Your 2006 Business Resolution: Review Those Sales & Credit Contracts
Bob Bernstein, managing partner of Bernstein-Burkley, P.C., says the beginning of the year is a good time to go over important contracts with a fine-toothed comb.
Pittsburgh, PA – Ben Franklin wasn’t necessarily talking about businesses when he offered up his famous aphorism about an ounce of prevention. But according to Bob Bernstein, he may as well have been. The managing partner of Bernstein-Burkley, P.C. says carefully examining your sales and credit contracts at the beginning of each year can save you a lot of heartache-and potentially, a significant amount of money.
“Clients tend to seek legal advice after the fact, after a customer has defaulted on a sales agreement,” says Bernstein, whose Pittsburgh firm specializes in bankruptcy and creditors’ rights. “But it makes more sense to take preventive measures. There are plenty of warning signs and weaknesses that a good attorney can spot just by carefully reading your sales and credit contracts. And he or she can help you shore up these and other legal agreements before you lose a lot of money.”
Bernstein has a simple suggestion: put your sales and credit contracts under the microscope at the beginning of each year. Here are four things you should look for:
- Do your sales and credit contracts provide for your customers to identify their correct legal composition (i.e., partnership, sole proprietorship, corporation, LLC, LLP, L.P.)?
- Do your sales and credit contracts require your customers to designate which of their employees are authorized to make purchases from you?
- Do your sales and credit contracts provide for interest/finance charges on past due balances and for the customers’ obligation to pay collection costs and attorneys fees if their accounts are referred to an attorney for collection?
- Do your sales and credit contracts’ terms and conditions provide that they supersede any terms and conditions on your customers’ purchase orders, and that your acceptance of your customers’ purchase orders is expressly conditioned on their acceptance of your terms and conditions?
Of course, there are other types of contracts that need annual review as well-employment agreements and leases, for example. Bernstein says if you don’t have an attorney on staff, it’s probably a good idea to partner with a law firm like his that handles the entire spectrum of legal contracts and agreements.
“Smart companies know that joining forces with the right law firm is as critical as finding the right marketing firm or CPA,” he reflects. “A law firm should not be there to put out fires and manage disasters. It should prevent them from happening in the first place. Make it your New Year’s Resolution to find a partner who can advise you and help you strategize, and consult that partner on a regular basis. It’s an ounce of prevention you’ll never regret.”