Customer Fee Agreements – Do you need one? What should they contain?

Do you have a written agreement with your customers or clients?  If not, why not?  Although there may be a few exceptions out there, it is always a good idea to have a written agreement with your customers.  If you are a carpenter, electrician, accountant, attorney (and yes, I do have my clients sign a fee agreement), business or personal coach, or just about any other type of  business, you can help prevent a number of problems by having a written agreement with your customers.  The following are key items that most customer agreements should contain:

  1. Clear identify the parties and contact information.  Yes – this is really very fundamental but you would be surprised by the number of agreements that don’t have the name and contact information of BOTH parties clearly set forth.  Make it very easy for your customers to obtain your phone, e-mail and website information.  You should also have the name, correct address, phone number and e-mail address for your customer. 
  2. What are you going to do for your customer?  With as much detail as you think is appropriate, describe what you are going to do.  You need to be very careful with this as it is key to preventing significant misunderstandings.  If you think you are only going to do “X” for the customer but the customer thinks you are going to do “X plus,” this will cause a problem.  If your customer thought this additional work was included, he or she will not be happy when they learn you can do this work but there will be an additional cost.    
  3. Describe what you will NOT be doing for the customer.  Perhaps a better way to phrase this is to list what is not included with your services.   I do work in the bankruptcy area and have a written fee agreement (as required by the US Bankruptcy Court).  The fee agreement specifically states that if there are adversarial proceedings (usually initiated by a creditor) then that is not covered by the flat fee.  If you are an electrician and have been hired to wire a room addition, it is a good idea for the customer to realize that if you are asked to fix an outlet or install a ceiling fan in another room (after all, you are already there!) an additional charge will apply.
  4. Clearly indicate your fee.  This again is a fundamental part of any agreement but it needs to be very clear.  How much will your services cost?  Is it a flat fee?  Do you charge by the hour or by the project?  If additional work is provided and the fee increases how will you notify your customer?  Being specific up front is always the best approach.  While most businesses are looking for more customers, having a customer who does not pay your fee is worse than not having a customer at all. 
  5. Payment terms.  How will you get paid and what, if anything, will you do before you receive a deposit.  If you are a contractor and a customer accepts your $20,000 bid to do a room addition, when will you be paid?  Do you want to have ½ or 1/3 down when the  bid is accepted?  Is another payment due when you start the job?  When is the final payment due?  There are no right or wrong answers for these questions however, it is always better to get paid sooner rather than later.  What is important is that both sides understand when payment is expected and the consequences of non-payment.   
  6. Time for performance.  This is not applicable to all contracts, but is probably good to have in most agreements.  It is very easy to find customers who complain about slow service.  We have all heard people complain about a room addition that was promised to be done weeks or months earlier. It may be that the work was really delayed or it could be that the contractor was not clear up front about then the work would be done.  Being clear up front is always the best approach. 
  7. State mandated language.  Depending on the area in which you work, there may be state mandated language that is applicable to the services you provide.  Do your customers have the right to cancel the contract within 3 days under state law?  If the answer to that question is yes then your written agreement needs to contain that notice.
  8. What happens if you don’t get paid?  Unfortunately, there will be times when you are not paid in a timely manner.  Do you want to charge interest on unpaid fees?  If yes, you need to have language in the agreement which clearly indicates when the interest will start to accrue and at what rate.  If you need to take the customer to court to collect your fee, your agreement should have language indicating your customer will be responsible for your attorney fees to bring a collection action. 
  9. List any customer restrictions.  If you send your employees into a customer to provide bookkeeping services, you should seriously consider putting a prohibition into your agreement which prohibits your customer from hiring your employee for a specific period of time (e.g. one year) after the service is provided.  You don’t want your customers to be stealing your employees and you don’t want your employees to be stealing your clients.  This is one example of a restriction you may want to include in your agreement. 

If you have a fee agreement when was the last time it was reviewed and updated?   If it has been more than a few years ago it would be good to review it and make any changes you think are necessary.  If you don’t have a fee agreement, you should consider the above items and determine if a well drafted fee agreement could help you with your business.  The above list of items to consider it not meant to be exhaustive, but is a good list of items that most fee agreements should contain.

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