Your First Business Contract: What to Watch For
Author: Junanda ConsultingReviewed by: Junanda Service Team2026-09-19
Signing a first business contract is often both the starting point of revenue and the starting point of risk. Many owners concentrate entirely on price and delivery and overlook the financial terms and the entity details in the contract, only to find obstacles everywhere when it comes to invoicing, collecting payment and pursuing liability. This article sets out what must be checked before signing, the clauses a contract should contain, and a checklist designed specifically for finance and invoicing, so that your first contract is clean, workable and traceable.
Verify the Contracting Party First
If the entity is wrong, everything after it is wrong. Inadequate checking leads directly to an inability to issue invoices, an inability to pursue liability, and money lost.
- Use the full enterprise name on the counterparty's business licence as the contract heading, not an abbreviation, a brand name or a shop name.
- Check that the unified social credit code matches the business licence exactly, character for character.
- Establish whether the counterparty contracting with you is the head office or a branch: a branch can generally sign, but liability ultimately rests with the head office, so confirm that the branch has authority.
- Confirm that the counterparty is in existence and is not listed on the abnormal operations list, which can be checked through public enterprise credit information channels.
- The name on the receiving account must match the name of the contracting party. If the counterparty asks for payment to a third party or to a personal account, that is a high-risk signal, and written reasons must be obtained together with the authorisation document.
The Clauses a Contract Must Contain
A contract that can support financial processing should contain at least the following clauses:
| Clause |
Key points |
Financial concern |
| Subject matter |
Name, specification, quantity, quality standard |
Determines whether the invoice description matches the business scope |
| Price |
Unit price, total price, whether tax is included |
Clarify whether the price includes tax |
| Payment milestones |
Proportion and conditions of advance payment, progress payment and final payment |
Determines the collection rhythm and cash flow |
| Invoicing obligation |
Invoice type, tax rate, invoicing time |
Determines input deduction and cost recognition |
| Performance period and place |
Start and end dates, place of delivery |
Determines when revenue and cost are recognised |
| Liability for breach |
How late payment and late delivery are calculated |
Determines the basis for a claim or litigation |
| Dispute resolution |
Litigation or arbitration, place of jurisdiction |
Affects the cost of enforcement |
The more specific the clauses, the less room there is for later argument. Price, payment time and invoicing time should always be written as definite points in time or clear conditions, avoiding vague wording such as "as soon as possible" or "in due course".
Designing the Order of Payment and Invoicing
This is where the first contract most easily goes wrong, and the two models carry very different risks.
- Payment before invoice (safer for the payee): the contract provides for an invoice to be issued within a certain number of days after payment is received. This favours the supplier, avoiding the situation where the invoice is issued, the money does not arrive and tax has to be funded in the meantime.
- Invoice before payment (safer for the payer): the contract provides for payment within a certain number of days after a compliant invoice is received. This favours the buyer and ensures that the deduction voucher is obtained.
- Risk warning: where the invoice is issued before payment is received, a counterparty that does not pay for a long time leaves the invoice already issued and a tax liability that may already have arisen, which then has to be dealt with by a credit note or through legal channels at a comparatively high cost.
- A middle course: provide that "the payer shall pay within a certain period after receiving the invoice", while also providing that invoicing follows the payment milestones, for example issuing invoices separately against the advance payment, the acceptance payment and the final payment.
Whichever option is chosen, the invoicing time and the payment time must each be stated clearly, not just one of them.
Seals, Signatures and Authority
- Contract seal and company seal: for ordinary contracts either the contract seal or the company seal will generally do, depending on the company's internal authorisation rules. The company seal has the widest effect, while the contract seal is generally limited to contract purposes.
- Signature of the legal representative: the legal representative's own signature can represent the company, and it is more prudent for the company seal to be applied as well.
- Signature by someone other than the legal representative: where a salesperson, project manager or similar signs on the company's behalf, a written letter of authorisation must be obtained, specifying the scope and duration of the authority, and kept as an attachment to the contract.
- Electronic signature: a reliable electronic signature meeting the legal requirements has the same effect as a handwritten signature, but it should be signed through a compliant platform, with the complete signing record and evidence retained.
- Multi-page contracts: it is advisable to apply a pagination seal across the pages, to prevent pages from being substituted.
How to Word the Invoicing Clause
If the invoicing clause is not clear, disputes over tax rates and invoice types easily follow.
- Specify the invoice type: a special VAT invoice or an ordinary invoice, decided by the tax status of each party and the needs of the business.
- Specify the tax rate or levy rate basis: state only that the invoice will be issued "at the applicable tax rate or levy rate prescribed by the state"; the specific rate changes with policy and should not be fixed in the contract (the latest official version prevails).
- Specify the invoicing time: link it to the payment milestones, for example "issued within a certain number of working days after receipt of payment".
- Specify who bears the taxes: whether the contract price includes tax, and who bears the taxes, must be stated clearly.
- Specify how discrepancies are handled: if the invoice details are incorrect or cannot be verified for deduction, the supplier should issue a credit note and reissue within the agreed period.
- Specify the information needed for invoicing: the buyer should provide complete invoicing details, such as name, taxpayer identification number, address and telephone number, and account-opening bank and account number.
Changes, Supplementary Agreements and the Accounting Link
- Any adjustment to price, quantity or delivery time should be made by a written supplementary agreement, not merely through a messaging app message or a verbal confirmation.
- The supplementary agreement should identify the numbers of the clauses of the original contract that it amends, to avoid conflict between old and new terms.
- Set up a contract register recording the contract number, counterparty name, amount, payment milestones, invoicing status and performance status, to assist reconciliation and collection.
- Pay attention to the point at which revenue is recognised, judged in accordance with accounting standards and the substance of the business, which is usually related to the transfer of control of the goods or the progress of the service.
- Keep stamp duty awareness: some types of contract are taxable documents for stamp duty purposes. The specific taxable items, rates and reliefs are subject to the latest official version and are worth confirming in advance.
Contract Financial Terms Checklist
This article is general business information prepared by Junanda Consulting. Specific policy positions, tax rates, deadlines and procedural requirements are subject to the latest official versions issued by the competent authorities. To understand how these requirements apply to your business, please contact Junanda Consulting for further information and support.
