Setting Up a Solid Business Contract
As with any aspect of business, contracts have varying degrees of efficacy. In order to be successful, they need to include sufficient details—if you were to review a contract 6 months later, you should clearly understand what it was discussing. This is why it’s so important to get everything in writing. Oral agreements can be nice, but they have a tendency to dissolve in our memory. Plus, they often don’t hold up in court.
A good contract also strikes a fair balance. If one party is getting the lion’s share of the value, there will inevitably be issues down the road.
“Good contracts are handshakes with teeth,” explains Forbes. “Done correctly, they capture the parties’ deal. Better still, your company’s contracts can be tremendous assets that lock down your rights to money, goods, and services. But you can ruin all of that.”
To stand the test of time, every good business contract should identify the parties involved and ensure they’re competent, lay out a legal purpose (referred to as the consideration), and present the terms and conditions. When any of these components are missing, the legality and efficacy of the contract could suffer.
Let’s look at some key elements that will strengthen your business contracts:
Get Professional Help
Even if you have substantial experience in creating contracts, you probably don’t have a mastery of the various laws that impact that contract. For this reason, it’s advisable to hire an attorney to handle the process.
“Most small business owners are overwhelmed by trying to do their work and figure out how to run a company,” explains legal expert Ally Lozano. “Business owners often add contracts to the never-ending to-do list and feel frustrated when trying to figure them out. The main reason that contracts are important is that they help set boundaries and expectations for each and every person that you come into contact with in your business […] Remember, a lawyer can help create these contracts. You are the expert in your business, and a lawyer is an expert in the law.”
If attorney fees are outside the realm of your budget—or you just have a visceral opposition to partnering with a lawyer—you can tap into the resources of a legal service. Options like Rocket Lawyer, Nolo, and LegalZoom are usually more economical and provide the convenience you get from user-friendly platforms.
Get the Parties Right
Contracts only work if they are drawn up between the most relevant people—if you need final say on the contract, you should also be involved in its early stages. Oftentimes, business owners dispatch unqualified employees to hammer out a contract. This only muddles the process and can endanger the contract’s success.
You also need to ensure that all parties are correctly identified in the document. If you’re dealing with an individual as part of the contract, make sure they understand their distinct role—then double-check that you spelled their name correctly.
Be aware that if the other party is structured as an S corporation, C corporation, or LLC, you wouldn’t use the individual’s personal name. Instead, the contract should refer to the business’s name. This aspect can be counterintuitive to many small business owners, but the law recognizes the business only by its entity name, not by the name of the owner or owners behind it.
Get the Obligations Straight
Never make assumptions in a business relationship. Luckily, contracts give you the opportunity to get everyone literally on the same page. If someone needs to make payments, the document should outline how and when those payments are made. If a delivery of products is involved, similar specifics should be attached to those actions.
Unfortunately, some business relationships falter. Payments are missed, meetings delayed, or goals revised. Your contract should include language that outlines what is acceptable and what isn’t. Should issues arise, make sure there are details regarding resolutions. For example, will you pursue mediation or opt for the courtroom?
If a signing party is negligent, there should also be an opportunity for the second party to end the contract. This option of rightful termination should be free of any legal repercussions.
Get It Locked Down
A lot of trust goes into a business contract. Given the nature of the document, you’ll probably be required to include proprietary data relating to your business. Thus, it’s crucial to include assurances of confidentiality from both parties.
“There are just a few elemental forces that hold our world together,” asserts a business guide from Forbes. “The one that’s the glue of society is called trust. Its presence cements relationships by allowing people to live and work together, feel safe, and belong to a group. Trust in a leader allows organizations and communities to flourish, while the absence of trust can cause fragmentation, conflict, and even war. That’s why we need to trust our leaders, our family members, our friends, and our coworkers, albeit in different ways.”
All language relating to confidentiality should be as clear as possible. Make it impossible for ambiguity to cloud expectations. By approaching this issue with precision, you can avoid the types of breaches that destroy relationships—and sometimes result in legal action.
Using Technology to Improve the Process
Digital tools are reinventing the small business world by taking recurring tasks off your plate. When you outsource such chores to software or applications, the human penchant for error is greatly diminished. This means you get better results with far less effort—a ratio that any entrepreneur can surely appreciate.
As technology improves, so does the number of business-related tech offerings. Popular examples of digital tools include:
- Quip: Helps keep your team in sync with a robust suite of workflow tools
- Marketo: Compiles your digital, social, email, and mobile marketing in one place
- RescueTime: Tracks your online habits and helps you manage your time better.
- Unbounce: Makes it easier to refine your online presence and gauge performance.
The good news: similar tools are available to help you prepare for, manage, and track the business-contract process. While using such a resource might seem like a no-brainer, they aren’t used as widely as they ought to be.
“Contracts spell out how revenue will be generated and what each party’s recourse will be if expected outcomes don’t happen,” explain technology experts Ken Contrata and Rob Marvin. “Yet, even though contracts are so important, it is still surprising how many companies manage their contractual processes by using a clumsy combination of emails and printed documents. The files could all have different document formats or even be stored in multiple locations, many of which are only known to those directly involved in the business relationship.”
