Almost every business uses contracts in various aspects of its operations. They are the foundation for relationships between businesses and suppliers, workers, customers, and other parties. These documents set the standards for obligations, responsibilities, expectations, and legal obligations. In most businesses, you’ll need several contracts in place, and knowing how to manage them and navigate various contractual complexities can help prevent costly conflicts and misunderstandings while increasing business profitability. If you run a small company with limited resources, the following 5 contract management tips can be very helpful.
By Team Savant
Image: Kelly Sikkema
1. Know Upfront What You Want To Achieve With Each Contract
Every contractual document should achieve a purpose for your business, so be clear about what you want to achieve before drafting any contract. Consider the results or targets you hope to meet when a contract concludes and what limitations or complexities to expect. When you’re equipped with such knowledge, it’s easier to decide what goes into each contract, how best to protect yourself, and how to keep your small business from potential risks. Thankfully, many contract management tools are available to simplify this process. And that leads to the next point.
2. Take Advantage Of the Right Contract Management Tools
While you can choose from many available contract management software, you need to know what you’re looking for in the right software. Most contract management software is designed to handle various aspects of the contract process and save you time. But each may also have unique features that address specific contract management challenges. For example, some tools can help you with contract lifecycle management (CLM) if your business deals with massive quantities of contracts. You can take the time to learn more about what is CLM and how it helps. Also, remember that each tool has different features and price points, so you need to compare your options before investing in any tool.
3. Don’t Forget About Legal Advice
Regardless of how effective or reliable a contract management tool is, it would help if you did not write off professional legal advice, especially since you run a small business. Most small businesses do not have a dedicated legal department that can help when drafting new contracts. That’s why third-party legal advice is important. You can always consult a lawyer specialising in contract law to help you navigate the process, negotiate favourable terms for your business, identify potential risks, and ensure you remain compliant with all relevant laws and regulations. Of course, that means your business may have to incur some up-front costs, but that’s nothing compared to the costly losses you’ll avoid.
4. Conduct Regular Compliance Reviews
You want to ensure that your company receives all the benefits and terms set out in a contract, and you can only do this by conducting regular compliance reviews. Such reviews can help you manage the costs put into any contract and the potential risks. It’s also easier to gather information that may be useful for all parties to the contract in the future, which can also improve their relationship with your business. You can hold regular meetings with all key stakeholders or contractual parties to discuss developing challenges, review key performance indicators (KPIs), and ensure everyone meets their obligations.
5. Considering a Franchise: Navigating Contractual Obligations
When exploring the option of purchasing a franchise, understanding and managing the contractual elements is crucial for small business owners. A franchise agreement encompasses various critical aspects, such as the use of the franchisor's brand, operational guidelines, training, and support structures, as well as ongoing fees and royalties. It is vital to thoroughly review and comprehend the contract before committing to a franchise for sale. Key considerations should include the length of the franchise term, renewal rights, and termination conditions. Additionally, it's important to assess how much autonomy you will have in business decisions, and understand the expectations and obligations set forth by the franchisor.