Contract Management Fundamentals For Small Businesses

Felix Yim

October 16, 2021

Your business’s contracts are what protect your rights and formalize your relationships with customers, suppliers, employees and other third parties. You need a system that makes it easy to manage these documents and access or amend them when you need to. With that in mind, below are the contract management fundamentals for small businesses. 

Use a Contract Management Software

There will be multiple contracts formed between different people in any business, even a small one. You will have vendors, suppliers, clients, and business partners. This means that even in the early stages of a company’s growth, a contract repository is essential.

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You won’t have to spend money on hiring people to file away all of the contract paperwork, and you won’t have to waste time looking for the right data at the right moment if you have a system in place. When your contracts are available on digital software, it will save a significant amount of time when it comes to accessing and organizing them. Contract competition will be speedier, the review and approval processes will be more efficient, and electronic signatures will be more convenient.

Establish a Contract Management Plan

When you start the contract management processes in your company, make sure you have a plan in place for each contract. The following three steps should be included in this plan: creation, execution, and maintenance.

With this structure in place, the process will flow smoothly, and you will make sure that each contract is handled in the same way. The most significant step would be contract maintenance; the plan should involve regular reviews. You might also set business objectives and keep track of when you achieve them.

Don’t Skimp on Legal Advice

Lawyers are required when negotiating contracts or asserting contractual rights. Because they are legal specialists, they will ensure that all bases are covered when it comes to claims and contracts.

If you don’t carry out operations correctly, you could be found in violation of the law, or your rights could be violated if you don’t have lawyers. This is critical in the contract management process, and it should not be looked over by a small business. There are times when you need to hire a lawyer

Review Your Compliance Frequently 

Regular compliance assessments are necessary to guarantee that your organization receives all of the benefits and complies with all of the obligations stipulated in a given contract. The reviews will aid in the management of the contract’s costs and risks. These reviews will help the parties obtain knowledge that will allow them to maintain a positive working relationship now and well into the future.

KPIs (Key Performance Indicators) should be prioritized, and meetings with employees and other stakeholders should be held periodically to ensure that they have fulfilled their performance targets. You can also discuss any issues the employee may have with their contractual obligations during these sessions. Being able to point to contracts and numbers that correspond to contract fulfilment puts you, as a business owner, in much better stead when it comes to contract renegotiation. 

Make Use of Templates

Contract templates will be very valuable for a small business just starting out, helping to ensure that the company’s contracts are uniform and to prevent missing key components. Once you have a legal team or a lawyer on retainer, using templates will help you save time and money.

The contract templates should be simple, straightforward, and well-structured. They should address all aspects of the contract to ensure that legal duties are not overlooked. And, lastly, they should also be simple to update or amend for different contracts and various scenarios.

Stay on Top of Expiring Contracts

Contracts expire, and it’s crucial to keep track of when this will happen since it is possible that the business will be disrupted if end dates and terms are not well known. Most individuals overlook the fact that a contract has an expiration date, which might lead to complications down the road.

Recording expirations before the contract begins is a good way to stay on top of them. You may set up a system that alerts you when a contract expires, giving you enough time to make necessary arrangements, such as renegotiating a new contract.

Conclusion

Getting your contract management right is a key part of running a successful small business. While you may not have the sheer volume of contracts to manage, as you grow, your need for a sound system you can rely on to keep everything up-to-date, accurate and easy to access will grow too. Keep the above contract management best practices in mind and ensure that you are on top of your business’s most important documents.

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