How to Use Contracts to Characterize Client Relationships

All businesses need to have clients to survive. However, these relationships need characterization, mainly in the form of a contract that can best define the relationship. A contract can help characterize these client relationships in a number of ways; scope of work, price points, and length of service are just some of the ways in which a contract can help to make sense of this relationship between a business or service provider and a client. Furthermore, a contract is very helpful in the instance of a dispute, as the contract can always be referred to if anything goes sour in this relationship.

However, in order to determine this, both businesses and freelancers who use contracts need to have a way to actually track the efficacy of the contracts they create. This process is called contract lifecycle management. A contract’s lifecycle is all stages of a contract, from its initial creation, to its negotiation, to the signing and renewal process. However, all of this needs to be tracked, and all contracts that are created are ultimately finite. Eventually, they will expire, and will have to be renegotiated, and the contract lifecycle management process gives companies a good idea of what is working well in a contract and what needs to be improved.

Understanding contract lifecycle management 

As stated, the contract lifecycle management process helps businesses better track contracts. There are a number of ways to do this. While every business relationship is unique, many contracts themselves are not. While boilerplate contracts are easy enough to create they need to have KPIs that are set in stone and make sense within the context of the business relationship. 

For example, if you are creating a contract with a supplier, a procurement KPI that might make sense to be included in the contract is supplier lead time. Supplier lead time refers to the amount of time, usually measured in days, that occurs between the time a supplier receives an order and the time when the order is actually shipped. A contract that is used to characterize a business relationship should specify what the supplier lead time is and when a supplier is actually going to ship out orders. If this supply lead time is consistently not met as specified in the contract, then you can keep this in mind for future contracts or contract renegotiations and make sure there is a way for you to enforce compliance of this clause. 

Contracts protect both your business and the other party

While you may not have any issues with the other party you start a contract with, they might have issues with you. As such, you want to make sure that your contracts protect both the other party and you from harm and benefit both parties. Legal protections are important to the success of any contract, and they will govern anything from non-payment, non-fulfillment of contract terms, to specific KPIs that show the success of a contract. 

Fortunately, contract lifecycle management can help with this, and can help you make contracts that help to better characterize a business relationship. While the process should be followed, it is also important to continually have a human relationship with the other party and make sure that the contract can help to facilitate that relationship.