episode A5.003 Review all Customer and Supplier Contracts

Introduction
Here we are in the last week of July and the first month of the 3rd Quarter is ending - how much closer are you to success?

If you have been with us all month, you know we have been railing against the politicians and bureaucrats for acting arbitrarily in response to the pandemic; and any illusion they are making data-based decisions should have been dispelled by now. This is not about a specific political party or group, it is about the arbitrary use of power at the expense of the most important global community - you.

People like us, Living the Life, employ 57% of the planet's population and yet are treated as the source of its problems. Not here, we celebrate the contribution you make to a better society and our focus is to improve your chances of success. 

This week we continue the new programming structure. We use a Balanced Scorecard to format our weekday shows: Finance (Monday) = Operations (Tuesday) + Sales (Customers) + People (Employees) with Fridays dedicated to Owners. Look at the week this way - Monday through Thursday is working IN the Present, Friday is working ON the Future.

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Have a great business week.
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Show Objectives
This can be a complicated issue and many large corporations have departments total focused to it. In a smaller business our concern is to assess and disclosing major risks and managing our accountability. This includes operations risk cost/benefit analysis and mitigation planning; supply chain "event" simulation, and scenario planning & modeling.

Key Issues - ​Owner Perspective:

1. Making the informal formal - handshakes and verbal commitments need the force of law otherwise there will always be misunderstandings without resolution.
2. Create only favorable contracts - use your boiler plate, not theirs. It is not a question of taking advantage of the other party, it is all about minimizing your risk.
3. Agree to only favorable contracts - you know where all of the risks are in the contract and refuse to agree until mitigated or eliminated.

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What You Need to Know

• Document and review lessons learned over the term of the contract.
• Assess Policies and Procedures, How Risk is Assessed, Monitoring & Reporting, and Internal Controls

What You Need to Do

1. Start with Price - was it sufficient to cover costs and expected margin?
2. Look at the delivery and support terms - did you make it difficult to deliver on time and does post sale support give away the store?
3. Scrutinize guarantees - how many times did you have to honor it and what did it cost? Here is a hint - only offer a guarantee when you know it won't be needed.
4. Spend a lot of time reviewing the payment terms - how often did you become a bank (accounts receivable consistently over 30 days)? Is the late payment penalty enough to make it expensive?
5. Are responsibilities clear - did you spend time arguing with the customer on who is supposed to do what? 
6. Where appropriate - did you make it clear what is proprietary information to your company and the customer? This should include exact terms of what can be shared and with whom, and what is off limits.
7. If there is insurance required to minimize risk, make sure that is clear and who is responsible.
8. Termination - make sure it is clear how either party can terminate the deal to include time frames and penalties - where appropriate.
9. Resolution of disputes - how are we going to resolve issues where consensus is impossible?
10. Signed - sounds stupid but any contract that is not signed by authorized personnel, yours and theirs, is unenforceable.

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