The strength of your contracts is incredibly important. Weak contracts won’t benefit your business — and they could, in fact, lead to unexpected failures. Luckily, you don’t have to flounder on your own to create stronger contracts. Start by learning more about what KPIs are and how to score your contracts around them. Then create and utilize these five key tools for your business to make your contracts stronger and more effective. Many of them, you can start using immediately!
1. Boilerplate Contracts
For the most part, your business uses the same basic standards every time you write a contract. Your team knows what you’re looking for, and you don’t have to reinvent the wheel every time you write a new contract. There’s nothing wrong with using the same basic language every time you take a new contract to a client — especially a client with basic needs that fit the common requests seen by your business. Building a strong library of contract templates — and deciding what your boilerplate provisions should be — ensures your contracts have a high score from the start.
Take the time to put together boilerplate contracts that fit your most common contract requirements. You don’t necessarily have to use those contracts directly and in their entirety every time, but they will give you a starting place — not to mention making it easier to ensure that your team doesn’t miss anything as you put together a new contract.
2. Acceptable Negotiation Thresholds
Some clients will sign that boilerplate contract as-is. Others will want to negotiate. When the time for negotiation hits, however, you don’t want to leave your team floundering without direction. So, create an important list of negotiation thresholds. These thresholds should always tie into the KPIs you identified at the outset of your contract management process. They might include:
- Acceptable negotiation thresholds for pricing. How low are you willing to go? What elements might a customer remove from their contract to take that threshold lower? Pricing parameters will also need approval from your company’s financial representative, so get them involved early.
- Contract term lengths. Are you willing to extend the length of a contract for a new client? Alternatively, is a contract with a shortened term profitable enough at a certain contract value? What about an existing client, especially one who has been with your company long-term?
- What features you’re willing to offer and how they impact the price range. Depending on the type of contract that you’re writing, this could include details like warranty, customer support, or service.
Once you have a solid list of your negotiation thresholds, your team can use them to shape their contract negotiation efforts. This can make it easier for the team to negotiate contracts on their own. Not only does this streamline the contract management process, but it can also increase customer confidence in your team.
3. Living Documents for the Approval Process
Sometimes, you will need to make unique changes to your contracts to fit a specific customer’s needs. When those unique approvals need to be made, who takes care of it? What does the process look like? Create a living document that you can alter easily: one that shows your team and your sales representatives exactly what will happen to get those changes approved. This accomplishes several things:
- Lets your negotiation team know what steps they will need to take.
- Specifically lists the individuals responsible for approving unique changes, which can let your team know exactly whom to go to.
- Helps give your sales representatives to communicate a timeline to the customers. That helps everyone understand how long they may have to wait for the contractual changes they want.
Learn more about how to streamline your company’s contract approval process so contracts never sit in someone’s inbox.
4. A List of Non-Negotiable Contract Elements
There are some details your business simply isn’t willing to give on. These are elements that must be contained within your contract in order for you to protect yourself or your customers. Make a clear list of those elements that are non-negotiable. This can substantially streamline the contract approval process by letting your negotiation team know exactly which elements you won’t be willing to give in on. Having an ironclad list also reduces friction between your team and the sales or renewals team when commissions are on the line.
5. A Scheduled Reporting Tool for Potentially Poor Contracts
When you automate your scoring system, you’ll start to find that it’s easier to keep up with your contracts as a whole. As part of your process, make sure you include a reporting tool and scheduled reporting systems. As a result, the people who need to track actions on those accounts will receive regular updates and reports. That will make it easier for your business to keep up with contracts that score poorly or that are at risk for causing danger to your business. With these reporting tools, you will ensure that no contracts fall through the cracks or cause potentially unexpected problems. Also, your team will get a better look at the elements that need to be changed in future contracts, especially as existing contracts come up for renewal.
Are you struggling to streamline your contract approval process? Do you need to make your contracts stronger? With these five important tools, you can both streamline the contract negotiation process and ensure that your contracts are designed to meet the needs of your business. By further empowering your team, you’ll find that they’re able to more easily negotiate exactly the contracts your business needs in order to maintain a strong presence in your industry.