Who was it that said that ‘prevention is better than cure’?
I think that it may be attributed to the Dutch philosopher Desiderius Erasmus in around 1500. As well as being a fundamental principle of modern health care across the UK, it’s a mantra that I like to talk about when looking at managing contracts.
The starting point is, of course, risk. There is always risk involved when entering into a commercial contract, but looking for, addressing and (hopefully) mitigating that risk saves, time, money, and the need to then revert to commercial legal advice if the risk then becomes a reality…
How do you do this? Well, there are specific risks in sectors, but some general tips would and should include:
- Make sure your contract boilerplates are not risky/out of date.
While price and term are usually the two most important points, give the rest of it a spring clean and make sure all of the key headings including tittle, excluding liability etc are covered. Remember that even if you deal with a variety of contracts, developing templates or a database of commonly used can both reduce risk and serve you well for any further negotiations.
- Get and keep organised after execution.
So many businesses don’t keep contracts correctly stored and organised after execution. A simple, easy-to-use, effective record system is vital to the success of any business, regardless of the size or type of business. Renewal dates get missed, key terms are forgotten, and commercial risks accumulated if you don’t, so the time spent on setting up a simple spreadsheet now should reap dividends down the line.
- Doing the basics well
Many times we see the final contract version signed but not dated, or with the wrong name at the top, or signed by the wrong person. It almost goes without saying but checking and then using the correct details makes you perform proper due diligence prior to contract execution and can save time and frustration if the relationship breaks down.
- Bad Comms
For some businesses, up to 25% of a company’s workforce can be involved in some part of managing contracts. The risks of this are obvious, if you understand not only who needs to sign the contract, but who will oversee its implementation, this helps reduce the risk of something going wrong.
Putting it simply, these can be great tools to reduce negotiation time and ensure important clauses are included BUT they are only effective if they are up-to-date. Book an annual review with us to make sure your templates contain all required language, along with any relevant information about the business that may have changed.
To conclude, hopefully some of the above will be helpful, the most important final thought though is to be proactive – don’t wait until a problem arises before taking control of your agreements.
Being proactive means reducing risk through tools and strategies like those discussed above throughout the contract management process.
Regards to all,