A Guide to Contracts for the New Entrepreneur
Contracts are a crucial part of any business
Contracts are legally binding documents that protect both parties in the event one party fails to uphold its end of the bargain. Contracts can be used to define a wide range of agreements, including employment contracts, service contracts, lease agreements, and purchase agreements, to name just a few.
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What Are the Basics of Contracts?
Contracts are used in many industries as a way to protect both parties from any unforeseen events, such as bankruptcy or other financial difficulties.
Every contract has three main elements: offer, acceptance, and consideration.
The offer is what one party offers another party in exchange for something else (usually money).
Acceptance is what the second party agrees to give in exchange for what was offered by the first party.
Consideration refers to anything of value given by one party to another in exchange.
Contracts can be created informally or formally. A formal contract is one that has been drafted by an attorney and has all the elements of a typical commercial agreement, such as terms of the agreement, payment terms, and dispute resolution process outlined in detail. An informal contract is one that was not written down but was agreed on verbally between two parties who knew what they were agreeing to at the time of the agreement. Or they can be in the form of an email or text message.
Negotiation
There are many aspects to negotiating a contract, such as terms of the agreement, confidentiality clauses, and special clauses. In order to negotiate a contract successfully, it is important to understand what each type of clause means and how it will affect the overall agreement.
Consider including an indemnification clause to protect yourself if something goes wrong with regard to the work.
Keep in mind who will be entitled to any intellectual property developed during the course of the work.
Make sure that if there is a delay or interruption on your end, there will be compensation for it or vice versa.
Be clear about what is expected from both parties in terms of time, quality and timeline for completion of tasks and milestones set by both parties
If you have agreed-upon payments, include them in appropriate sections
Thoroughly research the company or person you'll be negotiating with. By simply Googling someone or asking industry colleagues, you may find some information that can help you in your negotiations.
Try using accounting software to fully understand your business's financial health when negotiating contracts. The right accounting solution will allow you to manage all your finances on one platform and give you real-time insights into cash flow when you're negotiating.
Getting Paid
One of the most important parts of doing business is to be able to invoice and receive payment. One study showed that 70% of micro-businesses wait one to six months to get paid and 25% wait up to a year!
Make sure that you have an invoicing process in place to ensure you get paid quickly and on time. The ability to track invoicing can make or break your business. Make it as easy as possible with online tools like an invoice generator. They allow you to choose from pre-made templates to create customized invoices that include text, photos, your logo, and more. Look for an online invoice maker that also allows you to download your invoice in your preferred format.
Contracts can be complicated and intimidating, but they are essential parts of doing business. Understanding what they are and how to best use them to your advantage is key to keeping your business running efficiently and hassle-free.