An essential part of running a business is staying on top of your contracts. Without contracts, companies would be unable to enforce any legal agreement, leading to a chaotic situation in which no one could trust anyone else. Because of this, contracts play an essential role in allowing businesses to work more efficiently and focus their time and energy on doing what they do best. Good contract management is vital for companies, as they’re legally binding documents that define a business’s relationship with another business. Business contracts need to be legally enforceable and protect your interests. A good contract should also be clear and concise so that all parties can easily understand it.
Step 1- Examine Your Current Process
The first step to improving anything is understanding what you are currently doing, both good and bad. By conducting an audit into how your business handles contracts, you will see the main flaws in the process. This could be from inefficient use of tools to having a team member unsuitable for drafting the agreements. Regardless of the situation, it is much better to know what is happening than to stay in the dark.
Step 2- Identify The Points Of Contact
Before even embarking on a new contract, it is vital that you are all clear on who the main points of contact are and who has the authority to enact change. It should be made known to everyone involved who has the power and can act on whose behalf. If this step is left out, there could be severe implications later on in the process. Apart from the enormous waste of time from negotiating with the wrong people, there could also be legal ramifications to deal with from promises made that cannot be delivered.
Step 3- Be Clear On Expectations
The consequences of a broken promise could be catastrophic, not just for money but also for trust. It would be best to discuss clear expectations in initial meetings, and all stakeholders understand what is on the table. Expectations could involve delivery times, what happens if order or services are unable to be fulfilled, all the way to what happens if one party needs to break the contract early. Covering as much ground as possible early on will save you much frustration later.
Step 4- Use Software And Automate
A contract management system helps organizations manage to create, sign, store, track, and execute contracts. Due to the different business processes involved in developing and implementing an agreement, a contract management system integrates contract-related activities with an organization’s existing business processes. It also provides a centralized database of all relevant contract information for better coordination and streamlines communication.
These systems are an excellent means to organize contracts effectively and decrease the time involved and mistakes made. The automation tools can save countless hours on required but repetitive tasks such as updating via email once a change has been made. A content management system also allows the allocation of permissions which ensures transparency and security in all stages.
Step 5- Utilize Templates
Many tasks of managing a contract can be reused and recycled as they often use the same language. You can create an outline that addresses all the pertinent aspects of a deal, and then you can leave blank all the specifics of whatever is being sold or done. There are different ways that you can approach this, including hiring a law firm to draft an initial outline for you that you can use for all transactions. If you do this, you must make sure that you have permission to resume the contract and that you retain copyright over it. The main benefit is saving money which is most beneficial for smaller companies. However, the biggest drawback is that it can look unprofessional when dealing with multiple subsidiary companies that operate under the same organization.
Step 6- Hire a Consultant
Many companies forgo creating a contract altogether and outsource it to a consultant or company that specializes in this daunting task. The benefits include getting a professionally made contract tailor-made to your situation. They will advise on all aspects and may even have the legal knowledge to discover and close any loopholes that could arise. The biggest drawback is that this service can be costly, making it prohibitive for smaller companies.
Contracts can be a source of confusion and friction in many companies. Business owners sometimes don’t understand the purpose of the contract, and workers don’t understand the language. It is important to keep contacts up to date with the information relevant to your business to ensure a frictionless experience when dealing with multiple contracts.