A client services agreement is a contract between your business and your clients. Having a great client services agreement is one of the most important investments youcan make in your business. A great client services agreement can help your business in many ways, including by helping your business get paid more money, get paid on time, reduce risk and keep better clients for longer. Read on to find out more about what client services agreements are and why your business needs one.
“Do I really need one?”
A client services agreement is a formal document that sets out and defines the terms & conditions of the relationship between a business and its clients. Having a formal agreement in place ensures that both parties have a mutual understanding of their rights and obligations under the arrangement upon entering into the transaction, and that this understanding continues throughout the working relationship.
While it is possible for you to enter an agreement through less formal means, a well drafted client service agreement is essential to outline the full extent of your servicing arrangement with your clients, and it is absolutely necessary to give your business the broadest possible protections if things go wrong.
Here are just a few ways that a client services agreement can benefit your business:
1. Everything you need in one place.
A key benefit of having a client service agreement for your business is that you will be able to access all the terms and conditions that govern your relationship in one, easy to find place.
By having a single document setting out your entire relationship, you can ensure there is a shared understanding around the expectations and obligations of each party under the agreement. This can be an important factor in improving the overall working relationship, and it will also make it much easier to avoid misunderstandings and resolve then when they occur (without harming that relationship you’ve worked so hard to build!).
Some of the key terms that should be included in any client services agreement are:
Services: Clearly outline the scope of services and how they will be provided.
Payment: Set out the fees that are payable by the client, how these fees are calculated, the required payment methods, key payment dates, and any consequences for failure to make the payments as required.
Duration: Specify the time period in which the agreed services are to be provided – ie the start date and the end date.
Termination: Explain when you or the client are allowed to terminate the agreement early – for example, situations in which either of you would want to stop working with each other (eg if the client stops paying your bills).
Intellectual Property: Make sure your intellectual property rights are clearly defined and protected. This is particularly important if you are creating intellectual property while providing the services – is it yours, or the clients?
Liability: Include a liability provision that limits the circumstances in which a client may successfully sue your business.
2. Get paid
When running your business, your time is extremely valuable; the last thing you want is to waste it following up with clients for payments. By clearly setting out payment terms in your agreement, you can be certain that your clients understand how and when payments are required, and that they are aware of the consequences for failing to comply with their payment obligations.
3. Prevent problems (or solve them fast)
The truth is, things can (and often do) go wrong in business; mistakes are made, promises may go unfulfilled, and simple misunderstandings can amount to serious disagreements. And when things do go wrong, attempting to enforce the terms and conditions of your agreement becomes very difficult if there is no written document to refer too.
By setting out the agreed terms in a written contract, you will greatly increase your ability to prevent misunderstandings from happening in the first place and prevent disagreement from escalating when misunderstandings do occur. For example, if a client believes a service was not provided in the way that you promised, you can simply direct them to the written terms of your agreement to clarify the issue before a dispute arises.
Remember: hope for the best, plan for the worst.
4. Dispute resolution
Disputes with clients are expensive, time consuming, and distracting to your business. However, many disagreements can be resolved directly through negotiation or mediation with the other party. Accordingly, it is important that you include a clear, step by step, dispute resolution process into your agreement to ensure that any disagreement is resolved quickly and without any undue costs. Having these measures in place can also have the added benefit of helping to repair and maintain the relationship with your clients.
5. Appearances matter
Like it or not, appearances are important, and the appearance of your business is no exception. Having a well drafted, tailored agreement will make a great impression on any prospective clients. It shows you are a legitimate business, and displays the diligence and attention to detail in your work.
However, a poorly drafted contract may have the opposite effect, and you should always be sure to double-check your agreements before engaging with a new client.
We also advise that you avoid using any ‘one size fits all’ agreement templates that you may find. While these can be useful as a starting point, these documents will often include irrelevant or inappropriate terms that will not be suitable for your client arrangement. This will not only reflect poorly on your client’s perception, but it may also leave you exposed to unwanted risks and liability in the event that crucial provisions are missing from the agreement.
This blog post does not constitute legal advice and should not be relied upon as such. It is a general commentary on matters that may be of interest to you. Formal legal or other professional advice should be sought before acting or relying on any matter arising from this communication.