Every company has a case for contracts that have the potential to increase revenue and maximize value. How can companies best use them to serve the right purposes and meet goals? Contracts are a vital part of building relationships and completing business transactions. But, what other purposes do they serve?These were some of the nuggets of wisdom that were shared during the business contract writing session with the resource person, Mr. Ephraim-Etsey
Contracts have many purposes and thus many different reasons for why they are important. For starters, contracts are the main source of revenue and relationship building for an organization.Now, let’s take a look at a few of the key elements of why contracts are an important focus for a company.
1. They serve as a record of commitments for both parties.
At their very core, contracts are relationships. First, two parties agree to work together, and forge a connection that if fostered well and beneficial on both sides, can last years. A contract is the visual representation of that relationship.Contracts also hold each party to their original agreement. software for a specified amount of time. First and foremost, a contract is the trail that holds both sides accountable for the terms they set at the beginning of the relationship.
2. Agreements prevent conflicts and mitigate risk.
Contracts often go through a negotiation process that ensures both sides are getting the best deal possible. Obviously, good negotiation should lead to a mutually successful outcome that prevents conflict down the line and sets the foundation for a strong partnership moving forward. When managed correctly, contracts should have a comprehensive audit trail of every change, comment, and edit made. Interestingly, many modern businesses have all their processes automated—with this exception.
3. They help an entire organization maintain compliance.
Unless employees have a legal background, it’s likely they’re often not thinking about compliance. Luckily, having a process set in place for contracts, helps employees remember they need to create a contract that has to be approved by Legal.
4. Contracts serve as a collaboration and communication tool.
From their very creation, contracts are by nature relational and collaborative. Teams can work together to determine their needs through the creation of a contract, building healthy communication. Then, once the contract is sent out to a third party, collaboration continues at the start of a business relationship. Next, negotiation can be used as a tool to foster a high quality of collaboration. After a contract is signed, both sides can feel confident in the final outcome because of solid communication.
5. Ideally, agreements also help generate revenue.
Contracts are the binding agreement that says one side will deliver services in exchange for payment. Further, being able to have contracts processed efficiently and under the right terms helps companies generate more revenue.
A blockade to a signed contract means a blockade to more revenue. Conversely, faster contract processes mean organizations are able to sign more deals and bring in more income. Generating more revenue isn’t just about the contract itself, but the process around it. That’s why it’s important to look at what tools a company is using for contracts.
Unfortunately, being stuck in the past with PDFs, email, and a repository of documents on a desktop isn’t going to help bring more revenue. To move to the future, the entire process, has to be efficient and centralized.
6. They increase operational efficiency.
Looking at contract processes and evaluating the greatest needs for improvement will help organizations work more efficiently as a whole. In turn, working faster and smarter means using the right tools.Clearly, having all people, processes, and documents in one place is critical for aligning with the current pace of business.
7. Agreements extend a company’s brand and values.
Although this may not be the first thing that comes to mind when most people think about contracts, they are an extension of company brand. Additionally, sending out a contract is a symbol that an organization cares about having a detailed record of a relationship that they are making a commitment to.
Everything from wording to negotiations gives each party an idea of how the other functions. What’s more, a solid company brand shows through care in contract creation and the interactions that follow. The reasons to pay attention to contracts are clear. Every organization has contracts—from the first employee who is hired through every deal signed.