For any business, reputation is everything. And it very much depends upon how well you stay in compliance with contracts. Your business is more likely at risk of getting its reputation hampered if you miss contractual obligations. If you are running a growing company, you would know the value of repeated business opportunities as they help you meet your business objectives. Failing to complete a business contract is a sign of poor contract management, which can do irreversible damage to your business.
Therefore, let’s read what experts say about the importance of contract management for growing businesses.
1. Contracts: The Foundation of Business Relations
Martin Peters, Chief of Staff
As it pertains to my background, I have directed all contract management functions at a national, large, complex nonprofit. My duties included research and interpretation of laws, rules, and industry standards; writing, editing and finalizing contracts; developing and updating contract policies; procurement and negotiations; oversight of department expenditures, tracking and compliance; supervision of the contract management team.
As it pertains to contracts, they are extremely important for growing businesses. Contracts are the foundation in which relationships are developed with both your customers and your suppliers or funders. A primary example of a contract is a lease for your office location or equipment.
Many times the size of the office space or the number of copiers or other equipment you may need changes as your business grows, or sometimes strategically shrinks. Negotiating clauses that allow you to adjust your space or quantity of goods as your business changes is important.
In many of the leases I have negotiated I advocated for clauses that allowed the client to terminate the lease with the loss of their government funded contract. This was important because without the revenue of the government contract, they had no need for the space or the funding to pay for it. The same is true for office equipment such as copiers.
If you are scaling a business up or down, you need to have the ability to terminate contracts, even if there is a nominal fee, to have the flexibility to accommodate your growth.
2. It is Essential to Work According to the Contracts
David Reischer, CEO/Founder at ProBono.LegalAdvice.com at LegalAdvice.com Corp
Contract management is essential for the negotiation, formal drafting, finalization and continual monitoring of a particular contract. Counsel must ensure that procedures are set up to quickly and effectively to communicate any new development to the appropriate party.
If this communication goes missing because there is no clear delineation of responsibility between counsel and company participants, the end result could be that parties feel under represented. At worst, a lack of coordination can significantly increase the risk of an embarrassing mistake or misunderstanding between the parties.
3. An Extra Form of Protection
Ken Eulo, Managing Partner at Smith and Eulo Law Firm
Contact management is extremely important for small businesses because it is an extra form of protection for you, as well as your employees. In a B2B example, quality contract management is a sort of checks and balances system, aimed to maximize the potential of the contract so both businesses are benefiting.
Every growing business should understand the basics of contract management, or hire a professional, when negotiating contracts with a larger entity. Larger businesses often take advantage of smaller businesses via unfair contracts, and normally have their own team of legal representatives to negotiate the terms of a contract.
4. Efficient Contract Management is Crucial to Maintain Sustained Growth
Katy, CEO | Author | Lawyer | Speaker | Board Member. Aid Companies Build Stronger Brands & Cultivate Human/Employee Potential
I saw you are looking for lawyers to comment on importance of contract management for growing businesses and I’d love to share some information with you. My name is Katy Goshtasbi. I’m a Lawyer, best-selling author, professional speaker, stress, self-confidence/behavior expert and the immediate past chair of the American Bar Association (ABA) Law Practice Division
I’ve been featured in the ABA Law Practice Magazine, ABA Journal, Investment Lawyer, Simple Steps Real Change Magazine, and other prominent publications, as well as TV.
As with anything else that’s necessary to grow your business, structure and organization is critical. Therefore, contract management that is functionally organized and efficient (i.e., removes redundancies and clarifies roles, rules and has SOPs) is crucial to effective implementation of contracts in a timely manner to maintain sustained growth.
There are always lifecycles to contracts and the key is figuring out: a) who does what and b) what software can support this process easiest and most cost-effectively. As with any kind of growth process, answering that first question regarding proper human capital/talent usage is the hardest one (i.e., who does what).
