Are you new to entrepreneurship? If so, you might not have a lot of experience creating and negotiating contracts. Contracts are common in business agreements. Whether you’re setting up an account with a supplier, hiring an employee, or onboarding a new client, there’s a good chance that contracts are involved. Contracts have become increasingly complicated. Because individuals and businesses want to cover all their bases, contracts can be long, overwhelming, and incredibly detailed. However, here are some important things to know about contracts courtesy of the Corona Chamber of Commerce.
Why Contracts Matter
Why bother with business contracts? Isn’t a verbal agreement enough? According to Concord, there are seven main reasons to create contracts for your business agreements. First and foremost, contracts serve as a written record of the commitments of both parties involved. These agreements ensure both sides are happy with the arrangement, which prevents conflict and mitigates the risk that someone decides to take legal action. Plus, contracts can serve as a communication tool, encouraging parties to work together to arrive at an outcome that produces benefits for everyone. In short, contracts are essential for protecting your business.
Negotiating with Clients
Contract negotiation is an important part of the process. Through negotiation, the parties involved in the contract deliberate over the details to reach an agreement. Typically, both parties push for their interests and wind up compromising to ensure everyone walks away happy. For example, when negotiating a contract with your suppliers, you might seek to secure longer timescales for payments so you can maintain better cash flow.
Research and preparedness are essential for successful contract negotiation. Make sure you know exactly what you want and what the other party values. This way, you can offer something valuable in exchange for your own needs being met.
Businesses often negotiate payment terms before settling on a contract. Besides agreeing on payment terms, make sure you have a good invoicing process in place to ensure your clients uphold their end of the bargain. Invoicing your clients quickly and including essential payment information with each invoice will encourage clients to pay on time.
Using accounting software will ensure you fully understand the financial health of your business before beginning negotiations. Choose an accounting app that offers real-time insights into your cash flow so you can refer to accurate financial data during business negotiations.
Creating and Modifying Contracts
Contracts often require multiple revisions, so it’s important to have tools available to help you with the review and revision process. If you and your client want to avoid meeting in person for every draft, you can send a PDF that they can add comments and virtual sticky notes to, so you can revise according to their feedback or schedule a meeting to discuss larger changes. You may find that there are sections of a previous contract you would like to include or that there are previously sent documents that need to be inserted. By using a PDF extractor you can get that content from the other files and insert it into your new contract.
Once you have finished revising the contract and both parties appear to be satisfied, you can get all parties to consent to e-sign the contract. If done correctly, these electronic signatures hold up in court and they are already digitized for easy electronic filing, both for your business and for any other entities that may be involved.
Automating the Contract Process
Creating and negotiating contracts can take up a lot of your time. Take advantage of tools that will enable you to create, share, and modify contracts without a lot of email back-and-forth. Look for a contract management system that offers a centralized storage solution for all of your business contracts and automated alerts for obligations or expirations. Many contract management systems accommodate the use of pre-made contract templates, so you can ensure every contract is thorough, accurate, and up-to-date. Automating time-consuming business processes like this will help you focus on bigger-picture projects!
Creating and managing contracts is part of business. But for the new entrepreneur, the idea of writing and negotiating contracts can be completely overwhelming. Take it one step at a time, learn how to make data-based negotiations, and take advantage of tools that will make the contracting process much easier.
For more helpful info and resources on everything business, consider joining your local Chamber of Commerce!