No matter which industry you’re running a business in, it’s important to make sure you always handle the paperwork side of things properly, so you protect your venture and yourself if anything goes wrong.
In particular, ensure you’re covered legally when entering into relationships with internal and external stakeholders and contacts such as employees, suppliers, big clients, partners and more.
This is why putting effective contracts in place is incredibly important.
You might feel like you have other jobs to take care of and that this sort of paperwork can wait, but if you want to build a sustainable business, you need to address contracts with care at all times.
To assist with this, read on for five key contract management tips for entrepreneurs you can follow today and into the future.
Contract Management Tips
Know up Front What You Need to Achieve
When it comes to handling contracts effectively, it’s vital to know what you need to achieve with the documents.
Get clear on why you need a contract in the first place and the results you want to get by the time the contract finishes.
Knowing this will make it much easier to make decisions about contracts at each step, including how to best protect yourself and your organization from potentially risky scenarios.
Many contract management tools are available now, which can save you time and money, but you should know what you’re looking for when choosing software.
Each product has different features and price points, so compare options carefully. Think about the scalability of the tools you’re considering and whether or not they’re likely to be around for the long term.
For instance, IBM had a popular Emptoris product they discontinued recently, much to their customers’ chagrin. While contract management firm Exari has stepped in to help Emptoris users handle contracts in the future, this kind of thing doesn’t always happen.
As such, when investigating software options, try to find one that’s likely to continue to be in use for years, so you don’t end up in a difficult position.
Make Sure Your Contracts Cover All Bases
The next step is to carefully create contracts, so they cover all the bases you need them to and don’t have any holes which could prove problematic in the future.
When working with other parties on contract creation, you not only need to ensure you have all the necessary details of each side, and cover the rights and responsibilities of each, but also talk about the expectations each person or firm has.
Contracts should include performance indicators, for example, to ensure each party understands what’s required of them and when they must deliver.
Give Yourself a Way out of Contracts, Too
It’s also necessary to give yourself a way out of contracts, in case things go bad.
No matter how good your relationship is with the other parties, you never know when things could take a negative turn, or when your own situation may change. Include a clause regarding contract termination as a result.
This should state which factors can allow one or more parties to annul the contract if they choose to before its end date.
Have Set Contract Procedures in Place
Another tip when handling contracts is to have set procedures in place that all relevant parties in your business can adhere to.
Set up step-by-step instructions on how people should create new contracts and manage current ones.
Cover initial contract requests, how to identify the need for contracts, which parties and information must be included and the types of documentation and details that need to be on hand to compile them effectively.
Procedures should note who needs to sign off on contracts, which templates to use for which situations and details on auditing, reporting and renewal stages.
Do Regular Contract Follow-up
Contract management shouldn’t end once a document has been put in place. It’s important to conduct regular follow up over the term of the contract.
For example, check in as needed to ensure the other parties are doing what they committed to, in the right timeframes, and schedule meetings or calls to discuss progress as and when needed.
By doing this, you’ll notice ASAP if there are problems and any likely issues with due dates or other deliverables. Your follow-up should include watching out for upcoming contract end dates as you may need to renew or renegotiate.
However, contract management software can send automatic alerts about this these days, which makes life much easier.
