Top 5 Most Important Contract Management Tips for Business Owners

 When you’re running a business, it’s easy to get caught up in all the day-to-day tasks involved with marketing and selling wares, managing a team, providing good customer service, keeping track of finances, and so on. 

However, it’s also important to make sure you’re regularly “dotting your I’s and crossing your T’s” when it comes to paperwork and legalities. This is where having good contracts is vital. To help you cover yourself and your business today, read on for some key contract management tips you can follow.

Identify Needs and Goals

Firstly, identify your venture’s needs and goals up front. Contracts are legally binding documents, so should be taken seriously and put together with care. It’s important, then, to be clear about why you want to draw up a contract, the specific reasons for having one that you need to cover, and the results you want to achieve by the end of the contract date. 

When you know this information, it makes any decisions you have to make along the way much simpler. As well, since contracts are developed as a way of defining and mitigating risk in relationships between two parties, by looking ahead and thinking about any potential scenarios you need to plan and account for, you will better protect yourself and your organization. 

Include All Necessary Details

Next, include all the necessary details in a contract so you cover all bases. This doesn’t just refer to the contact details of all parties involved and the nature of the rights and responsibilities of each, but also a break-down of expectations. 

Good contracts tend to include performance indicators as contractual obligations. This way, each side of the equation knows in advance what is required of them, and when. It also provides grounds for termination of the contract or some other consequence, if the person or company you’re dealing with doesn’t provide work to a high-enough quality, or otherwise disappoints. 

Have a Way of Terminating Contracts

Make sure you have a way of terminating contracts if need be. Keep in mind that while you may think this isn’t necessary, because you trust the other parties you’re dealing with and have a good relationship with them, things can change over time. Work can go downhill, people can become unreliable, and disagreements and other issues can lead to relationship deterioration.

 As such, include a clause about contract annulment. This should be very clear, and state in simple language what kind of breaking of terms and conditions or other factors could allow one or both parties to end the contract if they choose. Of course, you will also likely have an end date on the contract that will provide closure too.

Follow Up

Successful contract management also involves regular follow up. Check in to see that the other party is doing what they are required to do over time. Depending on the time of contract involved, and whether it’s with employees, suppliers, or other people, you may want to ask for updates on a monthly or quarterly basis, or schedule a regular meeting to discuss where things are at. 

If you notice any problems at this point, it’s easier and more effective (and affordable) to address them straight away, as opposed to waiting until the document expires and then discovering you won’t receive what the other party was meant to deliver. 

Make sure you keep an eye on any upcoming end dates of contracts too. Time goes quickly and it’s easy to miss out on renewing paperwork on time if you’re not careful. It pays to utilize quality contract management software that will send you automatic alerts as the final date draws near.

Set up Contract Procedures 

Lastly, set up procedures to step through, one by one, when creating new contracts and managing existing ones. For example, first there is the initial request, where you identify what contracts need to be created, and compile all the pertinent documents and information needed to put them together. 

Next, contracts need to be authored. It pays to utilize a template you find online or are given by an attorney. Alternatively, make use of automated contract management systems which streamline the process for a low cost. 

After that, it’s on to negotiation (hopefully a simple matter, but it can sometimes take weeks or even months to cover the various revisions and amendments); and getting approval for the contract, if this happens to be something you have to run by a board or other stakeholders. The other party will need to approve the contract on their end of things too. The process ends with a potential auditing and reporting stage (where you determine compliance), and a renewal if required. More negotiations may be necessary at this point, too.