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Contracts, invoicing and suppliers

You can't afford to be casual about contracts. Empower yourself and your business by being aware of the legal issues involved in all of your commercial activities. Read carefully and you’ll see that simple contracts and everyday legal matters should pose few problems.

In business, there are sets of laws covering two key areas:

Contracts - Contracts exist between your business and your suppliers and customers.
Trade - Trade means how you are allowed to sell, and the restrictions that apply. Selling to members of the public is regulated and you should be aware of the restrictions.

Contracts

Contract law is one of the main areas of law that is likely to affect your enterprise. A contract exists when three conditions are met:

the buyer and/or seller make a contract;
an offer is made and accepted - a customer may offer to buy and you can then accept the customer’s offer (note that just displaying your product in a brochure or in your shop is not an offer, but an invitation to the customer to make an offer)
something of value is exchanged.

Invoicing

An invoice is a commercial document issued by a seller to a buyer. It indicates products, quantities and agreed prices for products or services which the Seller has provided to the Buyer. It also indicates that unless paid in advance, payment is due by the Buyer to the Seller according to agreed terms. Invoices contain a serial number and date of issue. Invoices are often called bills.

A typical invoice contains:

a purchase order, invoice and internal order numbers
a business name and address
a customer's name and address
supply and invoice dates
a VAT registration number (where applicable)
a description of the goods or services
terms of payment including date the amount is due
an itemised list of products, quantities and prices, excluding VAT
the total amount due, with and without VAT
the shipping method and cost.

Getting your invoicing system and payment terms right is essential for a healthy cashflow. If everyone understands how much they need to pay and when they must settle up, customers are more likely to pay you on time.

Suppliers

The basic rule for suppliers is to get a minimum of three quotes for every job. Ensure that your suppliers deliver goods at a competitive price and on time. Here are our tips for choosing a supplier.

What should you look for in a supplier?

Your supplies should consistently be delivered on time and of a high quality. A good supplier won’t let you down and will always respond to an urgent request.
Word of mouth reputation counts for a lot. Talk to contacts in a similar line of business and see who they recommend. If three out of five recommend the same firm, you’re probably onto a good thing.
ISO 9000 status. The International Organisation for Standardisation exists to maintain acceptable business standards across the globe.

What should make you run for the hills?

Be suspicious of using a 'friend of a friend' who can get you what you want on the cheap - are you really confident that you'll receive your order on time, and is there a reliable way of getting in contact if there are any problems?
Be wary of firms that don't deliver on time, even if their goods are of good quality.
Keep on top of suppliers’ pricing. You may have been using a firm for years but are their prices still competitive?

Our favourite links

iso.org The International Organization for Standardization (ISO) is a network of the national standards institutes of 157 countries. The standards it develops are useful to industrial and business organisations of all types and contribute to making the development, manufacturing and supply of products and services more efficient, safer and cleaner.

legalpulse.com Legal Pulse provides access to pre-prepared downloadable legal documents at low cost. It also offers a telephone advice line.

Shell-LiveWIRE.org Shell LiveWIRE has a comprehensive guide to everything you'll need to about Legislation and Tax.