Contracts are the most important aspect of any business, as they define your relationships with clients, supplier, strategic business partnerships, and more. However, companies often don’t realize that their contracts are what define their business relationships, and often don’t refer to their contracts after they sign them and file them away. This is a big mistake, as failing to manage a contracted that is poorly created can cause legal harm down the road for a business, especially if a dispute arises between the two parties that signed the contract in the first place.
Failing to follow through on the provisions created in the contract can also cause confusion and a breach of trust with the other party that you signed a contract with, which can irrevocably harm the relationship. With that in mind, here is what companies can do to stop mismanaging their contracts so that they can get the most out of them and improve their relationships with those they have signed contracts with in the first place.
1. Failing to legally review contracts
Many businesses that are just starting out often make the mistake of attempting to solicit a deal by giving overly favorable contract terms to the other party. This is often done by salespeople at nascent businesses, who are looking to sign deals and get their own commission, without a thought to the long-term health of the company. This can be a difficult problem to solve, especially when salespeople have antithetical goals to the overall business, which should be more interested in sustainable growth rather than unmitigated growth.
To stop salespeople from negotiating contract terms, it is important to have a legal contractor or law firm on hand who can review the contracts before signing. Even if this causes the deal to fall through, it is better than having unfavorable contract terms that can hurt your business down the road. While it isn’t necessary to have a lawyer on staff, you should make sure that your contracts follow a certain template that is legally reviewed and that any changes that are made to the contract to better sell are approved beforehand.
2. Not using contract lifecycle management with a contract management software
It is very important that business owners, no matter what size the business is or what industry they are working in, to understand the contract lifecycle management process. This process allows businesses to better organize, quantify, and analyze the efficacy of their contracts and understand where they can improve in the future. This includes all the different elements of contract creation, including requesting and drafting a contract, the negotiation process, fulfillment and compliance, and ultimately the renegotiation or ending of the contract depending on its performance.
This can be done quite easily within a contract management software. This can allow you to organize the entire process, including where your contracts are located, setting alerts and notifications for key dates and stipulations within the contract, and also ensuring that contracts are legally reviewed in a way that makes sense for the contract at hand.
Overall, mismanaging your contracts can be a costly and tiresome mistake. By not having your contracts reviewed legally, and also failing to use contract lifecycle management along with a contract management software, you are putting yourself at potential risk that you should work to avoid.