How to Write a Fair Cancellation Policy for Your Business

Posted on January 5, 2021 by in Business

How to Write a Fair Cancellation Policy for Your Business
Blog / Business / How to Write a Fair Cancellation Policy for Your Business

If you don’t have a cancellation policy in place for your business, make this task item number one on your to-do list for this week. Your time is money. That includes the time you spend planning for and holding meetings with your clients. Next to a contract, a cancellation policy is one of the most important elements that will protect your time and income from being run roughshod by client inconveniences or insensitivities. To help you tackle this task, this article will outline why you need a cancellation policy, what a fair policy should include, how you should communicate it, and template resources to write your own.

Do I Need a Cancellation Policy?

Absolutely, yes. Cancellation policies are the boundaries you set to ensure your time and expertise are not taken for granted. Your clients pay for your expertise, and the price you’ve put on that expertise allows you to make a living at it. When you set time aside to meet with or do work for a client, that precludes your ability to do any other work in that timeframe. Your policy protects you by ensuring that you can still receive some or all of the income for that time or allow you time to schedule other work that can make up for that income.

What to Include in Your Cancellation Policy

  • Timeframe: Typical timeframes are 24 to 48 hours before the appointment, but you can set this based on the type of work you do and how impactful a cancellation is to your schedule.
  • Penalties: Your penalty should be based on how financially impactful a missed appointment is to your business. A financial penalty can act as a strong deterrent for some clients. Clients may be less likely to cancel if they know they will be out of that money even if the appointment doesn’t happen. Even if you don’t intend to actually charge the fee, a known penalty could greatly reduce the chance of a cancellation. See more about penalties in the next section.
  • Contact Information: Clearly outline how you want to be notified of a cancellation. Is a phone call necessary in a certain time frame? Do you want the cancellation in writing? Is a text message acceptable? Be clear on these points so that you can hold clients to the process when needed.
  • Require a Signature: This puts the onus on your client to understand and adhere to the policy.

Penalties and When to Charge Them

For your cancellation policy to have a carrot-and-stick effect there must be a consequence to canceling – especially so for last-minute cancellations. Consider the following when deciding what penalties to apply:

  • Is this the first time this client has canceled? – Waiving your penalty for a first-time cancellation can create goodwill between you and a client. Be clear that the waiver is one-time though, preferably in writing. In the event it happens again, you will have both records and cause to charge the penalty.
  • Is the client willing to reschedule right away? – If so, since the appointment is back on the books, you could decide to waive the penalty here too.
  • Are there financial obligations you have to cover as part of the session? – While you may rely on video or phone today, you may eventually need office space to accommodate a group. If you are paying a fee for anything related to that setup, you may consider passing that fee along to a client who cancels. This should be considered especially if the office or co-op has its own specific terms about cancellations.
  • How much prep work is required ahead of the appointment?  – If a client cancels seven days out from an appointment, you could reasonably waive any fees. Seven days should be ample time for you to reschedule or find another client to fill the gap. Closer in though, you may have already spent time preparing, so you may need to charge for that time. For example, if a cancellation occurs within 24 hours of the appointment, your cancellation policy could dictate that the full appointment fee will still be applied.

How to Inform Clients About Your Cancellation Policy

Inform your clients about your cancellation policy as early as possible in your working relationship. It may not be appropriate in an introductory meeting. However, once you agree to do work, present the policy in writing along with your contract and payment arrangement. This will set the right expectations from the beginning.

If you have a physical office, post your cancellation policy in a visible location. And last, include your cancellation policy in any appointment reminders you send via voice or text.

Template Starters and Resources

Below are some suggested starters for crafting your own cancellation policy:

Simple

If you need to cancel your meeting with me, please notify me by email at <(insert email> or phone/text me at <insert phone number>. Meeting cancellations made within <time frame> will be subject to a cancellation fee of <insert penalty>.

If/Then/Unless

If you need to cancel your meeting with me, please notify me as soon as possible by email at <(insert email> or phone/text me at <insert phone number>. Cancellations requested more than <time frame> ahead of your appointment will not incur any penalty. Cancellations within <time frame> will incur a cancellation fee of <insert penalty> unless your appointment is rescheduled on the spot.

Detailed

Please know that I value both your time and my time. When we set up a meeting, that time is set aside to focus on your project along with additional time to prepare. This allows me to come to the meeting ready and to utilize our time as efficiently as possible. I understand emergencies happen and cancellation may be required. If you do need to cancel, please contact me as soon as possible to reschedule by email at <(insert email> or phone/text me at <insert phone number>.

To avoid being charged a cancellation fee, please make sure you contact us at least <time frame> ahead of your scheduled appointment. Cancellations requested within <time frame> will incur a penalty fee of <insert penalty>.

Other template ideas can be found here. It’s your policy, so feel free to mix and match elements, and write your policy in a tone and style that suits you.

And Lastly

Cancellations will happen; a cancellation policy will help protect you from loss.  If you’ve implemented a policy, but are still experiencing last-minute cancellations, see this article for tips on how to address them. Also, if you need information related to how to protect yourself in the event of a contract cancellation, this article provides some tips to consider as does this one.

What has your experience been with cancellation policies? Will this article help you write your first one, or do you have one in place that’s already working? Tell us about it in the comments!

Featured Image via Bankrx / shutterstock.com

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