At one point, I was negotiating and implementing 16 large contracts when I was in-house: all at the same time! Back then, there was limited technology and no real understanding of contract management. We had no software nor any type of system. So I had to use my organization, leadership/delegation and business savvy to get all the contracts in place. This shouldn’t happen to anyone these days, as far as I can help it. That’s why I train on this subject and bring to the table all the growth tools that are needed.
Read: Laywers’ Suggestions to Avoid Mistakes during Contract Drafting!
5. Avoids Possible Issues Between Parties
Nicole Hudson, Leadership and Adaptability to Take Care of Yourself and Your Teams will be How this Period Defines Your Company.
The MOST important thing for growing businesses and their contract management is to get an attorney involved. Many times, businesses (and people) try to avoid legal fees on the front end to only wind up spending much more on the backend when things go wrong or awry. As attorneys, we are often contacted to resolve issues that could have (or should have) been avoided in the first place.
I recently had a small business owner come to me AFTER signing a commercial lease for space (that had been vacant and unused for many years) because he was not able to get a Certificate of Occupancy. The Landlord put all obligations on the Tenant and the Tenant / Business Owner had no idea what was being agreed to. Then, in order to receive a Certificate of Occupancy, the Tenant had to bring all the floors, electrical, plumbing, and fire suppression system up to Code. To make matters worse, all of this expense had to be done for a mere one-year lease.
6. Ensures There’s no Confusion
Andrew Taylor, Director at Net Lawman
Having appropriate contracts set in place is the key for both parties in business to find success. It’s not a matter of trying to trick another into paying more for something or to cheat them out of doing a good business deal – it is to ensure that there is no confusion when a disagreement occurs and neither party knows what to do about it.
Having a lawyer over every conceivable base in a contract allows businesses to move forward confidently with one another, allowing for success to be more readily achieved.
7. To Avoid Litigation Expenses in Case of Contract Breach
Dennis Sawan, Managing Partner, Sawan & Sawan LLC
When someone starts a business, we find that it is common for business owners to avoid paying legal bills – and instead opt to cobble together crude contracts from a variety of sample sources. While many businesses can manage this for considerable time without an issue, as a company begins to grow in size and complexity, a foundation of poorly drafted contracts can cost a company everything.
Here is a good rule of thumb, the cost of a lawsuit almost always dwarfs the cost of the underlying contract drafting. This fact is only further compounded by that fact that lawsuits contain uncertainty, and this is especially true when they are based on confusing or ill-conceived contract provisions.
To avoid the expense of litigation, and the compounding effect of poor contracts, it is always the best practice to involve legal counsel as soon as practicable in the business’ life cycle. It’s also important to maintain that communication throughout the growth of the company, as the unique needs and risks associated with a companies size and complexity require frequent attention.
8. For the Safe and Proper Running of the Business
Bradely Stevens, Partner at LLC Formatios
For anything to function correctly, it is pertinent that it must have some set of rules, guidelines, and frameworks. For machines, that role is played by hydraulic fluids, and engine oils for food spices are considered an integral part. Similarly, contracts play a vital role in the safe and proper running of many businesses all across the world.
Contracts are of many types, and they do not touch businesses but also small transactions such as sale, purchase, transfer, etc. The essential thing to consider about a contract is how it is managed. That is that the parties of a contract must execute the contract according to the decided terms and the rule of law, and they must abide by the said terms. Without contract management, a company or a business is just like a jungle where everyone having stakes in the business have their own set of rules which they use for their and their benefit only.
Conclusion
Concluding this round-up post with the fact that managing the contracts properly is the keystone for the success of any business. It is actually the foundation that ensures both parties work according to the guidelines included in the contact.
After considering experts’ opinions described above, we now know that contract management is vital for growing businesses. Yes, contract management sometimes becomes challenging, but everyone knows that contracts are no less than a valuable asset. Thus, for the proper management of business contracts, it is recommended to either use contract management software or get external help, such as a reliable contract management outsourcing service provider.
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