Have you and your business spent 2021 just hanging on in there, scrapping through by the seat of your ‘pants’? Or perhaps you’ve been busy ‘pivoting’ like so many businesses have during the pandemic. Either way, you’re going to want to think about contract management.
contract management?
Yep – contracts…we don’t blame you if you’re thinking ‘dull!’…however, bear with us! As we near the end of 2021 we reflect on the year we’ve all had (and what a year?!?). Then look to 2022 – what are our ambitions? What do we need to solve or improve? At Lawbox we think that considering how you’ve been doing business and, more importantly, how you can do it better is just business smart. Would you not agree?
the problem?
We get it, when most (all?) businesses start out, they just want to get the deals done and get up and running. We get it and, let’s face it, have done the same thing. You enter into a host of agreements with suppliers, contractors and other third parties. You receive a suite of contracts to sign and, often without reading the small print, just sign.
However, this is where the problem starts, although you might not realise it at the time and it may take some time to really surface – we find the 3-4 year mark the first pain point.
Problems with contracts tend to only become apparent when a business, now more established, wants to start thinking about changing some of the commercial agreements that it has now outgrown. It is then that you may realise you have a bunch of messy unknowns that are seemingly impossible to untangle. Some businesses might even find themselves stuck in contracts that they don’t feel they can get out of.
So…what to do? Well, some grin and bear it. Others might turn to their lawyers – and quite rightly so. Whilst we would always advise getting ahead of any risk or resulting issues by getting your contracts right in the first place this isn’t always possible or what has happened. In this case, we can help!
the solution? Contract management.
We are regularly asked by new clients to review their existing contracts to help get them out of a contractual mess. It’s something that we in fact pride ourselves in being rather good at!
We use our legal design brains to consider the entire business, all your systems, suppliers, processes, etc. And this is where we then discover some of those unknowns in your contracts, agreements, and tie-ups that are no longer fit for purpose. It’s a bit like pulling that loose thread on your jumper! Maybe you want to take a different direction in your business – the classic pivot – or start using a new supplier? Or you feel that because of the contracts you have in place you’re unable to make fundamental changes to the way you do business. But we can help.
getting the best out of your contracts.
We want to help businesses to be the best that they can be and so much of this starts with acknowledging problem areas (the ‘not burying your head in the sand’ that we mentioned in the last article on avoiding disputes) and working out strategies to tackle them. There are several different paths we can take for our clients:
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Reactively deal with problems.
This isn’t really a long-term solution, but, it’s an option (insofar as doing nothing is always an option). Here, we don’t really do anything for you, but are on call for when problems arise and we then deal with them for you, as and when they do.
Of course, we can do this for you but the reason why this isn’t really something you want to be doing is that when problems rear their heads and you need to act, well, you need to act. This doesn’t leave room for ensuring that the result is the best one for your business. Which kind of brings us back to the same issues over and over again – you want to make a deal, or sign on the dotted line, so you do, with haste. But we rarely get the best deal or sign on the most commercially friendly line when being pushed into action.
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Pick on the contracts which are problematic.
This is really a half-way house. Here we can identify those contracts which are likely to be the most problematic going forward for your business and deal with them before the problems arise.
It takes away some of that sense of urgency and means we can be a bit more bullish when agreeing terms. However problem areas shift for businesses over time, so this can only ever be a solution for the moment.
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Health check and contract management.
This is the optimal solution. The solutions for moment AND the future.
When we conduct a full health check and then offer a business ongoing contract management we work with your contract team (or the person who has been doing all the signing!) to conduct a health-check of all the contracts that are in place. We pull out the key dates and clauses so that we can manage them more effectively going forward. We go back and fix those contracts that no longer fit the business and future proof new agreements so that problems don’t arise again.
Commercial positions change depending on where a business is in their journey. You might have changed your payment terms, for example, or you might be less willing to accept someone else’s than you were previously. These are the sorts of things we will look at and change – to the betterment of your business.
When you start out a business you have likely taken a commercial view – you wanted the work so you accept risks. However, that appetite for risk will change over the course of your journey and that appetite for risk is something that can be documented and managed.
signs that you need help with contract management.
Some of the most common signs that our assistance is needed with contracts are:
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You’ve changed
Has your business changed but your contracts don’t reflect the changes? Perhaps you are in year three or four of your journey and haven’t been keeping track of what you have signed. If this is you then you may need our help because your business will have changed and your contracts won’t have kept up.
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You’ve been ‘copying and pasting’
Have you found yourself using the last contract you signed as a template for your next deal? We get it – it’s easy. It’s there. But there a re many potential risks with this – not least that you forget that you changed parts of the contract and you end up with massive inconsistencies and increased risk. Is this you? Well then, yes, you guessed it, you need our help!
what are the risks of doing nothing?
As we said, doing nothing is always an option. However, there are three risks associated with that:
- You come unstuck
- You have agreements that are not as competitive as others you could have
- Your business is not kept up – to a degree, you should be jumping between suppliers and third parties as required by your business – or at least be able to do that if you want to!
thinking of forging ahead on your own?
Whilst DIY contract management is always an option we would also advise against this. Here it is likely that the contract management will end up being more commercial than legal. You might not be able to see the legal pitfalls ahead for your business when you have grown and changed – when the commercial doesn’t stack up against the legal risk.
getting it right from the start.
If you are a start-up business reading this article, then you’re already ahead of the game! Avoid these pitfalls entirely. We offer a cost-effective solution so that you can start to build up a pack of documents for your new business. We can also flag your key dates and help you manage your risk and contracts for the future as your business grows.
contract management tips for start-ups
If you don’t quite feel that you are there yet to get in touch then our top tips for start-ups are:
- Keep a database of all the contracts you have, including some of the key information/terms, such as the parties names, termination dates, and break options
- Include a high-level review of what’s important for you to know about the decision-making process at the time you entered into the contract
- Schedule a regular (six-month/annual) review to make sure everything is up to date.
find out how we can help.
Wherever you are on your journey as a business we can help with contract review and management. Simply get in touch for a free phone consultation to review how your business might think about tidying up or reviewing existing contract management processes. Contact us at onwards@lawboxlegal.com.