Handling contracts is a crucial part of any business, but it’s often not given the attention it deserves when entrepreneurs are learning how to run things successfully. Knowing how to create, negotiate, and understand legal terms and documents is essential as you work with other professionals, as it will help minimize risk for both parties while allowing everyone to fully grasp what their rights and responsibilities are. Fortunately, there are several tools available for you to use that will make the process easier; here are a few tips and resources that will help you along the way.
Because most contracts involve a financial exchange of some kind, it’s essential to have a strong understanding of your business’s finances before hashing out the details. Knowing what your cash flow is like will prevent any issues down the road while giving you peace of mind that you can easily cover the terms of the contract. Utilize cloud-based accounting software that allows you to manage all the financial aspects of your business in one place and gives you information about your current cash flow situation in real-time.
Once you have a solid grasp of your business’s finances, it’s time to learn more about what goes into a standard contract. Understanding how both sides put their rights and obligations into the document, how to clearly set terms that will prevent or resolve disputes, and agreeing on how and when either party can terminate the contract will be crucial.
What will be exchanged, and for how long? Will the contract cover an ongoing deal or just a one-time exchange of goods or services? It’s also important to note whether there will be a non-compete clause included (and to understand the conditions), as this will ensure that those same goods and services aren’t sold to a competitor during the terms of your contract. Are you identified correctly in writing? Typically, a contract is between two businesses rather than two individuals, so it’s especially important to make sure your company name is the one used within the terminology. If your business has subsidiaries, you may need to note that in the contract.
Finally, are all involved parties of the right age and sound mind when they enter the agreement? This is an important detail that affects the validity of the contract.
You’ll also need to know how to edit your contract. If there are sections of a current document that you want to use for a new agreement, you can use a tool to extract PDF pages in order to choose the parts you need and create a new, modified PDF that spells out your needs. It’s crucial to ensure that, after edits or revisions are made, both parties are given the opportunity to read through the contract once more to check for any mistakes or overlooked details, and that the final copy is signed and dated correctly by all essential individuals. Want to make sure the document is completed safely? Utilize an app that allows all parties to sign and retain a secure copy.
Unfortunately, entering into an agreement with someone isn’t always a cut-and-dried process. Once you have a solid understanding of what goes into a contract and how to ensure it suits your needs, it’s time to figure out the art of negotiation. Often, this is a skill that business owners must learn anyway, but working out the terms of a contract is different than making a sale. It’s important to know from the beginning who you’ll be working with on the document and to come prepared with any relevant research so you can understand what the other party’s objectives are. Negotiating successfully has several benefits, including saving you money.
Once you understand the ins and outs of creating and negotiating a contract, the final step is to ensure that you’re familiar with the legal details. While there are a few general rules that always apply to contracts–such as that it must be signed and dated by both parties–there are also specific regulations that vary from state to state, so you’ll want to research the laws in your area and tailor the physical contract to those specifications rather than using a cookie-cutter form.
Creating and handling contracts is an inevitable part of any business, so being prepared with the right tools and knowledge is essential. Ask questions, change any aspects you’re not comfortable with, and remember that entering into a business agreement is not personal, so it’s important to keep your feelings separate from the professional task at hand.
Photo via Pexels