Just as a tool like QuickBooks organizes and protects your expense reports, a good contract management product will do the same for various versions of the contract as negotiations take place. Each party has access to updates, and a timeline exists to ensure everything is done properly.
Of course, we expect more from modern technology than to be merely a digital filing cabinet. Similar to Marketo, which helps you track and analyze advertising performance, top-line contract management tools do the same for the analytics involved in the business contract process.
All these various features are impressive, but the greatest benefit of contract management software is that it takes the human element out of one of the most volatile areas of business. It’s not unusual for emotions to take over as various parties try to protect their interests—which is why it’s important to have a digital assistant that stores everything in the most transparent, accurate way. Contract software is one of the best ways to bring neutrality to the equation, helping to put everyone at ease.
You’ll also find that contract management tools can save you a lot of heartache down the road. Mistakes will decrease due to the clinical precision of the software you’re using, which can be a major benefit if you’re ever audited. Nearly every risk associated with a business contract can be minimized with the right software.
Choosing the Best Software for Your Needs
The first challenge associated with contract management software is choosing the one best suited for your needs. There are numerous options, each with unique functions and limitations.
“As you search for the best contract management solution for your organization, you’ll want to consider the full capabilities of the software against the needs of your company,” suggests a report from Technology Advice. “Many solutions allow contract sharing between internal and external partners, but if you’re concerned with security and accessibility, you might want to look into how those contracts are relayed to external partners […] As always, keep your industry’s regulatory requirements at hand for reference. Most contract management companies design their software with federal and international regulations in mind, but it’s best to double-check before you commit.”
There’s a symbiotic relationship between the core functions of any good contract software. First, it should store all relevant documents. Storage is only beneficial, however, if there’s a robust search capability that allows you to find what you need when you need it. Likewise, it’s important for your software management solution to track provisions. To get the most from this tracking, you’ll need to have access to reporting as well. When all 4 of these functions support one another, you’ll find that contracts can be surprisingly easy to manage.
As you dig deeper into contract management software, you’ll find details about how it will carry out these primary functions. Here are some key questions to consider:
- What kind of reports does the software provide?
- Are the reports catered to the way your business handles tracking?
- How easy is it to search various data fields?
- Can you save an important search to make it easier to locate in the future?
- Are there tracking features to let you know when key dates are approaching?
Answering these questions will help you to make educated choices about a software product. The more customizable a system is, the more you can adjust it to your business. Of course, the collaborative nature of business relationships makes it advisable to consult with the other parties in this selection process. When everyone has a seat at the table, they’re more likely to support decisions and be engaged.
Let’s take a look at some of the top contract management software products currently available:
- Conga: This versatile product has your back from the onset of contract discussions all the way through renewals. Conga’s dashboard is intuitive to use and puts a broad range of tools at your fingertips. It’s easy to make updates and track a contract’s evolution, helping everyone stay informed during negotiations. Another benefit of Conga: it can be either cloud-hosted or based in your office.
- Outlaw: Unlike Conga, Outlaw is only available in a cloud-based version. But that option gives you lots of storage and the ability to access it from just about anywhere you may be. The time-saving features of Outlaw allow you to search files quickly and access whatever you need. And the product’s word processor makes it easy to create templates for your future contracts.
- Concord: This solution is best for users trying to manage existing contracts rather than creating something new. Concord’s search and tracking capabilities are excellent—plus, it offers top-notch security features to keep everything safe and secure.
- PandaDoc: Another product that dwells only in the cloud, PandaDoc offers a wide range of templates that can be tailored to your needs. It’s designed for maximum configurability and includes bonuses like an e-signature feature. You’ll find that the tracking abilities of PandaDoc are second-to-none. For example, you can view statistics for who is viewing documents and how those documents have progressed through the contract process.
- ContractSafe: With its focus on security, ContractSafe is a good option for those who desire a shorter leash on their contract management. You can dole out permissions as you see fit while trusting that no one else will be able to access your contract documents. As for document management, this product gives you a selection tool that makes it simpler to highlight key sections, sort through information, and filter your results.
- Precisely: While this product’s name implies sophistication, it’s surprisingly user-friendly. The dashboard provides tools for contract creation, editing, e-signing, approvals, tracking, and workflow alerts.
- Cobblestone: For contract newbies who are looking for a simple interface and limited features, the lowest tier of this product could be a good solution. It still has customizable features that help you get from point A to point B, but you won’t get bogged down by advanced tools in the process.
As you review your options for contract management systems, you’ll need to balance features with cost. There are probably some non-negotiable functions that you require, while others may only be nice-to-haves for your business. Take the time to consider all the best possible solutions, then make the financial decision.
Before signing on the dotted line, however, be sure to talk to someone who has used that software. Online reviews are certainly helpful, but they can be biased (or even fabricated). You’ll find that a 15-minute chat with a trustworthy colleague who has used a certain software product is more effective than an hour of sifting through various reviews.
Armed with contract management software, you’ll be more organized, efficient, and reliable. Most importantly, you’ll be able to get the most from each of your business relationships, which benefits everyone involved.