delays. Or, a customer may ask an interior designer to “just take a quick look” at another room while you are presenting concepts for a kitchen or change their mind and request colour of blue when they had specific shades of yellow. Now, how you will handle scope creep, like whether you will maximize the retainer or project fee or bill hourly.
2. Hourly Contracts:
You will be billing for your services on as decided hourly rate. Some freelancers prefer to bill different services at different rates, for the example, client meetings are billed at less than writing work or strategy bills maximum than research. Ensure that your contract is specified on the rate, including a cap if needed.
Also make sure to track your time carefully, so that you can provide a complete project summary on the bill of how much time was spent on what tasks.
Benefits: Scope creep is specially eliminated in an hourly-based agreement as the client is literally getting what they are paying for.
Things to be taken care of: Hourly work can immediately escalate without the client realizing it, creating a surprise bill. Discuss the limits of agreed-upon for hourly work with your client, and ensure to keep them in the loop as you reach the cap. Then they have the choice of prioritizing the work to stay below the ceiling or allowing you to continue to bill.
3. Project-Based Contracts
This type of contract depends to a specific scope of work; for the example, building a deck or installing new features.
Benefits: Project-based contracts clearly denote the scope of work and allow you to remain focused on one agreed-upon goal. It also gives a perfect reason for trying out a client and vice-versa, to ensure that your work styles and expectations are comfortable. As the project is over, you can agree to part ways or decide to work on a new project.
Things to be taken care of: Parameters and work products must be clearly and completely described so that there could be no confusion on what exactly the deliverable are. In other words, check how many design meetings you will hold and exactly what materials will be included. Will you clean up a work-space every day or at the end of the job?
4 Important things to consider when dealing with the Payment section of your Contract
As a business owner, your #1 goal is to get paid. In case if you have experienced that client is not paying on time before then you may be shocked to learn that making “Payments” section of your contract is clear as water and can help you ensure that you get paid in a regular period of time.
Here is what payment information you must include in your contract:
1. Payment Methods:
Your customer may have told you how they typically pay their partners, or you can let them know if you have a preference. Note that the easier you make it pay you, the quicker your client is likely to pay.
That is why it’s important to accept large types of payment methods on your invoice, from checks to credit card. Another popular choice is an automatic bank transfer, known as Automated Clearing House (ACH), where money moves directly from the customer’s bank to your bank.
QuickBooks also has a feature as “Pay Now” button on your invoice which can actually get you paid up to two times faster.
2. Payment Terms:
This tells your client to understand when the bill is pending. The most common term is “Net 30” and it means that the customer must pay within 30 days. But you can also specify other terms. Always add a deadline to your invoice hence the clients get busy too and they want to know when they have to pay to you.
3. Late Fees:
Most of the clients are bound to pay on time, but if a payment is unpaid then this can lead to a disaster on your budget. That’s the reason it is considered smart to allow the customer to know up front that you will be applying for a late charge if their account goes 30 days past.
You can select to add a surcharge or make it a percentage of payment. Let them know if you have planned to pause work if they do not want to pay in a certain period of time. Even though many contractors do not want to stop work and you may find it to be an exceptional method for “reminding“ clients which need to pay.
4. Installment Invoicing:
Do not wait until the end of the project to get paid? It is great to build in payment milestones all along the way. QuickBooks Invoicing feature gives freedom to invoice in installments, as specified in your contract with your customers or clients. That is helpful generally for a project-based task where you might want to bill a percentage up front and then in some increments along the way as you hit projected milestones.
QuickBooks will automatically track payments to show what you have collected and what is still outstanding to ease your accounting.
I hope with the help of this post you have set-up a contract to ensure your Invoices to get paid on time. For any kind of queries you can get in touch with our QuickBooks help team anytime at 1(800)880-6389. Our certified ProAdvisor are always ready there to assist you.
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