For any business, reputation is everything. And it very much depends upon how well you stay in compliance with contracts. If you don’t meet your contractual obligations, it could harm your business’s reputation. 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. Recognizing the Importance of contract management is crucial for maintaining trust, safeguarding reputation, and securing future opportunities.
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 large, complex national nonprofit. In my role, I researched and explained laws, rules, and industry standards. I also wrote, edited, and completed contracts and kept contract policies up to date. I handled procurement and negotiations and tracked department spending and compliance. Additionally, I supervised the contract management team.
As it pertains to contracts, they are extremely important for growing businesses. Contracts are the foundation on 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.
When growing or shrinking a business, it’s crucial to be able to end contracts, even if it involves a small fee. This flexibility is essential to adjust to your changing business needs.
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. Lawyers must establish efficient procedures to promptly and clearly communicate any updates to the relevant parties.
If communication is unclear due to a lack of clear roles between lawyers and company team members, parties might feel unsupported. 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
For small businesses, managing contracts is crucial—it’s like an extra layer of protection. In B2B scenarios, good contract management acts as a checks and balances system, ensuring both sides benefit from the agreement.
It’s essential for growing businesses to grasp contract management basics or bring in professionals when dealing with larger companies. Big corporations usually have their legal teams, and without contract know-how, smaller businesses can end up with unfair deals. Understanding and negotiating contracts properly is key for a level playing field.
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 the 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 on TV.
As with anything else that’s necessary to grow your business, structure and organization are critical. Therefore, contract management that is functionally organized and efficient (i.e., removes redundancies, clarifies roles and rules, and has SOPs) is crucial to the 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 or 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, only to wind up spending much more on the back end 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 systems 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. The goal isn’t to deceive or unfairly benefit from a business deal. It’s about preventing confusion and uncertainty when disagreements arise. By thoroughly covering all aspects of an agreement with a lawyer’s help, businesses can proceed confidently, promoting success and smoother relationships.
7. To Avoid Litigation Expenses in Case of Contract Breach
Dennis Sawan, Managing Partner, Sawan & Sawan LLC
When starting a business, many owners try to save money by piecing together contracts from various templates. This might work initially, but as the business grows, relying on poorly drafted contracts can be disastrous.
A straightforward rule is this: it’s much cheaper to have a good contract from the start than dealing with a lawsuit later. Lawsuits are not only expensive but also uncertain, especially when caused by confusing or poorly written contract terms.
To avoid costly legal conflicts and issues from weak contracts, it’s wise to engage legal experts from the beginning of your business. Make this a continuous practice as your company expands because the specific requirements and risks change as your business grows in size and complexity. Keeping open communication with legal counsel is key.
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 come in various forms and aren’t just for businesses—they’re also used in everyday transactions like sales, purchases, and transfers. The essential thing to consider about a contract is how it is managed. In a contract, parties must follow the agreed terms and legal rules. Without contract management, a business can turn chaotic, resembling a jungle where everyone follows their own rules for personal benefit.
Conclusion
In summary, effective contract management is the cornerstone of a successful business. It is actually the foundation that ensures both parties work according to the guidelines included in the contract.
After considering the 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 reliable contract management outsourcing services.
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