Owning and operating a small business can be rewarding, but certain parts of the job can be challenging. This is especially true if you happen to be a novice entrepreneur who’s new to the world of business. You’ll quickly find that one of the most important aspects of business is knowing how to navigate contracts. This includes contracts with clients, employees, freelancers, and other professionals you’ll work with. Use this guide from Frameworker to find out what the most common contractual mistakes are and how you can protect yourself from these missteps.

Contracts are essential to running your business efficiently because they allow you to establish clear expectations and obligations for all parties involved in a transaction. A contract should also include details on termination protocol, dispute resolution, and benchmarks for achieving key objectives. One of the key objectives, of course, is ensuring that you get paid fairly for your work.

To achieve this, you should carefully negotiate the terms of payment prior to completing the contract. Be clear about what your outputs / deliverables are and explicitly state, within your contract terms, that your client has the responsibility to pay your invoice once these outputs have been delivered. It is also extremely important to have a clause that states your payment terms i.e. how many days your client has to pay your invoice. This helps to set expectations and minimises the chances of late payments. Remember that contracts are there to fall back on when things go wrong, so be fair, but also be thorough. Include a clause that explains what happens if your client doesn’t pay you in time. Typically this can include an option for you to charge interest, or a late payment fee. Whichever you choose, this can act as an incentive to make sure clients stick to your payment terms but also gives you some protection if they choose to ignore your invoices. The best way manage payments upon completion of the contract is to establish a clear invoicing process.

One of the best ways to ensure your invoices get paid is to build a site that allows for online payment. According to research, unpaid invoices have become increasingly common in the post-pandemic world, but making it easy to pay can combat this problem. When a client submits payment online, you can even get an alert letting you know that the invoice has been paid. If you plan to have regularly scheduled invoices, this should be explained in your contract, too.

Another important mistake to avoid is using ambiguous language in a contract. Contracts are all about clarity, so if any element is unclear, it can majorly compromise the outcome you seek to achieve. When you’re negotiating the contract, you should clearly explain each party’s duties so that there is no room for unmet expectations.

You can further ensure that your contract contains clear language by investing in some research beforehand. When you understand the other party’s needs and motivations, you can enter negotiations with confidence, and this can ensure that expectations are outlined clearly.

If it becomes apparent that a certain part of the contract needs to be clarified, there are many tools you can use to revise and resubmit a contract. Try an editing tool that allows you to modify a contract and forward it to all signees for completion. Finding a PDF editor online can make working on a contract with input from multiple parties easier. This makes it simple to conduct necessary changes without requiring all parties to meet in person again.

Developing a thorough knowledge of contracts is one of the most important elements of becoming a savvy business owner. Still, it can take time and practice to achieve this level of expertise. Even if you are new to entrepreneurship, though, you can make sure that you get paid on time by clearly outlining your invoicing protocol in a contract. Be sure to highlight any online payment options that you offer as well as the key responsibilities of each party and the expected outcome of the contract.

Having well-crafted contracts are essential to doing business well. Be sure to spend time understanding the contracts you are party to for the good of your business.

Written by Tina Martin