Share

30th October, 2019

New to business? Here’s what you need to know about contract management

Understanding contracts and how to properly manage them is fundamental to any sound business venture and might just save you from a number of legal headaches. In this article, Kellie Byrnes explains the basics of good contract management.

As entrepreneurs, we’re focused each month on ways to bring in more business, satisfy customers, pay bills, and grow the brand.

While these factors are all essential, we can’t have a prosperous venture without also focusing on finer details.

One of those areas is contracts. No matter what type of organisation you run, there are some contracts you must handle along the way.

Such documents are used when setting up the structure of a venture, to hire employees and contractors, deal with suppliers, and even when doing business with big clients.

As such, the paperwork must always be handled with care and, when in doubt, always consult with a qualified legal professional.

This process is daunting if you don’t have much experience in dealing with contracts. But if you follow a few strategic tips, you’ll find it all easier and the outcome more successful.


Set clear goals in advance


Before you start drawing up any paperwork, get clear on your goals for the exchange.

What are your main reasons for organising a contract? What do you need to achieve with the documents?

For example, a guarantee of price and quality is something many manufacturing businesses, wholesalers, and retailers concentrate on, while trades and construction contracts are very focused on adherence to deadlines.

The more you have your goals straight in your mind, the simpler it will be to make decisions about contracts at each step in the process.

READ: 7 traits that make great business leaders


Gather all necessary information


Getting clear on goals helps you to see which information you have to collate to design an effective contract, too.

Before you draw up this paperwork, gather every detail you’ll require from all parties.

Doing this upfront saves time and helps you to avoid misunderstandings and other issues along the way.

Before you sign a contract, go over the document word for word to ensure the inclusion of each bit of information you need to protect your business and yourself.

Don’t leave gaps other parties could use to get out of doing their part or doing things well at some point later on.

Each contract is different, but there are a few factors the paperwork typically needs.

For example, contracts should include all the relevant information about each party. This includes contact details and the rights and responsibilities of each person or company involved in the exchange.

Your document should note the expectations of each party; what everyone hopes to get from the relationship.

Use key performance indicators for clarity. They’ll provide structure around what each person or business must provide to satisfy the others.

Also, always include the milestones to be reached during the contract’s term, with deadlines for different elements as time progresses.


Give yourself an exit strategy


Be sure to give yourself an exit strategy within the contract, too.

Leave yourself with an out so that if the relationship sours or the other parties don’t pull their weight, you can end things without suffering too much damage.

If you’ve worked with a person or business for years with no problems, or the people you’re dealing with are friends or family members, it’s tempting to not worry about this side of things. However, it’s to your detriment if you don’t.

Unfortunately, issues do pop up and you never know when situations could change for the worse.

This might not be due to any fault of the other parties, either, but simply due to bad luck or misfortune, like a fire, illness, or change in regulations.

Remember that your situation could change unexpectedly, too.

As such, having a termination clause that details when one or more parties can annul the document before it expires, if need be, is essential.


Create contract processes


Another way to ensure your contracts turn out successfully is to create a process for the people in your team to follow when working on them.

By setting up template contract forms for each document plus steps to focus on and check off each time, you’ll not only save time for all involved but also reduce the risk of missing something important.

Provide instructions about topics like:

  • Who to contact for initial contract requests
  • Which details must always be included
  • Who needs to sign off on documents (multiple signatures may be required)
  • Which templates to use for each type of contract
  • How and when to follow up on paperwork
  • Processes for negotiating and agreeing on contract renewals
  • What types of reports to compile when finalising contracts after their end date

Use helpful software


Lastly, keep in mind that there are many excellent contract management tech tools on the market now that you can use to save time, money, energy, and stress.

All the products have different features, so work out the functionality you need and the budget you have available, and compare options with all this in mind.

Be sure to consider the scalability of programs you’ll need over time, and how trusted and secure products are, too.

For ideas, check out the numerous add-ons MYOB’s software partners offer in Australia as well as in New Zealand. All of these products integrate easily with MYOB software.

Subscribe to be updated on all things MYOB

A valid email is required
Congratulations! You've successfully subscribed to our newsletter!
Something went wrong
You're also consenting to receive communications including by email. We value your privacy, please see our Privacy Disclosure Statement for information on how we collect and handle your personal information.